Q2 2025 BrightView Holdings Inc Earnings Call
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Speaker Change: Good day everyone and welcome to today's BrightView earnings call. At this time, all parts of spent are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing the star and two. You may register to ask questions during the question and answer session.
Speaker Change: Please note, this call may be recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Chris Stoczko, Vice President of Finance and Investor Relations. Please go ahead, sir.
Chris Stoczko: Good morning, and thank you for joining BrightView's second quarter earnings call. Dale Asplund, BrightView's president and chief executive officer, and Brett Urban, chief financial officer are on the call. I'll now refer you to slides two and three of the presentation which can also be found on our website and contains our safe Harvard disclaimer.
Chris Stoczko: Our presentation includes floor-looking statements subject to risks and uncertainties. In addition, during the call, we will refer to certain non-GAAP financial measures. Please see our press release in 8K issued yesterday for reconciliation of these measures. With that, I will now turn the call over to Dale.
Thank you, Chris, and good morning everyone.
Speaker Change: Starting on slide five, we're off to a very strong start fiscal 2025. In fact, a record for both Q2 and year-to-day in adjusted EBITDA.
As we continue to transform this business
Speaker Change: We believe our resilient business model and momentum in key underlying metrics has a well-position to deliver another record year of adjusted EBITDA while continuing to reinvest in our business to support long-term, profitable growth.
Speaker Change: As a result, we are raising our full-year guidance on adjusted EBITDA margins and free cash flow. None of this would be possible without the unwavering focus of our approximately 20,000 team members who deliver best-in-class service to our customers on a daily basis.
Speaker Change: Our outlook, both near and long term, is underpid by the multiple initiatives underway, which we outlined in detail during our investor day back in February .
Speaker Change: These initiatives continue to be our North Star and are the key to delivering long-term, sustainable, profitable growth and creating meaningful shareholder value.
Speaker Change: But I want to be clear, well, we've come such a long way. We are still early in our transformation and have only just begun to unlock some of the significant opportunities that lie ahead of us that to drive this business forward both near and long term.
Thank you for tuning in. We'll see you next time.
Speaker Change: As I've said from day one, this all begins with prioritizing our employees, so they feel valued and are proud of the company they work for. We've reinvested into areas like consistent service hours, safety, refreshing our fleet and launching a frontline paid time off program, which I'll unpack in a minute.
Speaker Change: Of all of which continue to lead to reduced turnover in higher tenure.
Speaker Change: This translate into taking better care of our customers as we continue to see the momentum build across areas like customer retention and development to maintenance conversion.
Speaker Change: Both key growth levers. It's simple. The happier employees are, the better care they take of our customers and the more likely they are to partner with us long term.
Speaker Change: On top of positioning ourselves as both the employer and service provider of choice, we have significant untapped opportunities to better leverage our size and scale as the number one player in the commercial landscape industry.
Speaker Change: We continue to progress on our fleet and procurement initiatives while centralizing key support functions and reinvesting into technology, which enables our branches to focus on their employees, customers, and growth.
Speaker Change: Executing on these initiatives while strategically deploying our capital to support long-term profitable growth will further differentiate us from our competitors and ultimately position us as the investment of choice.
Speaker Change: Moving on to slide 6. Given all the macroeconomic dynamics, I'd like to remind everybody of how well our business is positioned against these uncertainties.
Speaker Change: At the core of our business is a resilient, diversified customer base largely with reoccurring revenue. Complimenting this is our development business with a strong backlog which presents future reoccurring maintenance conversion opportunities.
Speaker Change: Thanks for joining us. I'm Brett Urban. I'll see you next time.
Speaker Change: Turning the labor, we believe we are the only national company in our industry with an e-verified workforce.
Speaker Change: which is a significant competitive advantage. Also, as I will discuss on the next slide, we have seen another quarter of improved frontline turnover and because of that, our hiring and training needs continues to decrease.
Our business is well positioned against inflationary dynamics.
Speaker Change: In both our maintenance and development segments, our pricing strategy mitigates against inflation of both commodities and wages.
Speaker Change: Additionally, 80% of our debt and a portion of our annual fuel consumptions are hedged. Regarding tariffs and trade, we believe our business is largely insulated, but it's a fluid situation that changes daily and can take months to unfold.
Speaker Change: Well, there's a lot of uncertainty in the macro backdrop. We believe we are very well positioned due to our resilient business model and remain focused on executing our strategy.
Moving on to Slide 7 [inaudible]
Speaker Change: We continue to see sequential improvement in both front line turnover and customer retention.
Speaker Change: This all starts with prioritizing and investing in our most important asset, our people.
Speaker Change: Another example of this is the launch of our paid time off program for our frontline team members.
Speaker Change: which will raise the bar for the industry standard and further set us apart from our competitors. Making sure all team members can spend time taking care of their families is an important part of our One Bright View culture.
Speaker Change: Additionally, customer retention rates continue to trend in the right direction, increasing 170 basis points on a trailing 12-month basis.
Speaker Change: We know that improved employee turnover drives higher customer retention and are encouraged by the improvement in these metrics as we position ourselves as a service provider of choice.
Speaker Change: Turning this slide eight, as we look ahead, I'd like to remind everyone of our simple winning formula. Prioritize our frontline employees, drives lower employee turnover, which leads to improved customer retention and ultimately leads to larger more profitable branches.
Speaker Change: While we are still early in our transformation, I am more confident than ever that are willing formulas in motion and is the key to driving long-term profitable growth and meeting shareholder value.
Brett Urban: With that said, I will now turn the call over to Brett.
Brett Urban: Thank you, Dale, and good morning, everyone. Before I start with my repair remarks, I share Dale's conviction, energy, and enthusiasm in our transformation. We remain disciplined in executing our strategy and managing our business for the long term.
Moving to side 10 to discuss our results.
Brett Urban: Total revenue for the second quarter was $663 million, which is an increase of approximately 3% when adjusting for the unwinding of BES and the sale of US loans in the prior year.
Brett Urban: As a reminder, this is the last quarter we will back out the results from these two non-core assets.
Brett Urban: We remain optimistic that we will return to land growth in the near term and remain highly encouraged by the underlying trends in our land business, notably the improvements in both employee turnover and customer retention as Dale outlined earlier.
