BrightView Holdings, Inc.

Hello and welcome to today's Brightview Holdings Incorporated fourth quarter fiscal 2022 results call. My name is Bailey and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to today's host, Vartan Frehar, Vice President of Investor Relations. Please go ahead. Your line is now open.

Thank you, Operator, and good morning, everyone. Thank you for joining Brightview's fourth quarter and full year fiscal 2022 earnings conference call. Andrew Masterman, Chief Executive Officer, and Brett Urban, Chief Financial Officer, are on the call. Please remember 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 conditions. 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. I will now turn the call over to Brightview CEO, Andrew Masterman.

Thank you and good morning, everyone. As I reflect on the last couple of years, I couldn't be prouder of the Brightview team's efforts during this difficult and unique environment. The challenges we overcame and improvements we made showcase the strength of our fundamentals and resiliency of our business, built on an 80-year legacy of providing best-in-class landscape and services. We transformed the company through investments in the sales force and technology, to drive consistent and sustainable organic growth. We strategically expanded our footprint through creative acquisitions that further accelerated our top line. And in the last two years, we have grown total revenue by more than $425 million, approximately the size of our largest competitor. Let's now turn to slide four and review our performance for fiscal 2022. We ended fiscal year 2022 with a record $2.8 billion in revenue despite historical low snowfall, particularly in the first quarter. We delivered land organic growth of 4.4%, exceeding our long-term plans and significantly outpacing projected industry growth of less than 1%. Development organic growth of 10.2% reflects our robust backlog and clear business momentum. Our strong-on-strong M&A execution contributed $140 million to the top line, $75 million in maintenance and 65 million in development. All of this resulted in total revenue growth of 8.7% for the year, supported by total organic growth of 3.2%. Turning now to profitability. Our profitability for fiscal 2022 was impacted by various external factors, including below average snowfall, particularly in the first quarter, a rise in labor and material costs, as well as an unexpected spike in fuel costs. We have implemented various mitigating actions including proactive pricing initiatives, shortened development project pricing commitments, and other technology enhancements. These initiatives mainly offset the anticipated rise in labor and material costs. As we look ahead, we are closely monitoring fuel costs and looking at a variety of different options to help lessen their impact on our business. Lastly, We remain disciplined in our overhead spend as evidenced by the improvement in corporate expenses year over year. As I reflect on this remarkable year and our excellent execution, I believe it's a testament to the strong business foundation we have built over the last six years. Let me reiterate some key performance highlights. We drove industry-leading organic growth, and we significantly beat our long-term organic growth plans. We are incredibly proud of our ability to manage through a unique environment and deliver on the elements within our control, driving new growth, mitigating material and wage inflation, as well as instilling overall cost discipline. When we can't control snowfall and spikes in fuel prices, we have an unwavering focus on driving our business forward through strong organic growth, M&A execution, and cost discipline. As we look ahead, our priority is clear. We will continue to execute on our growth plans to deliver another year of solid organic growth in fiscal 2023 while implementing initiatives to mitigate against externally driven headwinds and strengthen our profitability. Let's first review key financial highlights for the fourth quarter outlined on slide five. Revenue across maintenance and development was supported by both organic growth and continued benefits from M&A transactions. We delivered land maintenance organic growth of 2.2% on top of a prior year organic growth rate of 9.2%. Hurricane Ian and significant rainfall across the east coast during the last week of September impacted our higher margin ancillary services. Excluding this impact, land maintenance organic growth would have been about 3% and in line with our guidance. Adjusted EBITDA came in line with our expectations. Fuel headwind for the quarter was $5 million, net of a fuel surcharge, a little better than anticipated, as fuel prices improved modestly from Q3. However, Hurricane Ian and significant rainfall at the end of the quarter impacted our profitability. In addition to realizing lower-than-expected ancillary services, we incurred hurricane preparation costs to fortify our branches against the impact of the hurricane. The total impact we adjusted EBITDA was approximately $3 million, and we expect to repair efforts over the next 12 months to offset this headwind. Excluding this weather-related headwind, adjusted EBITDA would have been at the high end of our guidance for the fourth quarter. Lastly, from a capital allocation standpoint, while our leverage ratio remains flat with Q3, we are intently focused on growing our EBITDA to improve our leverage ratio. We are committed to efficient capital deployment, remaining disciplined with capital expenditures, and continuing to pursue select attractive M&A opportunities to maximize shareholder value. Let's now move to slide six to review our top line growth drivers, which remain unchanged. On our last call, I went into details behind each pillar. I won't spend as much time today, but I wanted to give you an update on a few initiatives. First, our sales force continues to grow and is driving strong sales growth across our entire business. We expect robust organic growth in both maintenance and development segments in fiscal year 2023. We continue to see solid customer demand in our contract-based business, ancillary penetration remains high, and our development pipeline is robust. On the technology front, we upgraded our customer portal and launched Brightview Connect 2.0. This enhanced portal is now available to our customers and has the entire relationship online, similar to online banking. This service is aligned with our customers' demands and enables them to engage with us in an efficient manner. Customer feedback so far has been very encouraging. Our digital innovation has helped drive net new growth, and it is one of the reasons we continue to enjoy organic growth that exceeds industry growth rates. Lastly, our integrated