BrightView Holdings, Inc.

Good morning and a warm welcome to the Brightview first quarter fiscal year 2023 earnings conference call. My name is Candice and I will be operator for today's call. If you'd like to ask a question, please press start followed by one on your telephone keypad. I would now like to hand you over to our host, Vatan Freja, Vice Principal of Investor Relations. Please go ahead.

Good morning. Thank you for joining Brightview's first quarter fiscal 2023 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 condition. Comments made today will also include 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'll now turn the call over to Brightview's CEO, Andrew Masterman.

Good morning, and thank you all for joining us today. We are pleased to start fiscal 2023 with a strong first quarter underpinned by robust organic growth, acquisition benefits, disciplined cost management, and a steadfast focus on executing our growth strategy to continue to drive momentum in our business. We delivered a fifth consecutive quarter of land organic growth, and we grew our annual snow contracts in the mid-single digits. and our development business continued to deliver excellent organic growth. From a profitability standpoint, adjusted EBITDA exceeded the high end of our guidance, driven by the strength of our top line, pricing efforts, improved operating performance, and disciplined cost management. Investments we made over the last few years in our sales force and technology are driving the strength and durability of our top line results, and these benefits are being realized in our profitability. Our priority is clear. We will continue to execute on our strategic plans to deliver solid organic growth, focusing on elements we can control while implementing initiatives to mitigate against externally driven headwinds and improve profitability. Looking into fiscal year 2023, I would like to emphasize my conviction that despite the low snowfall, we intend to deliver strong organic growth and margin expansion in both our land and development businesses. Let me begin by reviewing the highlights for the first quarter on slide four. Revenue performance was supported by robust organic growth across maintenance and development, as well as accretive M&A transactions. Land organic growth of 1.5% was driven by new sales growth, stabilized retention rates, and ancillary growth. We benefited from additional hurricane cleanup revenue in the Fort Myers area which was offset by significant rain across our coastal markets, impacting ancillary installations. Our snow services business consists of annual contracts, and our results vary based on actual snowfall realization. In Q1, our snow services revenue grew by 50% organically relative to the prior year, reflecting 6% growth in annual contracts and 44% in snow volume realization. It's important to note that in the prior year, we experienced significantly below average snowfall. Even with this quarter's growth, snowfall was about 15% below historical averages in our footprint for Q1 of fiscal 2023. The development segment delivered 5.9% organic growth this quarter, underscoring a clear momentum in the business. Our team is working hard on expanding our customer base, and as a result, our backlog is extremely robust. Adjusted EBITDA for the quarter was $49 million, significantly above the high end of our guidance range of $44 million, driven by organic growth, pricing benefits, as well as continued recovery in our development margins. Adjusted EBITDA certainly benefited from the snow increase. However, margin of flow through was lower than expected due to significantly below average snowfall in the Northeast and the Mid-Atlantic. Total consolidated adjusted EBITDA margin of 7.4%, reflects 20 basis points year-over-year improvement, underscoring our focus on profitability and supporting our long-term expectations of improving margins over time. From a balance sheet perspective, we entered into hedge agreements that effectively fixed interest rates on 70% of our total current debt, or approximately $1 billion. Through these agreements, we kept our exposure to interest rate headwinds and structured a hedge that enables us to benefit should rates decline. Brett will have more details in his remarks about our debt management. And importantly, we remain disciplined stewards of capital and continue to manage capital expenditures, prioritize select accretive acquisitions, and target improving our leverage ratio through EBITDA growth. Before I get into a strategic update on the business, let's turn to slide five to review snowfall data, the largest variable to our results for the first and second quarters. On the left-hand side, the slide showcases snowfall averages in our top three markets for the first quarter versus the prior year. As you can see, Denver's snowfall came in above historical averages. At the same time, snowfall in Chicago and Boston were significantly below average. Across our footprint for the first quarter, snowfall was at 85% of the 30-year average compared to 30% in the prior year. We experienced snowfall in the Midwest and Pacific Northwest. However, we saw little to no snow events in the Northeast and Mid-Atlantic, our two largest regions, with higher levels of self-performance and margins. Therefore, while our top line benefited from snow removal services, the benefit to our adjusted EBITDA was lower than expected. As we have noted in the past, snow margin is driven by many factors including when, where, how much, and how often it snows, and will change every year. Looking ahead to Q2, it's prudent to call out that snowfall totals in January of 2023 are significantly below historical averages, particularly on the East Coast, which represents 60% of our total snow business. As you can see, snowfall averages in January across our total footprint are down from the prior year. Furthermore, the elevated temperatures indicate that snow levels will likely remain low. As a result, we are guiding to a second quarter adjusted EBITDA range with this no expectation that reflects this reality. Brett will provide the detailed guidance in his remarks. Let's move to slide six to review our top line growth drivers which remain unchanged. Our sales force is driving strong sales growth across our entire business. Their consistent execution drives the confidence behind our expectation for robust organic growth in fiscal year 2023. We continue to see solid customer demand in our contract-based business Ancillary penetration remains high, and our development pipeline remains robust. Importantly, we are not seeing any indications of a slowdown in our landscaping markets. On the technology front, our digital innovation across a number of platforms has helped drive net new growth, and it is one of the reasons we continue to enjoy organic growth that exceeds industry rates. Our initiatives around digital implementation tools have a time horizon of several years as we continue to roll out enhancements based on customer feedback. Our streamlined customer engagement tool, BD Connect, enables us to continue to transform the industry and our business into a more digital and future-focused organization. Furthermore, our integrated suite of applications drives efficiency, seamless acquisition integration, and robust data analytics, the net result being superior operational efficiencies with better service quality and safety. Over time, Technology investments will drive enhanced customer engagement and retention, as well as team member engagement. Let's turn to slide seven to discuss our