Brett Urban: Course now in the quarter increased $22 million or 15%, during a mainly by increased snowfall in our East Coast markets.
Brett Urban: Total snow was approximately flat when considering the unwind of the BES business last year.
Brett Urban: Switching to the development business, revenue increased 5% as a result of the ongoing conversion of our high quality backlog of our high quality backlog.
Brett Urban: As we continue to further align our one BrightView culture, we remain highly encouraged by the momentum in our conversion rates as this serves as one of the many lovers that will contribute to sustainable, top-lined land growth [inaudible]
Speaker Change: Moving on to slide 11, I want to elaborate on Dale's earlier comments about the resilience of our business. Approximately 60% of our revenue is extremely resilient and predictable, underpinned by our recurring contract revenue and a portion of our ancillary work.
Brett Urban: We also have Price & Scope Flexibility, which gives us the ability to work with our customers to make sure we meet their needs while also covering any inflationary pressure.
Brett Urban: In our development business, we have a good line of sight into our backlog and our currently selling work that will be completed in fiscal 2026 and beyond.
Brett Urban: Finally, the more discretionary piece of our business is a portion of our Ancillary Revenue. This represents approximately 10% of our total revenue, excluding snow, of which we have already recognized roughly one-third to the first half of fiscal 25th.
Brett Urban: Given our resilient revenues, we feel extremely confident that we will deliver results within our guidance ranges despite macro uncertainties.
Turning now to Profitability on Slide 12.
Brett Urban: We delivered record, total adjusted EBITDA for the second quarter of $73.5 million, an increase of $8.6 million, an impressive 13% higher, versus the prior year period.
Brett Urban: Adjusted EBITDA margins of 11.1% were also a Q2 record and expanded by 150 basis points.
Brett Urban: which marks another consecutive quarter of year-over-year margin expansion on a company-wide basis as we continue to transform this business for the long term.
Brett Urban: The adjusted EBITDA margin in our maintenance segment expanded 60 basis points, driven by a more streamlined operating structure and the added benefit from course snow, partially all set by our reinvestments and prioritization of our frontline team members.
Brett Urban: In the development segment, adjusted EBITDA for the second quarter was $17.1 million. This represents a record Q2 for this segment.
Brett Urban: The adjusted EBITDA margin expanded 410 basis points, which are driven by continued success in converting our high quality backlog and further cost efficiencies from operating as one great view.
Brett Urban: Turning the slide 13, we are off to a great start.
Brett Urban: We delivered record EBITDA and EBITDA margins in the first half of fiscal 25 and expanded margins in both our maintenance and development segments by 100 basis points and 230 basis points respectively, all while continuing to invest in key areas of the business.
Brett Urban: One more recent investment, as Dale mentioned earlier, is our paid time off plan for our frontline team members. This enhanced benefit speaks to our unwavering commitment to our crew members and the dedication to delivering best in class service to our customers.
Brett Urban: Dale has turned his slides 14 to review our capital expenditures, adjusted free cash flow, and leverage. As expected, we are focused on executing our capital allocation and fleet strategy, which resulted in record net capital spend for the first half of the year.
Brett Urban: These investments are in testament to our focus on reinvesting back into the business and signify our commitment to prioritizing both our employees and our customers.
Brett Urban: Adjusted free cash flow results for the first half were extremely strong when considering investments in Capact. We spent 65 million more on fleet and equipment and still generated 67 million in adjusted free cash flow.
Brett Urban: Net leverage at the end of the second quarter came in at 2.1 times, which compares to 2.4 times in the prior year period.
Brett Urban: This was driven by lower debt levels, improved profitability, and improved liquidity.
Brett Urban: The improved leverage dynamics enable us to have significant financial flexibility for investment, as evidence in our recent $100 million stock repurchase program, which I will provide more details on the next slide.
Brett Urban: 30th of slide 15, we remain disciplined on our strategic couple of occasions to drive shareholder value.
Brett Urban: This is underpinned by the strength in our balance sheet, including ample liquidity and favorable bet structures with no long-term majorities until 2029.
Brett Urban: We continue to accelerate our fleet refresh strategy of fiscal 25, having ordered over 1000 core production vehicles with the majority being delivered to branches in the back half of this fiscal year.
Brett Urban: Also, with the 3,500 mowers, we have replaced this year. I am now proud to announce that all of our mowers are within our target useful life.
Brett Urban: As a reminder, this strategy will lead to improve employee satisfaction, higher customer retention, and reduced maintenance and repair costs.
Brett Urban: As mentioned earlier, we launched a $100 million share repurchase program in Mid-March.
Brett Urban: The strengths of our balance sheet, coupled with our current valuation and unwavering commitment to drive sustainable and long-term profitable growth, gave us the confidence to launch a new share repurchase program and return capital to shareholders in a disciplined and opportunistic manner.
Brett Urban: We believe our shares are significantly undervalued and that this is the strategic use of our capital.
Brett Urban: We executed against this program during the second quarter and subject to market conditions and regulatory requirements. We expect ongoing execution, killing forward.
Brett Urban: From an M&A standpoint, we are actively managing our robust pipeline [inaudible]
Brett Urban: Given the stress in our balance sheet and ample liquidity, we are positioned well to execute against our M&A strategy when the time is right.
Andrew Wittmann, David Wittmann, David Wittmann, David Wittmann
Brett Urban: Overall, the proactive management of our strong balance sheet further demonstrates that we are well positioned to continue to reinvest in the business to support long-term profitable growth and drive meaningful shareholder value.
Brett Urban: Now let's turn this live 16 to review our outlook for fiscal 25.
Brett Urban: As Dale previously mentioned, we are raising our justice, EBITDA, Margin, and free cash flow guidance.
Brett Urban: Our line of sight and our confidence for the remainder of the year, especially in an environment where forecasts are being revised or pulled, highlights the durability of our business model.
Let's hear some solid details
and Chris Stoczko.
Brett Urban: We are raising the midpoint of our Justin Dippit-Dog honest to 355 million, up from our original guide of 345 million.
This reflects raising both our maintenance and development margins and expectations.
As well as Benefits and Course Note
Brett Urban: We expect maintenance margins to improve by 70 to 110 basis points.
Brett Urban: and development margins to improve by 60 to 100 basis points.