suite of applications enables efficiency, seamless acquisition integration, and robust data analytics, supporting operational efficiencies with better service quality and safety. From an M&A standpoint and moving to slide seven, we continue to execute on our strong on strong M&A strategy. We closed on more than 15 accretive transactions in the last two fiscal years. And in September, we completed the acquisition of Syringa in Boise, Idaho. which complements our recent intermountain plantings or IP acquisitions and increases our presence in one of the fastest-growing markets in the country. Syringa is a leading service provider of landscape maintenance and irrigation services and has secured strong customer relationships within the Boise MSA. We announced this past Tuesday that we added Apex Land Group to the Brightview family. Apex is a leading landscape services provider in the greater Myrtle Beach, South Carolina market, with a strong record of client satisfaction and retention. This acquisition enables us to further build upon our presence in the high-growth Myrtle Beach market. Our M&A execution this past year will benefit our top line in fiscal 2023. We expect to generate approximately $35 million in revenue in fiscal 2023 as a result of transactions completed in fiscal 2022. Our pipeline remains robust with attractive valuations and more than $700 million of opportunity. In fiscal 2023, we will continue to execute on our M&A strategy in line with long-term plans to drive at least 2% growth, which would imply 20 million of incremental M&A-driven revenue as a result of in-year transactions. Let's move now to slide eight to review our cost structure. We continue to take a disciplined and strategic approach to managing our costs amid a challenging macroeconomic backdrop. The macroeconomic headwinds remain the same, inflation of labor and material costs, fuel price uncertainty, and a potential recessionary environment. To be clear, we are not currently seeing any indicators of a recession in our business. Ancillary services remain strong, and our development pipeline is very encouraging, and our net new growth remains robust. That said, we have taken measures in each of our business segments to enhance and improve our profitability. In our land maintenance business, our strategic pricing efforts will continue to offset wage and material inflation. This year, we established a centralized pricing office to support our branches across the country, partnering with them to further drive and enable pricing negotiations. The pricing benefits we realized were masked by the unexpected spike in fuel costs this year. We continue to take a balanced approach with our customers, absorb some of the incremental fuel costs in the near term, and focus on strategic pricing initiatives, improving ancillary penetration and attracting larger, more profitable clients. As a result, with prices continuing at current levels, we expect fuel to remain a headwind for the first half of fiscal 2023. Turning now to our snow business, while this business is highly reliant on amount and geography of snowfall, our goal is to stabilize the margin profile over time. And that is why, this past year, we began expanding our self-performance snow businesses. Self-performing snow management, where services are performed through direct labor without subcontractors, secures higher margins, eliminating the middleman. While the benefit from this expansion will be modest for fiscal year 2023, these efforts combined with normalized snow we believe will benefit total company margins over the next few years. Let's move to our development business, which has been primarily impacted by the increase in material costs. As you know, we shifted contract lead times to allow 10 to 15 days of pricing commitments compared to three to six months historically, and this has resulted in significant improvements in our development margins. This quarter, we began to realize the benefits of our efforts. Development margins improved by 200 basis points in the fourth quarter. Looking ahead, we expect development margins to improve by approximately 40 to 60 basis points in total for fiscal 2023. Lastly, it's essential to understand our support team structure. Our decentralized operational business model provides ample flexibility in managing support and overhead expenses on a regional basis, and importantly, we efficiently scaled our overhead costs relative to our business growth. In fiscal 2023, despite the inflationary pressures, we expect corporate overhead costs to represent approximately 2.5% of revenue in line with historical averages. Our disciplined expense management enables our continued investment in business growth to further drive top-line momentum. Let's turn to slide 9. While external headwinds have impacted our business, our strong business fundamentals and strategic plans give us confidence that we continue to be poised for long-term profitable growth. This slide outlines clearly the fundamentals that drive our confidence for the long term, which I will speak about in a few minutes. Looking to fiscal 2023, we expect robust top-line growth combined with slight improvement in adjusted EBITDA margins, if snow normalizes. We are focused on managing the headwinds we can control while also investing to drive long-term growth. Before turning the call over to Brett, I'd like to speak to our environmental sustainability efforts briefly on slide 10. We remain focused and dedicated to our strategic long-term sustainability goals and will continue to invest behind sustainable solutions that minimize our impact on the environment, improve profitability, and create shareholder value. Our ESG efforts will enable us to better serve our customers and stay ahead of upcoming regulation, particularly in California, where gas-powered equipment will no longer be sold by 2024. Furthermore, we expect to generate cost savings as we lessen our reliance on fuel over the long term. I am pleased to report that we are committed to converting approximately one-quarter of our entire management fleet to electric or hybrid by the end of fiscal 2023. As we have said in the past, ESG is embedded in the fabric of what we do every single day and has been an integral component of our business strategy for many years. Our diverse workforce, leading industry position, and dedication to creating the best landscapes on earth drives us to continue to invest behind sustainable solutions. Early in calendar 2023, we plan to issue our second sustainability report where we will continue to expand and refine our reporting on environmental and social performance, as well as our progress against our ESG goals. I'll now turn it over to Brett, who will discuss our financial performance in greater detail.