BV BrightView Holdings Inc

Third Fiscal Quarter Highlights

• Record revenues of $630.3 million for the third fiscal quarter, up 0.4% from the prior year period: 2.9% increase in Maintenance Services; 5.7% decline in Development Services due to revenues from certain large projects in the prior year.
• Revenues for the nine months ended June 30, 2018 increased 6.8% from the prior year period to $1,771.8 million.
• Net loss of $1.4 million for the third fiscal quarter; Adjusted EBITDA of $97.8 million for the third fiscal quarter; Adjusted Net Income of $33.2 million for the third fiscal quarter.
• Net cash provided by operating activities for the nine months ended June 30, 2018 of $123.7 million; Adjusted Free Cash Flow of $77.5 million, an increase of $54.2 million over the nine months ended June 30, 2017 driven by improvements in working capital management.
• Successfully completed the acquisition of two landscape services companies in the third fiscal quarter with combined annualized revenues of $73.2 million.

Initial Public Offering

• Successfully completed an IPO on July 2, 2018, generating net proceeds of approximately $501.2 million for debt repayment.

BrightView Holdings, Inc. (NYSE: BV) (“BrightView” or the “Company”) today reported results for the third fiscal quarter ended June 30, 2018.

BrightView Chief Executive Officer, Andrew Masterman stated: “Our third quarter was another strong period for us. We successfully grew top-line revenue from the same period of 2017, recognizing $630.3 million in revenues which is the highest revenue generating quarter in our history, led by growth in our Maintenance Services segment. We generated Adjusted EBITDA of $97.8 million during the quarter and had a 15.5% Adjusted EBITDA Margin. We also continue to execute on our ‘strong-on-strong’ acquisition strategy, successfully acquiring two landscape service companies during the quarter enabling us to further expand our business. Since the quarter end we successfully completed our IPO, generating net proceeds of $501.2 million. We are excited to embark on this new chapter for the Company.”

Unless indicated otherwise, the information in this release has been adjusted to give effect to a 2.33839-for-one reverse stock split of the Company’s common stock effected on June 8, 2018.

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Free Cash Flow are not measures recognized under generally accepted accounting principles (“GAAP”). Please see “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” below for more information.

Third Fiscal Quarter Results

For the third quarter of fiscal 2018, the Company’s consolidated revenues increased 0.4% to $630.3 million compared to the same period in 2017 due to 2.9% revenue growth within the Maintenance Services segment primarily driven by incremental revenues from businesses acquired of $26.1 million. Revenues from the Development Services segment declined 5.7% compared to the same period last year due to winding down production on certain large projects that reached substantial completion during the quarter, coupled with the timing of commencing work on new projects.

On a GAAP basis, net loss was $1.4 million, compared to net income of $15.4 million for the third quarter of fiscal 2017, primarily driven by an increase in equity-based compensation costs incurred in connection with our IPO and other one-time IPO expenses.

Adjusted EBITDA for the third fiscal quarter was $97.8 million, compared to $98.5 million for the third quarter of fiscal 2017. Adjusted Net Income was $33.2 million, compared to $35.2 million in the 2017 period.

Net cash provided by operating activities for the nine months ended June 30, 2018 was $123.7 million, compared to $69.0 million for the same period last year. Adjusted Free Cash Flow for the nine months ended June 30, 2018 was $77.5 million, an increase in cash generation of $54.2 million over the same period last year. The increases are reflective of improvements in working capital management. For the nine months ended June 30, 2018, capital expenditures were $71.7 million, compared with $51.0 million last year, driven by the purchase of legacy ValleyCrest facilities for $21.6 million in October 2017.

Recent Developments

On July 2, 2018, the Company completed an IPO in which it issued and sold 24,495,000 shares of common stock at an offering price of $22.00 per share, which generated net proceeds of approximately $501.2 million after deducting underwriting discounts and commissions and other offering expenses.

Proceeds from the IPO were used exclusively to pay down debt, resulting in a total debt to Adjusted EBITDA leverage ratio post-IPO of 4.0x, compared with 5.7x pre-IPO.

Conference Call Information

A conference call to discuss the third fiscal quarter 2018 financial results is scheduled for August 9, 2018, at 10 a.m. Eastern Daylight Time. The U.S. toll free dial-in for the conference call is 866-393-4306 and the international dial-in is 734-385-2616. The conference passcode is 3147928. A live audio webcast of the conference call will be available on the Company’s investor website https://investor.brightview.com, where presentation materials will be posted prior to the call.

A telephone replay will be available shortly after the broadcast through Thursday, August 16, 2018, by dialing 800-585-8367 from the U.S., and entering conference passcode 3147928. A replay of the audio webcast also will be archived on the Company’s investor website.