Brett Urban: History reflects total margin improvement of 80 to 110 basis points also an increase from our previous expectations.
Brett Urban: We expect a continuation of healthy cash flow generation to provide improved operating performance.
Brett Urban: Our outlook reflects a momentum on broad basin issues to reinvest in the business.
Brett Urban: We now expect to generate free cash flow of $50 to $70 million while spending a record amount of cap-backs as we accelerate our fleet refresh strategy.
Brett Urban: When normalizing for CapEx timing from fiscal 24 of $51 million, the midpoint of our adjusted free cash flow guidance is $111 million, the highest since 2020.
Brett Urban: More reference, our Justin free cashflow guidance reconciliation appears in the appendix on slide 25.
Andrew Wittmann, David Wittmann, David Wittmann, David Wittmann,
Brett Urban: Finally, we are maintaining our revenue range of 2.75 to 2.84 billion dollars.
Brett Urban: This reflects the assumptions of 205 million for the year while both land and development ranges remain unchanged
Brett Urban: For reference, our Revenue Guidance Reconciliation Appears in the Appendix on Slide 24
Dale Asplund: Before turning the call back over to Dale, I want to again express my appreciation to our BrightView team members.
Dale Asplund: Without their support and commitment, along with their ability to adapt and proactively embrace our one-bred-view culture, our ongoing success would not be possible.
Dale Asplund: With that, let me turn the call back to Dale to wrap up on slide 17.
Speaker Change: Thanks, Brett. As I reflect on my first 18 months, I am so proud of how far we've come and even more encouraged than ever in how much opportunity we still have ahead.
Speaker Change: As I've said from day one, this all begins with our people and I couldn't be more proud of our dedicated team members who provide best in class service to our customers on a daily basis.
Speaker Change: Our One Bright View culture is resonating in our focus on becoming the employer and service provider of choice has made significant strides
Speaker Change: Coupled with our focus on unlocking size and scale and allocating our capital strategically will position us as the investment of choice. With that operator, you can now open the call for questions.
Speaker Change: Thank you, Mr. Asplund. Ladies and gentlemen, at this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. We'll go first this morning to Greg Palm of Craig Hallum Capital Group.
Yeah, thank you so much, good morning everyone, and congrats on the results here.
Thanks Greg.
Speaker Change: You know, it's been a while since we've been talking about a positive impact from snow, but it looks like that's kind of a drove up...
Speaker Change: A big portion of the revenue upside in the corner. I guess the question is, did this?
Speaker Change: You know, take away some of the expected revenue from Corlan, maybe you know unpack this if you can help us out with that, thanks you
Yeah, thanks Greg. Good question. Let me start it off Bye.
Speaker Change: We made a commitment that our message behind snow is going to be only good news from snow.
Speaker Change: We're down here doing this call from our Destin Branch in Florida.
Speaker Change: And we actually saw up to six inches of snow in this market as well. So it's snowing areas, Greg, that it doesn't typically snow. But let me let Brett unpack it a little bit because snow did impact, but it wasn't the only driver of all the improvements we've seen. And so,
Speaker Change: Brett, what does he give us some detail? Yeah, great, great question. Base 10 of the presentation. You know, if you're looking at our core [inaudible]
Brett Urban: Snow, we had $22 million of increased course snowfall. That really was from Boston down through the Carolinas and the pale mention even into Florida, it was really the East Coast markets.
Brett Urban: So if you think about that, you know, this would be our fifth consecutive quarter of that land core land improvement, where you date back to the last Q1 all the way through this, this second quarter where we're seeing that land shrink and continue to get smaller. If you normalize, that's no impact.
Speaker Change: Okay, yeah, perfect, that's what I was looking at. And then secondly, you know, you notice this buyback, you know, it looks like you already repurchased some stock in the quarter. How aggressive do you expect to be? I mean, it was related to, you know, M&A, I mean, is it more attractive to buy your own stock back at these levels versus M&A? What are your thoughts there?
Speaker Change: Yeah, I'll start off and I'll let Brett do the math. I think we put in the appendix of the deck that we posted. We put in there our activity. We launched the program in mid-March in the back 11 days of March. We purchased roughly $1.7 million of stock at an average price at 1311. We launched the program in mid-March. We launched the program in mid-March. We launched the program in mid-March.
Speaker Change: I would say if our stock continues to trade at those significantly undervalued levels, we will continue to be aggressive in that opportunistic buying of our own stock.
Speaker Change: When it comes to M&A, obviously we know the value of this company, and as we illustrated at our investor day in February , we know what we're going to do over the next several years to keep making this company better
Speaker Change: So we're going to buy our stock back as long as we're dislocated from the market and when the market reacts the way it's reacted with all the noise we're going to take that as an opportunistic time.
Speaker Change: Now, there's going to be positive that comes out of the administration's change.
Speaker Change: We know we're hearing a lot on trade and tariffs right now, but we believe eventually we'll hear more on Goodwill and some bonus depreciation and obviously those benefits that could come in the form of cash flow will make us re-look at how we're going to spend that money. The goodness Greg? Let's go.
Speaker Change: We can do both. We can continue buying our shares opportunistically and not be afraid to do some M&A if we find the right deal. So we have positioned this business so well. In fact, as we exit Q2, we have $140 million of cash on our ballot sheet.
Speaker Change: So, we're in a position that we don't have to make that decision. [inaudible]
Speaker Change: The stock state is dislocated. We're a buyer. We're a buyer all day long, because we know the value of this stock should be well above $20 $20.
Brett Urban: And if there's a deal that we should be done, and it makes sense from an M&A standpoint, we are positioned from an operations team to be willing to absorb it. But Brett, do you want to add anything? No, we're just going to add that our balance sheet is the best spot it's ever been. Our leverage is at 2.1 times. Dale mentioned we have...
Cash available to do both the share repurchase and if the right deal came across our desk.
Cash to do acquisitions [inaudible]
Brett Urban: And in our guidance, for updated guidance for cash flow, we're assuming we're to spend a record amount of capital this year.
Brett Urban: At about $190 million net capital to continue our fleet refresh strategy, which is critical to making sure our employees are taken care of and then in turn they can take care of our customers. So our balance sheets in the position where we can really do all three.
