BrightView Holdings, Inc.

Hello and welcome to the Brightview Fiscal Fourth Quarter Earnings Call. My name is Juan and I will be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. If you have joined us online, you can press the flag icon on your web browser to ask a question. I will now hand over to your host, John Isafe, Vice President of Investor Relations, to begin. John, please go ahead.

Thank you, Operator, and good morning. Before we begin, I'd like to remind listeners that some of the comments made today, including responses to questions and information reflected on the presentation slides, are forward-looking and actual results may differ materially from those projected. Please refer to the company's SEC filings for more detail on the risks and uncertainties that could impact the company's future operating results and financial condition. Comments made today will also include a discussion of certain non-GAAP financial measures. Reconciliations to comparable GAAP financial measures are provided in today's press release. Disclaimers on forward-looking statements and non-GAAP financial measures apply both to today's prepared remarks as well as the Q&A. For context, Brightview is the leading and largest provider of commercial landscaping services in the United States with annual revenues over $2.5 billion and seven times our next largest competitor. Together with our legacy companies, Brightview has been in operation for more than 80 years, and our field leadership team has an average tenure of more than 14 years. We provide commercial landscaping services ranging from landscape maintenance enhancements to tree care and landscape development. We operate through an integrated national service model, which delivers services at the local level by combining our network of more than 280 maintenance and development branches with a qualified service partner network. Our branch delivery model underpins our position as a single-source end-to-end provider to a diverse customer base at the national, regional, and local levels, which we believe represents a significant competitive advantage. We also believe our customers understand the financial and reputational risk associated with inadequate landscape maintenance and consider our services to be essential and non-discretionary. I will now turn the call over to Brightview's CEO, Andrew Masterman.

Thank you, John, and thanks to all of you for joining us this morning. It is remarkable to consider that we're officially closing out Brightview's fiscal year with this announcement on fourth quarter and full year 2021 results. And yet so much of our day-to-day news is still consumed by the COVID pandemic. You told me at this time last year that we would still be talking about COVID and its immense challenges today. I would not have believed you. And yet, the Brightview team has amazed me every day with their resilience and fortitude. At the end of the day, we are a people business, and I could not be prouder of every single one of my more than 20,000 Brightview colleagues who have continued to show up and serve our customers with excellence. Don't get me wrong. It has certainly not been easy, and there have been many challenges. But as I mentioned during our Investor Day back in September, Brightview is built on an 80-year legacy of providing best-in-class landscape and other services to customers across the country. Just as our predecessor companies persevered through multiple macroeconomic disruptions while continuing to deliver significant value to their owners, so will Brightview. Moving to slide four, as I will discuss in more detail in a moment, Despite the difficulties of 2021, the Brightview team has accomplished so much while driving strong operational and financial results. We continue to invest in our people and our technology, and we completed eight acquisitions, adding close to $160 million of annual revenue. Despite labor shortages, our HR team recruited over 5,000 new employees. We committed to carbon neutrality by 2035 and so much more. While investing in our future, we were also sharply focused on delivering superior financial results. Additionally, I'm delighted to welcome Frank Lopez to the Brightview Board of Directors. Frank brings a depth and breadth of knowledge and experience to our board from his many years in an executive leadership role with Rider System Inc. I look forward to working together with Frank and the rest of the Brightview board. Our team of more than 20,000 employees has continued to go above and beyond. Their perseverance made it possible for us to deliver strong maintenance land organic revenue growth, and our people, their performance, and their intense customer focus is why I'm confident in our ability to deliver continued profitable growth. Starting on slide five, First, I'm thrilled to report another solid quarter led by the maintenance segment, with growth of 14.5%, underpinned by 9.2% of maintenance land organic growth. This expansion was driven by continued growth in our contract business, as well as a rebound in ancillary services