About BrightView

BrightView provides high-quality landscape services with an unwavering commitment to client service. As the nation’s leading commercial landscaping services company, BrightView’s 19,000 team members provide services ranging from landscape maintenance and enhancements to tree care and landscape development for thousands of client properties, including corporate and commercial properties, homeowners’ associations, public parks, hotels and resorts, hospitals and other healthcare facilities, educational institutions, restaurants and retail, and golf courses. BrightView landscapes positively impact millions of lives every day.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, statements related to our expectations regarding the performance of our industry, growth strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information. You can identify these forward-looking statements by the use of words such as “outlook,” “guidance,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks, uncertainties and factors, including general economic and financial conditions; competitive industry pressures; the failure to retain certain current customers, renew existing customer contracts and obtain new customer contracts; a determination by customers to reduce their outsourcing or use of preferred vendors; the dispersed nature of our operating structure; our ability to implement our business strategies and achieve our growth objectives; acquisition and integration risks; the seasonal nature of our landscape maintenance services; our dependence on weather conditions; increases in prices for raw materials and fuel; product shortages and the loss of key suppliers; the conditions and periodic fluctuations of real estate markets, including residential and commercial construction; our ability to retain our executive management and other key personnel; our ability to attract and retain trained workers and third-party contractors and re-employ seasonal workers; any failure to properly verify employment eligibility of our employees; subcontractors taking actions that harm our business; our recognition of future impairment charges; laws and governmental regulations, including those relating to employees, wage and hour, immigration, human health and safety and transportation; environmental, health and safety laws and regulations; the impact of any adverse litigation judgments or settlements resulting from legal proceedings relating to our business operations; increase in on-job accidents involving employees; any failure, inadequacy, interruption, security failure or breach of our information technology systems; any failure to protect the security of personal information about our customers, employees and third parties; our ability to adequately protect our intellectual property; occurrence of natural disasters, terrorist attacks or other external events; our ability to generate sufficient cash flow to satisfy our significant debt service obligations; our ability to obtain additional financing to fund future working capital, capital expenditures, investments or acquisitions, or other general corporate requirements; restrictions imposed by our debt agreements that limit our flexibility in operating our business; and increases in interest rates increasing the cost of servicing our substantial indebtedness. Additional factors that could cause BrightView’s results to differ materially from those described in the forward-looking statements can be found under the heading entitled “Risk Factors” in our prospectus dated June 27, 2018, filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b) of the Securities Act on June 29, 2018, as such factors may be updated from time to time in our periodic filings with the SEC, including our quarterly report on Form 10-Q for the quarterly period ended June 30, 2018, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Non-GAAP Financial Measures

To supplement the Company’s financial information presented in accordance with GAAP and aid understanding of the Company’s business performance, the Company uses certain non-GAAP financial measures, namely “Adjusted EBITDA”, “Adjusted EBITDA Margin”, “Adjusted Net Income” and “Adjusted Free Cash Flow”. We believe Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Free Cash Flow assist investors and in comparing our results across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes these non-GAAP financial measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. Management regularly uses these measures as tools in evaluating our operating performance, financial performance and liquidity, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and capital investments. Management uses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Free Cash Flow to supplement comparable GAAP measures in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. In addition, we believe that Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Free Cash Flow are frequently used by investors and other interested parties in the evaluation of issuers, many of which also present Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Free Cash Flow when reporting their results in an effort to facilitate an understanding of their operating and financial results and liquidity. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.

Adjusted EBITDA: We define Adjusted EBITDA as net income (loss) before interest, taxes, depreciation and amortization, as further adjusted to exclude certain non-cash, non-recurring and other adjustment items.

Adjusted EBITDA Margin: We define Adjusted EBITDA Margin as Adjusted EBITDA, defined above, divided by Net Service Revenues.

Adjusted Net Income: We define Adjusted Net Income as net income (loss) including interest and depreciation, and excluding other items used to calculate Adjusted EBITDA and further adjusted for the tax effect of these exclusions and the removal of the discrete tax items.

Adjusted Free Cash Flow: We define Adjusted Free Cash Flow as cash flows from operating activities less capital expenditures, net of proceeds from the sale of property and equipment, further adjusted for the acquisition of certain legacy properties associated with our acquired ValleyCrest business.

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Free Cash Flow are not recognized terms under GAAP and should not be considered as an alternative to net income (loss) or the ratio of net income (loss) to net revenue as a measure of financial performance, cash flows provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. Additionally, these measures are not intended to be a measure of free cash flow available for management’s discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. The presentations of these measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.

Please see “Reconciliation of GAAP to Non-GAAP Financial Measures” below for reconciliations of non-GAAP financial measures used in this release to their most directly comparable GAAP financial measures.