Dale Asplund: We can continue to invest in our fleet equipment, mower strategy, which we're doing actively doing every day. We can continue to buy back our shares as Dale said it.
Brett Urban: Significantly undervalued prices, and when the right yield comes across our plate and it makes sense for us to do it, we have cash to do M&A as well.
Speaker Change: Yep, makes sense. Alright, thanks for the color and congrats again.
Thanks, Greg. Thanks, Greg.
Speaker Change: Thank you. We'll go next now to Bob Labick at CJS Securities
Bob Labick: Good morning and my congratulations as well on a great quarter.
Thanks, Bob.
Speaker Change: Sure, yeah, so one question, you touched on this briefly in your prepared remarks as well, I think it was five-seven, but one question we're constantly getting is the
Speaker Change: What is the impact on availability of labor and cost of labor given this political environment, deportations, whatever you want to call it? Can you talk more to like kind of real-time labor trends and how you're dealing with it? Obviously, you're doing a lot for your employees and your attention is improving but maybe a little more color...
Speaker Change: You know, around how the macro is impacting availability and cost. [inaudible]
Speaker Change: Yeah, great question. I mean obviously it's a big topic right now and I would just let me give you some color. We've seen another sequential improvement on our employee turnover reduction.
Speaker Change: And like I said, that helps us in so many ways from onboarding them, to training them, to make sure our customers get consistent service [inaudible]
In fact,
Speaker Change: The best part of my day is when I can start off with our frontline teams to instruction flex in the morning as Brett and I started off this morning here in Destin And Bob, I think you know our new employees were Orange Vests for the first 30 days and then we graduate them into our standard yellow vest.
Speaker Change: This morning at Streets and Flex, we did not have one employee with an orange vest. That's just visually seen what that employee turnover reduction continues to do to our business.
Speaker Change: Now, we've given a lot of benefits to these people. I've said from day one, the people that leave our branches in the morning there's nothing more important to make sure they understand their value to service our customers.
Speaker Change: We talked about the Boots program. We've talked about 4-10 hours shifts to make sure they can get their 40 hours a week. We recently put in paid time off for these people.
Speaker Change: These people have families and they need to spend time with their families when there is a situation that they can take care of.
Speaker Change: So we're doing so much more, but on top of all that, we feel like they see the value versus just seeing it in the wages they get. Our wages, we just went through our annual merit cycle, they normalize from those years of hyperinflation, down to the more two to three percent increased levels. So we feel great about where our labor is at, we feel great about our need. We just put in place our seasonal workers. Thank you very much.
Speaker Change: with our typical H2B employees that we bring in for this season, but Bob, this year because of our employee turnover reduction.
Speaker Change: We were able to get a record low level of those employees. In fact, we had the opportunity to bring even more in, but we didn't need all the employees. In fact, the number versus last year is half.
Brett Urban: of what we needed in 2024. So we are positioned so well, and all the levers we've said we've pulled are continuing to show value. But Brett, what do you want to add to that? No, I would agree. We've got to work at the most H2Bs that we have in the last three years, and we cut the least in the last three years, and that's really testament to...
Brett Urban: What Dale just mentioned, the investments back into our front line, whether it was boots last year or making sure we can work for 10 hours shifts
Brett Urban: Getting them new trucks, mowers, equipment, that's reliable, they go out in the job for and then latest the crew PTO. We just launched that program, it's another investment back into our front line. But that's continuing to drive that employee turnover down, which we know.
will drive customer retention up.
Brett Urban: And we know customer retention increases will lead to growing branches and that's the winning formula. So we feel great about where we're positioned. From a labor cost perspective Bob, you know, we've said historically we're in the 3 to 5 percent.
Speaker Change: Annual Range of Increases. We're actually seeing increases at or below the low end of that range right now. So real time, we're not really seeing any significant labor updates really at the low end of our historic range. So I love where we continue to stay focused on the right long term decisions for this business. Thank you.
We continue to invest in that hourly workforce .
Speaker Change: If our remind you of last Q3, really six months into Dell's CEO seat here, we put ten million dollars more in Q3 of 2024 back into our front-line service hours .
Q4, we put another $10 million more.
Q1, we put three to four million more in this past Q2.
If you look in our landry and our maintenance results,
Speaker Change: We had some uptick and snow, but we invested three to four million more back again into that frontline service hours and make sure our customers are taking care of the quality they deserve. Good news with that is we're laughing now from the investors may last year so two, three should be more comparable from a true quality service hour standpoint.
Speaker Change: That's great, really appreciate that color and it seems like obviously some really good results from these initial early innings of the programs you're putting in, so there's clearly more to come to, so that's great.
Speaker Change: And then maybe just one more of the questions I made. At the analyst, you had a chart on
Speaker Change: Your branches segmented with, you know, 40% of your branches were below 80% customer retention and 60% were above it and obviously you've just started to, you know, take that metric up but
Speaker Change: Could you talk about the differences in the branches that are below 80 versus above 80? Is there a structural difference? What are the steps you're going to take to get those kind of laggards up to or above 80% mark, which will obviously improve all of customer attention for the overall business? [inaudible]
Speaker Change: Yeah, so as you saw in the deck, once again we showed momentum in our customer retention across the business.
Speaker Change: On a trailing 12-month basis, we're up 170 basis points. Like I said, an investor day, anything between 100 and 200 basis points for the year will be considered a success again. So continued
You know, it's not seasonal.
Speaker Change: It's not geographical Bob. It comes down to our branch leader.
Speaker Change: The stronger our branch manager is, the more engaged they are with our customers [inaudible]
Speaker Change: The more our teams take care of them and the more that we see customer retention rise.
Speaker Change: So we had our first annual meeting since 2018 last year. We have another one on schedule this year. We're going to continue to focus on making sure every one of our leaders that runs one of our facilities, understands how important communicating with our customers, good and bad, and working with our employees to communicate with our customers is so that we can drive retention. Thank you very much.
Speaker Change: We feel like we're just getting started on this journey. Last year was the first-
Speaker Change: Positive uptick, we've seen since going public as we showed that investor day [inaudible]
Speaker Change: Like Dale said, we're early in the journey. We still have a lot of room to go for customer retention improvements. We have a lot of room to grow in this business.