penetration. This follows Q3, in which we grew organically 11% plus, and in Q2, our snow contracts grew 10% plus. In short, we have grown from fiscal 2019 organic revenue levels despite operating in an environment presented with continued challenges. For the full year, total revenue was a record $2.55 billion, and adjusted EBITDA increased 11.3% to over $302 million. Full year adjusted earnings per share increased approximately 32% to $1.20 per share, a record for the company. Because of the strategic investment we have been making in our sales force, impressive maintenance land organic growth trends continued. Our second half of fiscal 2021 land organic growth of 10.5% was a result of the continued positive net new sales we discussed over the past few quarters. Third, adjusted EBITDA for the quarter was $89.5 million, which was relatively flat to the prior year. Double-digit growth in our maintenance segment was offset by softness in the development segment due to increased inflationary pressure on material spent. More on that later. Fourth, our consistent and predictable free cash flow generation continues to be robust. For the fiscal year, we generated $96.7 million of free cash flow. And finally, the results of our strong-on-strong acquisition strategy benefited our revenue growth by $44.2 million during the fourth quarter. Our fragmented industry presents many more opportunities for consolidation, and you should expect to see M&A execution from us every quarter. Our adjusted EBITDA performance was within the range of the guidance provided during our third quarter call, and our revenue was above the top of the guidance range, resulting in a solid finish to the year. Before we turn to the details of our fourth quarter and full year, let me provide you with our outlook for our first quarter of fiscal 2022 on slide six. As expected, we continue to see COVID-19 business impacts specifically related to labor and material costs, but we are optimistic about our ability to deliver solid results. Our maintenance land contract-based business is growing and demand for ancillary services is improving. Our primary end markets, homeowners associations, and commercial properties remain durable. Hospitality and retail verticals are returning to pre-COVID levels. We are encouraged by what we see happening in the market, and we believe this will result in another quarter of maintenance, land, organic growth of approximately 3% to 4% or more. In our development segment, we experienced pandemic-related obstacles that impacted project volumes and introduced materials cost increases driven by supply chain issues and inflationary pressures, all of which collectively put pressure on revenue and margins. We expect these headwinds to continue in the first half of calendar 2022. With that said, in development, one external tracker we monitor is the architecture buildings index. The ADI is an economic indicator for non-residential construction activity with a lead time of approximately 9 to 12 months. The ABI scores over the last eight months continue to be among the highest ever seen in the immediate post-recession periods, underscoring just how strong the bounce back has been following the abrupt downturn in 2020. We are encouraged by the pipeline of work we are all tracking across all markets, and our backlogs are robust. Our revenue streams are diversified with a mix of public and private market, owner-direct, and general contractor channels and a balanced segmentation of contract sizes. As a result, we remain optimistic that modest organic growth trends in the development segment should return towards the second half of fiscal 2022 and into fiscal 2023. As such, for our first quarter of fiscal 2022, we anticipate total revenues between 570 and 600 million dollars and adjusted EBITDA between 44 and 52 million dollars. We believe with an average snowfall during the fiscal year, continued sales force performance, and ongoing M&A execution, we will be poised to deliver revenue and margin growth year over year. Annual guidance for fiscal 2022 will be provided post our snow season and during our fiscal Q2 report in May. Now moving to slide seven, let me provide you with a snapshot on how we expect to deliver reliable, consolidated annual top line growth. As we shared with you in our investor day, we have multiple levers to drive top-line growth. The first lever is a dedicated, locally-based sales force to generate new sales, along with newer technologies to support sales. The second lever is our omnichannel digital marketing to help expand the targeted customer base. And the third lever is a continuation of accretive acquisition as part of our strong-on-strong M&A strategy. Our sales and enablement technologies continue to be a differentiator and have continued to support growth and improve customer retention and satisfaction. Brightview Connect and HOA Connect are proprietary technologies that allow our customers to review the status of submitted service requests, expedite the response time from Brightview, and track the progress of the service