BrightView Holdings, Inc.

Good day and welcome to the Brightview fourth quarter and four-year 2024 earnings call. At this time, all participants are in a listen-only mode. Following the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question at that time, please press star 1 on your telephone keypad. Please note, today's call will be recorded. Lastly, if you should require operator assistance, please press star 0. It is now my pleasure to turn the call over to Chris Stocksco, Vice President of Finance and Investor Relations. Please go ahead.

Good morning, and thank you for joining Brightview's fourth quarter and full year fiscal 2024 earnings call. Dale Asplen, Brightview's President and Chief Executive Officer, and Brett Urban, Chief Financial Officer, are on the call. I will now refer you to slide two of the presentation, which can also be found on our Investor Relations website, and contains our safe harbor disclaimer. Our presentation includes forward-looking statements subject to risk and uncertainty. 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. As I reflect on my first year here, I am both honored and humbled to lead this journey together. and incredibly proud of the progress the team has made in such a short period of time. As we committed to you 12 months ago, we delivered breakout results for physical 2024, all while transforming this business, unwinding BES, selling our U.S. lawn business, streamlining our operating structure, and snow coming in below original expectations. We are also positioned to grow EBITDA again in fiscal 2025, reflecting a second consecutive annual record EBITDA. This is underpinned by revenue growth in both our development and land maintenance business. As each quarter passes, we as a team gain greater conviction that we are in the early stages of capitalizing on the many expansive opportunities that will benefit our results in both the near and long-term. We are doing all this by operating as a unified One Brightview team. As I have said since the first day I joined Brightview, this begins with taking better care of our employees, who will in turn provide better service to our customers to make us the service provider of choice. This is the cornerstone of our One Brightview approach that will drive long-term profitable growth and deliver meaningful shareholder value. I will start on slide four by emphasizing our achievements and ongoing progress, along with strategic updates that will enhance our position to accomplish our future objectives. First, we delivered record Q4 and full-year EBITDA results while expanding EBITDA margins in both operating segments. Throughout 2024, we not only demonstrated consistent financial improvement but position the company for further success in 2025. With our fiscal year 2025 guidance, we are on track to deliver another record EBITDA year, reaffirming our commitment to delivering profitable growth. And we have significantly improved the balance sheet, enabling us to reinvest in the business with our employees at the epicenter of this investment. Brett will get into more details on the finances in a few minutes. I want to focus my comments on the tremendous progress being made towards further developing our One Bright View culture. We continue to prioritize our employees and customers to become both the employer of choice and service provider of choice. This will be the key to our sustained success as we progress on this journey, which remains in the early stages. Further leveraging our size and scale will supplement these initiatives to drive our laser-focused goal of long-term profitable growth with margin expansion to deliver continued value to our shareholders. Moving on to slide five, here we recap many of the initiatives that we have been successfully delivering on, equipping us to drive organic revenue and continue the momentum of profitable growth. As you can see on the top left of this slide, We have been prioritizing our employees through multiple avenues and are highly confident these actions will continue to improve our employee turnover and customer retention rates. By putting our customers first and delivering best-in-class service with improved communication to our customers, we are demonstrating why we should be the preferred partner of choice. All of our ongoing hard work will generate a more unified One Brightview culture. which will continue to drive the exciting transformation already underway. This was all done while streamlining our operating structure and integrating our sales group into our branches. On the customer retention front, we again saw sequential momentum resulting in a 200 basis point improvement in 2024. Further evidence that we are gaining traction. But again, we remain in the early innings and are excited for what is still On slide six, we illustrate a long-term perspective of the transformation we are undergoing. While we are proud of the strategic success to date and the financial results we delivered this year, it's important to keep in context how far we have come. In fiscal 2022, EBITDA margins were at all-time low. The company was operating in silos, and we were executing non-accretive acquisitions that led to an over-levered balance sheet with limited liquidity. During 2023, we partnered with One Rock Capital, a strategic partner with operational expertise whose investments enabled us to de-lever the balance sheet and significantly improve liquidity. This set the stage for the breakout year in 2024. Looking ahead, there is much more to accomplish. With plenty of runway ahead of This includes returning to top-line land growth, leveraging our size and scale, and executing future acquisitions. As we reincorporate acquisitions into our growth strategy, we will be utilizing a drastically revised playbook to ensure the transactions are accretive. Before turning it over to Brett, who will discuss our strong results and our financial guidance, I will say it again. It's an honor to lead this journey. and I am proud of the team for executing and delivering on the multifaceted transformation. This has enabled Brightview to turn the corner, and we will benefit from these initiatives for years to come. With that said, I will now turn it over to Brett.