 

BrightView Holdings, Inc.

Consolidated Balance Sheets

(In thousands, except par value information)

        June 30,

2018

    September 30,

2017

(unaudited) Assets Current assets: Cash and cash equivalents $ 16,429 $ 12,779 Restricted cash 150 213 Accounts receivable, net 343,565 330,173 Unbilled revenue 102,305 88,907 Inventories 21,031 24,954 Other current assets   55,868   45,495 Total current assets 539,348 502,521 Property and equipment, net 260,536 245,534 Intangible assets, net 305,287 371,271 Goodwill 1,772,222 1,703,773 Other assets   41,839   35,521 Total assets $ 2,919,232 $ 2,858,620 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 84,001 $ 76,133 Current portion of long-term debt 14,600 14,600 Deferred revenue 76,665 58,221 Current portion of self-insurance reserves 38,019 56,079 Accrued expenses and other current liabilities   154,568   137,116 Total current liabilities 367,853 342,149 Long-term debt, net 1,643,142 1,574,882 Deferred tax liabilities 72,513 125,139 Self-insurance reserves 80,791 66,519 Other liabilities   33,564   53,670 Total liabilities   2,197,863   2,162,359 Stockholders’ equity:

Common stock, $0.01 par value; 185,000 shares authorized; 77,895 and 77,083 shares issued and outstanding as of June 30, 2018 and September 30, 2017, respectively

769 771 Additional paid-in-capital 912,027 894,089 Accumulated deficit (178,688 ) (178,015 ) Accumulated other comprehensive loss   (12,739 )   (20,584 ) Total stockholders’ equity   721,369   696,261 Total liabilities and stockholders’ equity $ 2,919,232 $ 2,858,620    

BrightView Holdings, Inc.

Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

        Three Months Ended

June 30,

    Nine Months Ended

June 30,

2018     2017 2018     2017 Net service revenues $ 630,330 $ 627,490 $ 1,771,800 $ 1,658,864 Cost of services provided   454,753   451,064   1,311,441   1,220,945 Gross profit 175,577 176,426 460,359 437,919 Selling, general and administrative expense 119,246 104,093 356,840 330,977 Amortization expense   29,247   31,250   89,611   94,800 Income from operations 27,084 41,083 13,908 12,142 Other income 265 343 1,284 1,320 Interest expense   27,499   24,922   77,481   73,372 (Loss) income before income taxes (150 ) 16,504 (62,289 ) (59,910 ) Income tax (expense) benefit   (1,247 )   (1,102 )   58,150   22,037 Net (loss) income $ (1,397 ) $ 15,402 $ (4,139 ) $ (37,873 ) (Loss) earnings per share: Basic and Diluted $ (0.02 ) $ 0.20 $ (0.05 ) $ (0.49 )    

BrightView Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited) (In thousands)

        Nine Months Ended

June 30,

2018     2017 Cash flows from operating activities: Net loss $ (4,139 ) $ (37,873 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 56,642 60,740 Amortization of intangible assets 89,611 94,800 Amortization of financing costs and original issue discount 8,080 7,512 Deferred taxes (57,837 ) (36,551 ) Equity-based compensation 20,753 2,637 Hedge ineffectiveness and realized loss 7,338 12,468 Provision for doubtful accounts 1,137 2,752 Other non-cash activities, net 2,281 (1,812 ) Change in operating assets and liabilities: Accounts receivable (1,597 ) (15,671 ) Unbilled and deferred revenue 4,219 (17,370 ) Inventories 4,290 8,096 Other operating assets (11,073 ) (29,131 ) Accounts payable and other operating liabilities   3,945   18,355 Net cash provided by operating activities   123,650   68,952 Cash flows from investing activities: Purchase of property and equipment (71,743 ) (51,022 ) Proceeds from sale of property and equipment 3,946 5,327 Business acquisitions, net of cash acquired (104,377 ) (22,682 ) Other investing activities, net   (403 )   2,498 Net cash used in investing activities   (172,577 )   (65,879 ) Cash flows from financing activities: Repayments of capital lease obligations (4,786 ) (2,572 ) Repayments of debt (64,820 ) (164,222 ) Proceeds from receivables financing agreement 70,000 150,000 Proceeds from revolving credit facility 55,000 — Repurchase of common stock (2,916 ) (2,419 ) Proceeds from issuance of common stock   99   — Net cash provided by (used in) financing activities   52,577   (19,213 ) Net change in cash and cash equivalents 3,650 (16,140 ) Cash and cash equivalents, beginning of period   12,779   35,697 Cash and cash equivalents, end of period $ 16,429 $ 19,557    

BrightView Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In millions)