Speaker Change: And even with that in the early stages, we're posting a record Q2, a record first half of the year. This will be a record.
Speaker Change: Full Year, EBITDA, EBITDA margin for us, free cashflow conversions are north of 30% so we feel we feel great so if you've had a great quarter we feel like we're off to a great start in the year and we're hyper focused . . .
Dale Asplund: Like Dale said, to make the right long-term decisions for this business that will drive that customer retention and other metrics back in the right spot for long-term sustainable growth.
Okay, great stuff. Thanks so much. Thanks, Bob. Thanks, Bob.
We'll go next now to Tim Mulrooney of William Blair.
Speaker Change: A. Good morning. This is Luke McFadden on for temp. Thanks for taking our questions today.
Speaker Change: Good morning. Maybe one to start out here on the guide. Can you talk about how much of the $10 million increase in your EBIT Outlook was driven by the stronger than expected snow revenue in the quarter versus a stronger outlook for the second half of the year? [inaudible]
Speaker Change: You know, I'll start off and then I'll kick it over to Brett Luke. As Brett said, we had a good snowy urine.
Speaker Change: No news is good news now, so we were up $22 million and if you translate that, it should be about $4 to $5 million of incremental EBITDA. For the quarter, we reinvested most of that back into our frontline team.
Speaker Change: So when you look at the increase that we're putting out there for EBITDAF for the year, it's really driven off the overall margin expansion that we're seeing in the business.
In fact, [inaudible]
Brett Urban: Back into our frontline teams, here in the second quarter, but it's not snow driving our uptick, it's the overall performance of both maintenance and development. But Brett, go ahead and add. No, I would agree. It was good for us. It did come with a little bit of an offset with land. Let's go ahead and let's see.
Brett Urban: spoke about earlier in the call about $6 million land impact but overall it's really the unlocking of the side and scale of the business.
Speaker Change: It's our fleet strategy. It's starting to go into practice. It's centralizing our procurement issues that we talked about, you know, during the investor day. We're putting technology into the business. We streamlined our operating structure. We've done a lot of really underline things in the business. Luke is driving margin expansion in both our maintenance and development segments. [inaudible]
Speaker Change: Not only in the first half of the year, but in the back half of the year, that's the main driver of raising our guidance. Snow Health, but it helped, like they all said, to allow us to reinvest them back into the business.
Speaker Change: I make sense and great to hear and then maybe just switching gears here here.
Speaker Change: With all the recent headline news related to tariffs and a more uncertain macro outlook, I was hoping you could just update on some I heard conversations with clients of intrending and maybe any color as it pertains to discretionary spending levels like enhancement revenue Just given the current macro environment that we're in. Thanks so much.
Speaker Change: Yeah, thanks, Luke. What I would say is we put a big focus on driving more customer engagement. In fact,
Speaker Change: As we sit at the end of Q1, we have more paper out on the street for quotes, for customers to do work, both
Speaker Change: An Antsville work, Ancillary work, then we've had any time in the history of the business.
Speaker Change: Obviously, there's a lot of unknown. We left our revenue range wide at this time of the year. We didn't change it, but we feel great. There is hesitation. There's a lot of companies that may be impacted much greater than what BrightView will be impacted by trade and tariffs. It's a lot of money, but it's a lot of money.
But right now, we feel great about what's up there.
Speaker Change: Every day this seems to change and our customers know we're here to support whatever need they have as we work through the back half of the year. But we can't control the macro. Everything we're going to do is to continue to focus on what's best for the business long term.
Speaker Change: Brett, you know, I'm page 11 of our presentation. We showed our resilient revenue mix, Luke, and that's where we feel like we're better positioned than most companies out there right now.
Speaker Change: Yes, so we're off and running into 2026 filling that backlog and we got a we got a small piece of the pie that you know is more discretionary in nature and could our clients feel a little impact from tariffs or something going on in the macro sure. This is our selling season for that.
Speaker Change: Business right now you know great news is they'll entered in the CEO Cherry teen months ago, We got well ahead of our fleet strategy, we already ordered our trucks and mowers and trailers and other equipment well before any towers were announced so minimal impact.
Speaker Change: During a fleet next year, we're getting ahead of that right now as we speak so we don't expect much unless something changes significantly to impact us on that front and from a commodity standpoint, they'll mention we hedge some fuel to make sure we mitigated and volatility in that commodity and we're not really seeing mu.
Speaker Change: Understood. Thanks, so much for the time guys. Thanks, Lou Hey, Thank you Luke. Thank you, we're gonna out to Stephanie Moore of Jefferies.
Stephanie Moore: [noise] hi, good morning, Thank you.
Stephanie Moore: Good morning wanted to go back and maybe discuss on the Snowside of your business I would say you know good year for that and you feel very clear about you know continuing that trend going forward, but if you could get us up to give us an update in terms of shifting some of those.
Stephanie Moore: The sixth model that could further reduce the volatility of the future. So maybe any update there would be helpful. Thank you yeah, I think I'll start off and then brick and add some color, but I think where we saw snow. This year, we saw snow and markets that we're probably not going to see.
Stephanie Moore: Maybe south Carolina as examples those are markets that are probably always going to be more time immaterial markets, but areas that hadn't traditionally seen snow, let's just say, Virginia kind of up towards New York City, They saw more tradi.
Stephanie Moore: So I think Stephanie we're going to see a pretty good sales cycle. This year as customers don't want the volatility that they felt as they were forced to pay some of that time immaterial in those key markets for us. So we're always going to have some of that time and those snow but.
Stephanie Moore: Markets that are more on the border of getting snow annually. We're gonna have a great progress as we go into the 2026 sales cycle for snow next year that'll happen over the summer and we'll work through it but Brett No I think yeah, you hit right on the heads of the business used.
Stephanie Moore: But as of last year, it's about two thirds that were variable. So in the guidance page 16, we put 205 million of snow. This year. So two thirds of that this year is essentially variable snow, but we said we said we're going to be diligent when years. We're it did snow like this year on.
Speaker Change: Absolutely understand and then maybe I think the conversations around inflationary pressures has picked up a little bit from here. So if you could talk a little bit about what you're seeing from an overall inflationary standpoint, particularly on the labor front and expectations kind of.