Thank you, Dale, and good morning to everyone. I'll start by echoing Dale's enthusiasm and conviction as we continue to transform this business. As we sit here today, a little more than a year into our one Brightview journey, the future has never been more exciting. This is a testament to the hard work and dedication of our 20,000 employees working together to make Brightview better by placing our customers at the center of everything we do. This unwavering passion and focus led to our record results in EBITDA for the year, alongside meaningful margin expansions. we successfully executed on our commitment to deliver a breakout year. While our transformation is not complete, we are already seeing the impact take shape in our results. Moving to slide eight. Total revenue for the fourth quarter was $729 million, which was an approximate 2% increase when adjusting for the U.S. lawn sale and the unwinding of BES, our aggregator business. In maintenance, we remain encouraged by the underlying trends in the business that will lead to long-term profitable growth, notably our customer retention improvement and our continued focus on cross-selling and route density. The development business increased 8.6% as a result of the ongoing conversion of our backlog into high-quality projects. As we continue to further align our One Bright View culture, we see numerous cross-selling opportunities to convert development work into recurring maintenance contracts. We believe this represents a meaningful lever as we drive future top-line growth in all segments of the business.

Turning now to profitability on slide nine.

Total adjusted EBITDA for the fourth quarter was $105.2 million, an increase of $3.6 million or 4% higher versus the prior year period. Adjusted EBITDA margins expanded by 70 basis points, which is a sixth consecutive quarter of year-over-year margin expansion on a company-wide basis. The adjusted EBITDA margin in the maintenance segment expanded 110 basis points as we continue to streamline our cost structure and create efficiencies. We are now well positioned to capitalize on our strong operating leverage as we return to land revenue growth. In the development segment, adjusted EBITDA for the fourth quarter was $41 million, which represented a record quarter for this segment. The adjusted EBITDA margin expanded 390 basis points, which is driven by a combination of converting our high-quality backlog and further cost efficiencies.

Turning to slide 10.