        Three Months Ended     Nine Months Ended (In millions) June 30,

2018

    June 30,

2017

June 30,

2018

    June 30,

2017

Adjusted EBITDA Net (loss) income (1.4 ) 15.4 (4.1 ) (37.9 ) Plus: Interest expense, net 27.5 24.9 77.5 73.4 Income tax provision (benefit) 1.2 1.1 (58.2 ) (22.0 ) Depreciation expense 17.8 19.9 56.6 60.7 Amortization expense 29.2 31.3 89.6 94.8

Establish public company financial reporting compliance (a)

0.6 0.4 3.4 2.4

Business transformation and integration costs (b)

2.5 2.6 21.4 10.8 Expenses related to initial public offering (c) 4.7 — 6.8 — Equity-based compensation (d) 15.0 2.2 20.8 2.6 Management fees (e)   0.7   0.6   2.1   2.0 Adjusted EBITDA $ 97.8 $ 98.5 $ 215.9 $ 186.8 Adjusted Net Income Net (loss) income $ (1.4 ) $ 15.4 $ (4.1 ) $ (37.9 ) Plus: Amortization expense 29.2 31.3 89.6 94.8

Establish public company financial reporting compliance (a)

0.6 0.4 3.4 2.4

Business transformation and integration costs (b)

2.5 2.6 21.4 10.8 Expenses related to initial public offering (c) 4.7 — 6.8 — Equity-based compensation (d) 15.0 2.2 20.8 2.6 Management fees (e) 0.7 0.6 2.1 2.0 Income tax adjustment (f)   (18.1 )   (17.4 )   (85.8 )   (40.7 ) Adjusted Net Income $ 33.2 $ 35.2 $ 54.1 $ 34.0

Free Cash Flow and Adjusted Free Cash Flow

Cash flows from operating activities $ 44.5 $ 0.2 $ 123.7 $ 69.0 Minus: Capital expenditures 27.6 18.6 71.7 51.0 Plus: Proceeds from sale of property and equipment   2.4   2.9   3.9   5.3 Free Cash Flow $ 19.3 $ (15.5 ) $ 55.9 $ 23.3 Plus: ValleyCrest land and building acquisition (g)   —   —   21.6   — Adjusted Free Cash Flow $ 19.3 $ (15.5 ) $ 77.5 $ 23.3    

BrightView Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In millions)     (a) Represents costs incurred to establish public company financial reporting compliance, including costs to comply with the requirements of Sarbanes-Oxley and the accelerated adoption of the new revenue recognition standard (ASC 606 – Revenue from Contracts with Customers), and other miscellaneous costs.   (b) Business transformation and integration costs consist of (i) severance and related costs; (ii) vehicle fleet rebranding costs; (iii) business integration costs and (iv) information technology infrastructure transformation costs and other.           Three Months Ended Nine Months Ended (In millions) June 30,

2018

    June 30,

2017

June 30,

2018

    June 30,

2017

Severance and related costs $ 1.1 $ 0.4 $ 3.3 $ 6.1 Rebranding of vehicle fleet 0.4 0.7 12.4 0.7 Business integration 0.2 0.2 0.4 0.4

IT infrastructure transformation and other

  0.8   1.4   5.3   3.6

Business transformation and integration costs

$ 2.5 $ 2.6 $ 21.4 $ 10.8     (c) Represents expenses incurred in connection with the IPO.   (d) Represents equity-based compensation expense recognized for stock plans outstanding.   (e) Represents management fees paid pursuant to a monitoring agreement.   (f) Represents the tax effect of pre-tax items excluded from Adjusted Net Income and the removal of the applicable discrete tax items, which collectively result in a reduction of income tax. The tax effect of pre-tax items excluded from Adjusted Net Income is computed using the statutory rate related to the jurisdiction that was impacted by the adjustment after taking into account the impact of permanent differences and valuation allowances. Discrete tax items include changes in laws or rates, changes in uncertain tax positions relating to prior years and changes in valuation allowances. The nine months ended June 30, 2018 amount includes a $41.4 million benefit recognized as a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the U.S. Tax Cuts and Jobs Act.           Three Months Ended Nine Months Ended (in millions) June 30,

2018

    June 30,

2017

June 30,

2018

    June 30,

2017

Tax impact of pre-tax income adjustments

$ 17.7 $ 17.5 $ 43.7 $ 40.8 Discrete tax items   0.4   (0.1 )   42.1   (0.1 ) Income tax adjustment $ 18.1 $ 17.4 $ 85.8 $ 40.7     (g) Represents the acquisition of legacy ValleyCrest land and buildings in October 2017.  

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BrightView Holdings, Inc.Fred Jacobs, Vice President of Communications & Public Affairs484.567.7244Fred.Jacobs@BrightView.com