Stephanie Moore: Terms of inflationary pressures and any kind of Medicaid mitigating efforts that you have thanks, yeah like I said, Stephanie earlier, I think our labor will start with that call it 2% to 3% increase in our front line crew. So I think it's a good position that puts us able to.
Stephanie Moore: Service, our customers and renew their agreements annually I would say on the commodity side, one of our largest suppliers, who recently reported talked about some of the deflation that they've seen and critical materials for us like PBC piping and grass have been positive.
Stephanie Moore: And then we've seen very minimal increases in some of the other components that we need to service our customers, but I would just say as of now we are in a great position to be able to deliver what we've committed to our customers for the price that we've committed to them for so.
Stephanie Moore: Positioned well our employees are more engaged than ever we're we're in a position that we can get this business rolling the unknown in the economy is not a tailwind for anybody right now, but that'll work its way out, but Brent you want to add any.
Stephanie Moore: Lose a customer due to price, we will work with our customers to stay within their budgets to meet their needs. If there's any major macro change and inflationary pressure. So that's that's first and foremost and like they all said the more we take care of our employees they'll.
Stephanie Moore: Take care of our customers that gives us the the ability to work with them. If there is any type of major inflationary uptick, we'll we'll work with our customers make sure we meet their needs.
Stephanie Moore: Absolutely and then just lastly for me you know as you noted we talked about you know on this call you know, there's certainly a there's certainly a uncertain macro environment, but at the same time I think that you've called out you know a lot of your own company specific initiatives to ultimately deliver you know mid single digit organic.
Stephanie Moore: Could you talk about just your level of confidence in your ability to achieve that target that was laid out you know in you know and what might be a less constructive or more negative macro environment. Thanks.
Stephanie Moore: So they're things, we can control and there's things that obviously, our customers have to make decisions on we feel we're positioned to grow our business in the back half of the year like we've commented somewhere around 1% to 3% for our land business and 3% to 6%.
Stephanie Moore: I feel like we're in a good spot with development a lot of that work is underway and it could just be a little bit of a timing, but we feel we'll fall within that range on the landside like we've said a couple times now we are positioned well for the amount of quotes out, but it's our customers decision.
Stephanie Moore: You could see an impact on that 10% of discretionary spend is it a timing impact from April to may or if these trades in tariffs don't get resolved throughout the summer is it a avoidance in the spend so I would just tell you Stephanie.
Stephanie Moore: Point, whether it's in April or whether it comes down to the Q4, we are focused to doing all the right things long term because our goal is what we presented for 2030, it's not just the 2025 years. The long term growth that we're gonna have overall for the business.
Stephanie Moore: Customer retention development to maintenance conversion all that's trending in the right area. We just have this noise out there in the macro and we consider ourselves lucky because we have a great very resilient business that we're managing active.
Stephanie Moore: Country H O A's that have a living organism that we have to take care of so we feel great at that but as part of our business people do have discretionary spend and they're gonna try to make decisions off what they have to spend based on their overall business. So, but we're gonna grow this business it.
Stephanie Moore: Everything's positioned and if we didn't have this noise I'd feel 100% confident with what we had committed to.
Speaker Change: Thanks, guys really appreciate it and just for what was worth based in Nashville here. We've had three consecutive years of snow in in January So, maybe it's becoming a little less volatile [laughter] on our side, but appreciate the time.
Stephanie Moore: Yeah. Thanks, Stephanie.
Speaker Change: Thank you. We'll go next now to Georgetong with Goldman Sachs. I think good morning, you're already guide for Hi, Your full year guide for Corland growth, excluding the impact of B E S and U S. L is up wonderful.
Speaker Change: That implies a positive inflection in performance in the second half of the fiscal year since the first half of the fiscal year was down on the core basis could you elaborate on what you expected drive this improved performance in in core land over the next two quarters.
Speaker Change: Goes up what we just talked to Stephanie about every time, we continue momentum our trailing 12 month customer retention is up 170 basis points George as you know the more of our customers. We keep the more you know there willing to spend money on ancillary work we.
Speaker Change: N feed in as much ancillary work as we can and grow the ancillary part of our business, whether it's irrigation or fertilization or tree work, we have so much opportunity to enable our branches to go after that work. So it's just a matter of timing George and look I wish.
Speaker Change: We're not going to let it distract us from our long term goal yeah. That's right George we're so high for focus on the long term, we're doing we're doing such good things for this business as Dal mentioned with how we're taking care of our employees. The recent launch of our crew PTO program, which gives our hourly employee.
Speaker Change: To spend time with our families or get paid if they're sick that those are important really important things to drive that employee turnover down to drive customer retention up the other thing that Dal mentioned on is is our development conversions. We strongly believe we have the best development team in the entire country.
Speaker Change: And you know as you think about converting that work from development into maintenance. We said this publicly before in 2023 really by Dumblock. We did about you know a little bit less than 10% of that conversion in 24 first year's one bright view or somewhere in the.
Speaker Change: Now, we're looking at trends north of 20% converting that business. So we're continuing to see momentum building in all the right metrics, whether it's employee turnover customer retention development and maintenance conversions as Dal mentioned, we have the most bids on the street right now for.
Speaker Change: Pricing increased on the year over year basis, this quarter and your ability to pass through any input cost increases to customers in the form of price yeah. So when we look at price George it's price and scope that we combine and we work with all of our customers and we look at that each year.
Speaker Change: Our customers to say do they need more work do they need less work and then what are we going to charge for it how do we make sure we miss their those budgets, but we've seen price capabilities with our existing customers that offset our labor inflation that we're feeling in the business.
Speaker Change: Physician, where we're not gonna get headwinds that over the you know our greater than what we're spending on the cost side from price capability the longer we keep these customers the more they're engaged the more they're going to want us to do more for them and increase that scope and be more.
Speaker Change: Said from day, one George Route density is what we need so keeping customers selling new customers on those routes. That's how we drive overall profitability not just trying to charge an existing customer more it's about getting more customers within the same areas. So we can.
Speaker Change: Let me take care of their needs first and offset any type of inflationary pressures, that's what gave us the confidence to raise our EBITDA and our margin guidance.
Speaker Change: Very helpful. Thank you.
Speaker Change: Thank you. We go next now to Andy Whitman of Baird.