requests. Today, we have over 150 active homeowners associations on Brightview Connect. Another tool, Quality site assessment is critical to delivering quality services in the field. It allows our account teams to walk alongside customers, collect and mark up visual feedback, note service priorities, and identify additional ancillary opportunities. QSA is a critical enabler that drives value for Brightview team members in the field and was a contributor to the slight uptick in retention. Both of these technology platforms We'll see 2.0 versions launched in fiscal 2022, allowing for an enhanced customer experience. We also continue to invest in our sales organization, growing our team by over 10% in fiscal 2021. To drive the success of these expanded sales teams, we remain focused on digital marketing initiatives in new markets through new channels. During fiscal 2021, our lead generation increased 41%, and our opportunity pipeline, which are leads that get further qualified, expanded by 38%. Most importantly, as a direct result of our expanded sales teams and sales enablement technologies, combined with our more effective omnichannel approach to digital marketing, our sales pipeline increased 41% year over year to over $3.7 billion. Prior to the pandemic, The development segment has proven they can grow consistently in the range of 2% to 3%. Given our backlog and current industry trends as evidenced by the ABI, we remain optimistic that modest organic growth trends should return towards the second half of fiscal 2022 and into fiscal 2023. Turning to slide 8, maintenance land organic growth of 9.2% during the fourth quarter of fiscal of growth in our contract business, as well as a rebound in our ancillary services realized across all three of our maintenance divisions, Evergreen East, Evergreen West, and Seasonal. Additionally, this is the third successive quarter of organic growth in our maintenance segment, recognizing Q2 snow contract growth. Inclusive of our forecast for the first quarter of fiscal 2022, it represents one full year of primary service line organic growth. Maintenance land organic revenue for the fourth quarter is now above fiscal 2019 levels, and we expect to continue on this trajectory and to be above fiscal 2019 and 2020 levels in fiscal 2022, further proof that our strategy is working. Our current maintenance trajectory, coupled with 2% to 3% acquired growth, creates confidence in our ability to deliver at least 4% to 6% sustainable consolidated annual growth going forward. Moving now to slide nine. Since 2017, we have completed 28 acquisitions that position us as market leaders in several key MSAs. We have a dedicated team and a disciplined and repeatable framework. Our acquisitions are accretive and a value-creating use of free cash flows. Our strong-on-strong M&A strategy leverages our scalable infrastructure while building on best-in-class platforms, processes, and people. Our M&A success is core to our top-line growth, and we will continue to deliver as we execute on transactions and the strategy we have developed and deployed over the last five years. We expect the eight acquisitions completed during fiscal 2021 to add close to $160 million in incremental annualized revenue. Fiscal 2021 has been a record year for M&A, and we still have attractive opportunities in our pipeline, which continues to develop. Our acquisitions of WLE based in Austin, GTI based in Las Vegas, and Baytree based in Atlanta reflects our refined, strong-on-strong acquisition strategy and expanded ability to operate in a high-growth housing development market, which benefits both the maintenance and development segments. We expect to leverage these acquisitions which will allow us to further penetrate or enter large MSAs with high-growth housing markets across the country during fiscal 2022. Turning to slide 10, despite operating in an environment presented with continued challenges, such as labor availability and wage inflation, materials cost escalation, and supply chain constraints, we have a pathway to consolidated margin improvements. In fiscal 2021, we delivered 11.8% consolidated margins. That's a 20 basis point improvement over fiscal 2020 in a very challenging environment. We believe there is a credible path to 13% consolidated margins over the next several years achieved through the following actions. First, in our development segment, we are confident we can begin to return to historical margin performance by fiscal 2023 and drive leverage through our cost structures. Next, our continued focus on pricing and productivity. We have initiated a proactive pricing strategy that we believe will help us to offset challenges with labor and material costs and is structured to begin to deliver margin improvement in fiscal 2022. And third, a continued rebound and focus on ancillary services. Ancillary delivers higher margins and is key to consolidated margin expansion. We are also realistic about the labor pressures impacting Brightview and other companies in the service industry and are aggressively pursuing initiatives to mitigate