strategic M&A, which remains a key growth pillar. Our acquisition strategy is focused on increasing our density and leadership positions in existing local markets, entering attractive new geographic markets, expanding our portfolio of landscape enhancement services, and improving technical capabilities and specialized services. Most recently, We completed our acquisition of Smith's Tree Care, a leading service provider based in Newport News, Virginia. In addition, we acquired Island Plant Company, or IPC, a leading commercial landscaping provider on the island of Maui in Hawaii. With IPC, we have further expanded our presence and strengthened our leadership position in this very attractive market. We believe Brightview is now the leading landscaping provider in Hawaii. In addition to the Hawaii market, over the last two years, Through attractive and accretive M&A deals, we have meaningfully expanded our presence and built a strong leadership position in Minnesota and Boise, Idaho, two excellent high-growth MSAs. As we have said on our last call, we are focused on select strategic transactions at very attractive valuations that will add significant shareholder value over time. Importantly, our M&A pipeline remains robust with more than $700 million of opportunity, enabling us to continue to execute on our expansion strategy and deliver robust free cash flow over time. Let's move to slide eight to discuss our cost structure. We continue to take a disciplined and strategic approach to managing our costs, as evidenced by our margin expansion in the first quarter. While you've seen strong top line growth in our business over the last two years, total profitability has been impacted by a number of externally driven factors, including variability in our snow business, historically high inflation rates, and most recently, a spike in fuel prices. We are determined and focused on managing through these headwinds to enhance our profitability and better position the company for the long term. And we have taken measures in each of our business segments to enhance and improve our profitability and help offset these headwinds. In our land maintenance business over the last couple of years, wage rates and material costs have risen significantly. Through our pricing initiatives, which we began implementing in the second half of last year, we succeeded in offsetting these increases. In recent quarters, the pricing benefits we realized were masked by the unexpected spike in fuel costs. We took a balanced approach with customers, absorbed some of the incremental fuel costs, while focusing on strategic pricing initiatives, improving ancillary penetration, and attracting larger, more profitable clients. While the spike in fuel has subsided, we remain diligent in balancing customer relationships, fuel surcharges, and market dynamics. Turning now to our snow business, while this business is highly reliant on amount and geography of snowfall, our goal remains to improve and stabilize the margin profile over time. As we have said in the past, we began the expansion of our self-performance snow business. Self-performing snow management, where services are performed through direct labor without subcontractors, secures higher margins, eliminates the middleman, and increases reliability. Furthermore, we are investing in our snow removal equipment to drive operational efficiencies In summary, our snow leadership team is intently focused on right-sizing crews, converting our equipment to enable efficiencies, and managing subcontractor usage more effectively. Due to lower snowfall, the benefits from these actions will be modest for fiscal year 2023. However, we believe these efforts will benefit total margins over time. Let's move to our development business, which has been historically 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 improvement in our development margins in the last couple of quarters. Our development team is focused on targeting larger, high-margin projects to continue to drive margin expansion over time. As we look ahead to the second half of the year, we are extremely encouraged by our project pipeline, which has surpassed our expectations. As a result of these efforts, we continue to expect development margins to improve by approximately 40 to 60 basis points in total, for fiscal 2023. Lastly, let's discuss our overhead and support team structure. We are intently focused on optimizing our costs while continuing to invest in the growth of our business. The vast majority of our expenses are related to labor and material costs, which are variable. Importantly, our decentralized operational model provides ample flexibility in managing support and overhead expenses on a regional basis. From a fixed cost standpoint, our teams have done a great job managing expenses with an eye towards driving efficiencies and maintaining a disciplined approach. Brett will share more insight on this in his remarks. This fiscal year, we remain committed to very strict cost management protocols. We are curbing hiring, bringing outsourced operations in-house, and thoroughly managing overhead expenditures. We are reducing T&E expenses, strategically managing marketing costs, and reducing reliance on third-party consultants. Importantly, these actions are manifesting in our results as we have kept our SG&A levels in line and scaled our corporate costs relative to business growth. Our prudent expense management supports our continued investments in business growth to further drive top-line momentum. Before turning it over to Brett, let's move to slide nine to review our EST efforts. As a company dedicated to designing, developing, and maintaining the best landscapes on earth, Prioritizing sustainable solutions is core to who we are. ESG is not only integral to our business strategy and deeply rooted throughout all aspects of our operations, but also a key component of our value proposition. On February 1st, we published our second ESG report, highlighting our achievements for fiscal 2022 across environmental, social, and governance pillars. From an environmental perspective, we continue to make progress against reducing our carbon footprint by investing in a cleaner fleet and converting our two-cycle gas-powered equipment to rechargeable electric models. Let me further illustrate our progress with a couple of recent examples. First, we tested and deployed one of the first all-electric F-250 trucks in the U.S. and are excited to convert our fleet over time. Second, starting in January 2023, all new management vehicles ordered by team members across our footprint will be either electric or hybrid. These initiatives will enable us to continue to make progress against our commitments and to reduce our reliance on fossil fuel. From a social perspective, we continued to diversify our workforce, and we accelerated our commitment to foster inclusion and belonging by launching a formal DE&I strategy. Over the past five years, the number of women managers increased by 60%, and management team members identifying as Hispanic have more than doubled. Importantly, protecting our employees continues to be a top priority, our industry-leading safety record remains below the industry average. Inspiring people and nurturing landscapes is at the heart of what we do every single day at Brightview. Looking ahead, I believe our purposeful ESG strategy positions us for continued success while supporting our team members and our clients' needs and sustainability objectives. I'll now turn the call over to Brett, who will discuss our financial performance in greater detail.