Andy Whitman: Great. Thanks for taking my questions guys. So I was just wondering about I mean cash flow is such an important thing I think in the investment pieces for people who are looking at your company and so I wanted to talk about the capital budget.
Andy Whitman: Not so much for this year, obviously, you've given guidance on that but given that you're going to have such a young fleet by the end of this year, how you're thinking about 2026 I think it's a particular instinct question now given that you do have tariffs and vehicle prices.
Andy Whitman: Moving a lot so not looking for 26 guidance, but I guess I'm looking for some help on the way to think about 2026. If you expect that maybe you'll have to to agely, a little bit more going into 26 of Capex, maybe is a little bit lighter because you're gonna have a good fleet and maybe the prices.
Andy Whitman: How are you thinking about allocating capital that way, maybe if you could help us just like percentage of revenue I know that this year is obviously elevated but is next year still elevated too I don't know you tell me yeah. Okay. Great question, Andy So what makes me feel.
Andy Whitman: Forced to age our fleet 18 months ago. It would have hurt our our earnings power and it would have hurt our customer service levels I feel today, we have the fleet that we can continue to provide service to our customers, whether it's our mowers or our production vehicles. So we're positioned very well.
Speaker Change: Make a decision because tariffs are something happen to availability of fleet, we could do that the one thing I would remind you is if you go back to what we had said at Investor day, we feel great about the mowers and Brett talked about that we've refreshed our fleet on the mowers, which is great we feel by.
Speaker Change: Summer next year all of our production trucks. If we go on our normal cycle will be at a healthy level and then by the end of the summer 2027, our trailers will be at that level. So we feel like we're on a good process as we go and we're not even getting the.
Speaker Change: We're still selling trucks that are far too old for call. It five to 10 cents on the dollar but long term, we're gonna see that uptick as we keep making the investments, but I think you you brought out a great point, we have more flexibility today than we've had in many years.
Brett Urban: But Brett you want to add anything yeah, Oh, two things one is first and foremost if you kind of look at the the 20 page 25 of free cash for Andy which is a great question. This business is going to generate cash.
Brett Urban: And we're gonna spend that cash we're gonna deploy that capital like you saw in the first half of this year with our capital spend you saw in our guidance. We're we're gonna spend money and refreshing our fleet refreshing our mowers, our corporate production vehicle fleet was called about 10 years old on average in 20.
Brett Urban: Now, it's about cutting half, it's gonna be less than five years old when we get those thousand production vehicles put into service. This summer and our mower fleet was older than three years old on average and you know happy to report that's right within our target age and less than two years.
Brett Urban: Yes, we've done so that's gonna lead not only to employee satisfaction, the customer retention that leads to less maintenance repair cost and and more efficient use in the business. The second thing I would add is look if if something happens with tariffs and vehicle prices lower prices.
Brett Urban: Purchase market, we should see our residuals also go up correspondingly in the resale market. So we feel like our aid our age of our fleet is such a better spot now that if something happens where vehicles or mowers or equipment goes up.
Brett Urban: That residual we got that nets down our capex that should also increase significantly. So we feel good about where we're at today things could obviously change we've made a lot of great progress, but but the key here is we will generate cash in this business and then we'll use that cash to make sure invest.
Speaker Change: Thank you.
Speaker Change: A follow up is on development margins that were obviously very very strong you know it's been almost a year since you've had the one bright field and I think that is probably a really important driver here. There are other factors and Brad I thought maybe you could just talk about how some of the projects may have closed out.
Speaker Change: If there was any positive adjustments there that helped the margins and just to level set things obviously, you've got your margin guidance for the year implies obviously, a deceleration from this ridiculously high level, but like is it a tougher comp world and as we look.
Speaker Change: But maybe on a long term basis, what's what's becomes the right way to think about the margin progression in that business. Thank you yeah. Great question, Andy The development business has been the biggest benefit of the one breakfast getting everybody together.
Speaker Change: Leverage resources across the company that traditionally were Siloed. So if you go back and look at the last four quarters. When we put the strategy in place a year ago that business is up 320 basis points 300 basis points 90 basis points.
Speaker Change: So we're gonna.
Speaker Change: A firm believer that the talent, we have in that business can help us grow that business and continue to feed our overall maintenance business. So the margins continue to grow how we continue to leverage our estimate resources our design resources.
Speaker Change: Well just keep that margin expanding we are since going public today on a trailing 12 month basis at the greatest development margin. This business has ever seen so we're positioned well we continue to see growth in that maybe not at the you know 100 basis.
Andy Whitman: We will continue to expand margins in the back half of this year and into 26, Bret Yeah Q2, salt some Andy as you mentioned saw some favorable job closeout in Q2, where we were approaching the end of a job and we were able to take some some more profitability than originally anticipated.
Andy Whitman: Million or 2 million bucks in the quarter, but generally as they'll just mention me. This business has been on a tear from margin improvement perspective, and most of that's related to really that one bright view culture operating together carrying down those silos centra.
Andy Whitman: Support functions, we do expect margin improvement by the way in the second half of the year. If you look at our guidance won't be at that same 300, 390, 410 basis point, Mark, but we do expect that business to continue to improve margins and the exciting part about it is like they all said branches.
Andy Whitman: We have over 250 branches in maintenance. So the more we can you know have that tip of the spear and locations like where you are today and Dustin Florida. You know, we don't have a development branch in Dustman, Florida, we have a great business here, we're sitting with our branch management team in the room. This is an area.
Andy Whitman: Can we can definitely expand into.
Andy Whitman: Thank you very much.
Speaker Change: Thanks, Andy We'll go next now to Tony Kaplan with Morgan Stanley. Thanks, So much I was hoping you could maybe elaborate on trends you're seeing within client conversations from you know sort of the beginning of the.
Speaker Change: January February versus more like what you're seeing in April may you know, whether you've seen any changes in terms of demand or price pushback or just decision, making timing any sort of changes or.
Speaker Change: Just still you know steady as they go yeah I think what we saw is we went through Q1 right through March was great communication with our customers. We talked about we had a little headwind in our land business from snow, but our customers were eager for spring as most people are.
Speaker Change: Oh, no it's been turbulent here and the month of April and our customers are feeling that many of our customers are probably they're just as open to having conversations with us to get quotes to do their enhancement work and to get their their jobs sites looking great their corporate campuses their.