the impact. John will expand upon this in his comments. Turning to slide 11, we continue to be leaders in environmental, social, and corporate governance, or ESG. We truly embrace our ESG strategy, and it is embedded into our corporate foundation and culture. The E element of ESG is the assessment of how Brightview interacts with our natural surroundings and how we perform as a steward of the physical environment. The E takes into account our utilization of natural resources and the effect on the environment, both in direct operations and across our supply chains. Brightview is actively engaged in ways to practically address environmental responsibility and achieve carbon neutrality. A few of these are highlighted on the slide. First, a cleaner fleet. Brightview is reducing emissions and is beginning to supplement our fleet with electric vehicles. To reduce our fuel and minimize our carbon impact, we have begun by deploying over 500 electric vehicles over the next 12 to 24 months. Furthermore, by 2027, we expect to convert 100% of our management vehicle fleet to electric or hybrid. Approximately 30% of our 11,000 vehicle fleet will be converted by 2027. Second, greener equipment. We are transforming our mowers and two-cycle equipment to sustainable power. We plan to aggressively convert all 50,000 pieces of two-cycle equipment to electric and sustainable energy, resulting in a 50% reduction of Brightview's carbon impact, according to our internal estimates, by the end of 2025. Third, efficient buildings. Brightview strives to improve energy efficiency and convert to green energy. More on that in a second. Fourth, sustainability. Brightview is committed to sustainability. We continue to proactively and purposefully plant 100,000 trees per year, and we intend to double those efforts. By 2030, we intend to plant upwards of 2 million trees. A mature tree absorbs carbon dioxide at a rate of 48 pounds per year. In one year, the 2 million trees Brightview intends on planting will offset the CO2 produced by approximately 7,000 vehicles. We are also transitioning our fertilization efforts to organics, as well as continuing to invest in irrigation technology with a focus on water conservation. We will continue to reduce pollution and implement green energy as a way of reducing, sequestering, and minimizing our carbon footprint. Turning to slide 12, this is a rendering of Brightview's Branch of the Future. As you look at this, you see solar panels on every roof, you see covered parking areas where our trucks are parked and charging to our electric charging stations. You see wind turbines in the background providing energy to our internal shops that are charging our lawnmowers and handheld equipment. You see bicycles our team can ride to and from work, and the trees and greenery surrounding our ranch. In the 300 parcels of real estate we currently own or lease, we will implement alternative and solar energy solutions and replace outdated energy equipment and appliances, Where possible, we will convert all electric service to our buildings to sources of alternative energy. We intend to launch a pilot branch in fiscal 2022. In fact, in October, while visiting a branch in Denver, I witnessed one of Brightview's initial all-electric crews. We are currently maintaining a landscape for the town of Superior in Boulder County and helping them achieve their sustainability goals to reduce greenhouse gas emissions by at least 25%. Landscaping is going electric, and the revolution is here to stay. Additionally, we expect the recently passed infrastructure bill, of which 40% of funding is for climate and clean energy investments, will support our efforts as landscaping is infrastructure. Right View is already having productive and proactive conversations with manufacturers that are supportive of our environmental strategies and with municipalities to help them secure funding and credits. Although capital investments will be required to build our electrical infrastructure, we do not expect there to be significant incremental capex to fund this build-out until the back half of the decade. Furthermore, any additional spending will generate fuel and other savings, resulting in an attractive return on investment. We expect to reduce our fuel consumption by approximately 90% by 2035. And additionally, we expect to decrease our equipment maintenance costs by upwards of 50% annually. The result of our efforts is an expectation of Brightview to be approximately 75% carbon neutral by 2030 and to achieve carbon neutrality by 2035. Most excitingly, Brightview, as the leader, has a unique ability to change our industry. We look forward to continuing to work with our partners and customers in our efforts to achieve carbon neutrality. We're in the early earnings of our journey, and during calendar 2022, we plan on issuing a formal sustainability report. This will allow Brightview to report on environmental and social performance, as well as having publicized ESG goals. I'll now turn it over to John, who will discuss our financial performance in greater detail.