Fiscal 24 was a breakout year as we delivered on our commitment to transform this business by taking better care of our employees and prioritizing our customers. In the past year alone, we delivered record EBITDA performance and expanded margins by 110 basis points, making significant progress from the low point in fiscal 22. We delivered these results despite unwinding BES, selling our U.S. lawns business, and snow coming in below original expectations. The 110 basis point margin improvement was driven by a combination of factors, including our new streamlined operating structure and reduced SG&A, the alignment of compensation plans that promotes profitable growth, and continued focus on centralization, scale advantages, and efficiencies. All of these factors allowed us to execute our strategy and reinvest back into the business, our employees, and our customers. Now let's turn to slide 11 to review our free cash flow, capital expenditures, and leverage. For the full year, our reported free cash flow was $145 million versus $80 million in the prior year. And CapEx was $60 million versus $50 million in the prior year. Important to note, there is a timing impact to CapEx related to newly purchased vehicles being delivered in fiscal 24, but paid for in fiscal 25. We will discuss this more in the guidance section of this presentation. On a normalized basis, adjusting for the timing impact of capital expense payments, free cash flows still increased $14 million, or 18%. Additionally, we executed our capital allocation and fleet strategy, which saw more than double the amount of net capital spent on a normalized basis from $50 million to $111 million. Net leverage at the end of the year came in at 2.3 times, representing the lowest leverage ratio in the history of Brightfield. This lower leverage reflects the impact from lower debt levels, improved profitability, and generating more cash flow alongside improved liquidity. The improved leverage dynamics provide significant financial flexibility and reduced interest expense. Moving to slide 12, we outline our revenue and EBITDA guidance for fiscal 25, which translates to another record-breaking EBITDA year and continued margin expansion. and is underpinned by returning to growth in our land maintenance business. For revenue, we expect to deliver results in a range of $2.75 to $2.84 billion, and EBITDA in a range of $335 to $355 million. The revenue guidance range assumes the following. For land, we expect total core land revenue to increase by 1% to 3%. When including the roughly $20 million impact from unwinding our BES business, we expect total land to be approximately flat to 2%. For snow, we are anticipating revenue to be in a range of $160 to $200 million, which incorporates the impact of unwinding the snow BES business, which is separate from the land business. We are also implementing strategic sales strategy in the snow business, to reduce the revenue volatility as we begin to shift towards more fixed rate contracts. For development, we expect revenue to increase in a range of 3 to 6% as the segment is well positioned to continue to benefit from the healthy backlog. Moving to adjusted EBITDA, we expect margins in the maintenance segment to expand by 60 to 100 basis points. and margins in the development segment to expand by 10 to 30 basis points, reflecting continued momentum in the multiple initiatives that are currently underway to drive profitable growth. It is important to note these margin assumptions reflect a reallocation of corporate expense into the operating segments. Turning to slide 13, we will expand on this. As we continue to focus on centralization, scale advantages, and driving efficiencies. In fiscal 25, we have eliminated our corporate segment and will allocate corporate expenses into the two operating segments. Here on slide 13, we present both as reported and the recast of our historical segment results, reflecting the elimination of the corporate segment. Further details, including quarterly views, are provided in our 8K and the appendix of this presentation. Continuing with guidance on slide 14, we are issuing free cash flow guidance in a range of $40 to $60 million. However, as we referenced earlier, free cash flow in both fiscal 24 and fiscal 25 is being impacted by the timing difference related to vehicles being delivered in fiscal 24 but paid for in fiscal 25. This represents a $51 million benefit in fiscal 24, as described earlier, with an offset in fiscal 25. Normalizing guidance to reflect the impact from the CapEx timing difference, the free cash flow range would be $90 to $110 million. Delivering on this range would represent a three-year cash flow conversion of approximately 30%. Before turning the call back over to Dale, I will provide a longer-term perspective on slide 15 of the exciting momentum we are seeing as we continue to transform this business. From the low of fiscal 22, we have increased EBITDA margins by 130 basis points and expect continued improvement in fiscal 25. From a leverage ratio perspective, we are currently at 2.3 times, which is less than half of where we stood in 2022. Also, our net debt has gone from $1.4 billion to approximately $740 million this year. And our liquidity has increased dramatically to $600 million. Furthermore, our free cash flow generation has increased from $7 million in 2022 to approximately $100 million based on the adjusted midpoint of fiscal 25 guidance. While still early in our One Bright View journey, this year's breakout year and our outlook for fiscal 25 reinforce our conviction in the incredible prospects that lie ahead. With that, let me now turn the call back to Dale to wrap up on slide 16.

Thanks, Brett. Before we open the call for your questions, I will provide a few examples of the many levers we are utilizing to drive further momentum in our profitable growth strategy. As you can see on the slide, there are many, including route density, fleet management, procurement, and continued focus on size and scale with centralized support. However, at the end of the day, it all comes back to our people and operating as one bright view. By investing in our employees so they provide best-in-class service, this will lead to a return to land revenue growth, which is paramount to our success in continuing to deliver on our commitments and drive value for our employees, customers, and shareholders.