Speaker Change: I can see Tony that there is a little more hesitation with customers to sign the deal for us to go get the work in the ground, but it could just be a short term glitch, we have more paper than we've ever had out there for quotes so we feel good about it but look there's a lot of manages whether the economy strong or whether.
Speaker Change: The toughest thing to do is manage it in the unknown because we're here to take care of our customers they've got to let us know what they need from us and we're going to take care of it but yeah. I think if you talk to anybody across corporate America I think people tell you that the tone has changed from one of.
Speaker Change: Two one of hesitation as it went through April and early may but that that short term, we all hear things on the news everyday our focus is on the long term growth of this business. So we're just going to keep telling our customers. The same thing whatever you need from us we.
Speaker Change: Great and then as a follow up I was hoping you could maybe just give it a bit more color on the ancillary business. You mentioned that you know there's a decent part that's recurring you know maybe just give some color on the services that.
Speaker Change: And how they have performed during prior slowdowns versus the part of ancillary that's a little bit more discretionary or or a little bit more volatile during prior downturns. Thanks, Yeah. So I think all I've read talk about the past, but I would just tell you we have in some of our contract obviously springs and fall.
Speaker Change: Irrigation work that type of stuff, even initial mulching and initial flowering it can be some of the similar work Tony It can be we just do more flowers, we do mulch, a few more times a year or it's enhancement work that really drives that discretionary, but let me let.
Speaker Change: The last time, we saw disruption yeah, Tony I'll go back to history in a second but look we feel great about the business model, we feel great about the quarter. We just posted first half starts of the year, we feel great about what we're doing from a strategy standpoint internally down mentioned at several times now we have more paper on the street to sell.
Speaker Change: And and really is is recurring in nature, even development piece, we're selling him to 2026 now work, we're going to perform in 2026. So yeah could there be some timing shift sure, but we feel really great about the life site to 90% of our business right now and even some of that.
Speaker Change: Larry work is included in the 60% predictable bucket because that's mulching, it's spring startup it's pruning it's tree trimming, it's irrigation startups et cetera, all that stuff's going to happen like it normally would we have a small piece of the pie, which is really true enhancements right. It.
Speaker Change: Including snow a total pies 2.6, billion% to 10% would be roughly 260 million a third of that already is completed in the first half of the year. So it leaves us about 170 million to to call. It fill through the back half of this year and that's projects.
Speaker Change: Oh, a new guard and our new rooftop guard and our you know I want to make an enhancement to an area a patio area or something like that may a customer based on the macro decide to hold tight a little bit on that or maybe delay it a month or two maybe we're not seeing that right now.
Speaker Change: Not seeing any type of buying pattern change, but we are in the middle of our selling season as we speak we have more paper in the street than we ever have so we'll see where it plays out we wish we weren't sitting here today with you know some of the noise in the markets, but I think we feel best positioned ever then.
Speaker Change: Business, especially given the resilient nature of our revenue mix. Thanks, Tony Thanks, Tony.
Speaker Change: And we'll go next now to Zack Pacheco with Luke capital Hey, Good morning, guys. Congrats on the strong results. Thanks, Zach just quickly following up on development sounds obviously, it's kind of been hard on that the backlog remain strong.
Speaker Change: To into next year, but kind of just looking forward I I just want to ask specifically like on current bidding and bidding activity have you seen any shift or given the macro or is the backlog growth. The way you see it discontinuing to trans strong. Thanks.
Speaker Change: We've seen nothing that's going to alarm us on that business and like we've said we have so much upside to expand that business organically into different markets development has huge upside for us whatever happens in the economy. We we have so much opportunity.
Speaker Change: Those people are the most skilled people in that industry, we need to fund them, we need to give them fleet, we need to promote them to go out and grow the business. So we are positioned well. It's the same stuff we're feeling on on the maintenance side, we put on a lot of people customers are making a decision.
Speaker Change: Overreact, we're working with them to decide when the times right, we'll get us locked in yeah, Yeah, just keep in mind development's that tip of the spear right. The development work kicks off maintenance work. So you know the one thing we have huge opportunities like that I'll say, that's a 20 billion plus market and we have roughly eight.
Dale Asplund: And if you think about just our geographical presence we have maintenance in 39 states. We have development in about half of those 39 states that overlap. So like Dal said, that's a huge market there's tremendous opportunity we're sitting here in Dustin, Florida with our maintenance branch here.
Dale Asplund: An area that we could easily use our expertise internally and open up a development branch and capture more of that 20 billion dollar pie. So we've haven't really seen any you know buying patterns change yet and I think we have tremendous opportunity to continue to grow this business.
Speaker Change: Got it that makes sense and then lastly, just any more color on the ramping of the sales Force initiative I know you talked about in the Investor day, but quickly like how are you guys thinking about the pace through the back half and where you think you'll be at the end of the year I guess really just how much more hiring.
Speaker Change: Level of productivity desire. Thanks look I think the productivity all happen over years I would just say we're in a great spot on the hiring initiative, our HR recruiting team have done a great job getting us people, we're continuing to focus on adding training so that they can be.
You can you can guess that new reps to the industry could take six to nine months to really become productive where people that we're getting that were already in the industry. They can hit the ground running a little more we said we're going to grow our sales force by 50% that includes both the people that in.
Speaker Change: Understood Best of luck exact hey, Thanks Act. Thank you and gentlemen that appears we have no further questions. This morning, Mr. Aspin I'd like to turn things back to you surf any closing comments. Thank you operator, and I know, we've got a little over but I think it's important with the interest and I appreciate.
Speaker Change: I will close by reiterating that we have made such great progress in a short period of time, but I'll remind everybody. This is just the beginning our resilient and predictable business model. Despite the uncertain macro gives us the.
Speaker Change: Across those three important metrics, we continue to make significant strides and solidifying our one bright view strategy and managing our business for the long term, which will ultimately position us as both the service provider and investment.
Speaker Change: Once again, I think everybody for their interest in Brightview and we look forward to speaking to you in 90 days with that operator, we can end the call certainly thank you Mr. Asphin again, ladies and gentlemen that will conclude today's bright view earnings conference call again, thanks, so much for joining US everyone and we wish you all a great remainder goodbye.