We will now open the call for your questions.

The floor is now open for questions. If you have a question or comment at this time, please press star 1 on your telephone keypad. You may remove yourself at any time by pressing star 2. Once again, if you would like to ask a question at this time, please press star 1. Our first question will come from Bob Lavik with CJS Securities. Please go ahead.

Good morning and congratulations on a fantastic year and doing what you said you would do a year ago. Great work there.

Thanks, Bob.

I wanted to focus on, obviously, the transformations driven around the One Bright View Foundation. And as you've said, it's the focus on the employees who focus on the customers. And you've really focused on employee retention, which has led to customer retention. So maybe... Are there incremental steps that you'll be taking in 2025, or what are the carryover steps that you've already taken, or maybe a little of both, that should help you benefit both of these key metrics, retention of employees and customers, in 2025 and beyond?

Yeah, great question, Bob. So from day one, I said, as I said in my script, it starts with our employees. Our employees touch our customers every day. So it's critical to make sure they feel good about the place that they work and they feel the value that they give us. We have made such progress and it's shown in our employee turnover number, which we saw another sequential decline in the fourth quarter. This is going to be critical as we keep driving that customer retention improvement that we talked about. We've used several examples from giving them safety boots to show how much we care about their safety. better fleet, better mowers, newer trucks. All those have been great. The next thing we started working on is our hourly frontline employees will be paying less for benefits than our salary people as we try to make it more affordable for them in the year to come. So our goal is to make sure these people understand the value they put into the business and every day how critical they are. in our mission to make sure our customers recognize that they're the most critical thing for us to grow this business. So the employees feel so much better, Bob. We just recently launched our employee engagement survey because after a year being here and traveling to the branches, I really want to get a pulse of what they're saying. And when I see responses like they feel that we prioritize safety and the sense of belonging, empowerment and teamwork, those types of things that they're responding about, that just gives me a sense of we are making a transition in this business. We have a long way to go. We are just at the early stages of this journey. But like I've said from day one, those hourly frontline people are the most critical asset we have. Brett, do you want to add anything? And

Yeah, I would agree with everything Dale said. And we're still early days of the One Bright View journey, but it's amazing with the right focus and taking care of our employees and in turn, we'll take care of our customers and the ability for us to streamline our new operating structure and lean out our SG&A to be able to take those dollars and reinvest them right back in the front line, Bob. And that 200 basis points customer retention improvement, as Dale mentioned, I mean, that's really the That's really what we're driving towards. So more improvement to come in 25. We've got to continue to stay focused on the right things, taking care of the employees who take care of the customers every day on the front line, getting the right equipment, getting the right safety equipment as well, and, you know, more good things to come.

That's super. And then maybe just one other quick question, and I'll jump back in queue. And, you know, one of the themes also throughout the past year has been, in terms of One Bright View, is getting the development done. services and the maintenance services to work together. And you've talked about in the past a little bit getting development work into the maintenance service work, and you've been very low previously. Where do you stand now and where do you see that going? How's that playing out?

Yeah, great question. I think as I traveled the country, the one thing I quickly became aware of is our development group has some of the best talent across North America in the jobs that we do. They were probably the group that unfortunately were operating the most in a silo versus our maintenance team. So we put a focus on that, and we have leaders in our business that are working with our branches today, both development and maintenance geographically versus having independent leaders in the past. We had mentioned in the past, if you do the quick math, Bob, roughly about 7% of new development work becomes the opportunity for maintenance. So we'll just use $800 million last year roughly of development that we did. That should create about a $56 million opportunity for new maintenance revenue. In the past, we said we converted less than 10% of that. I'm pleased to say it's now up to mid-teens. We made progress as we exited the year to get momentum entering this year. We are far from the 70% that I believe is very, very realistic. But I would tell you the momentum is really when you see the branches communicating and working together. And here's the exciting part. A lot of our maintenance branches now see opportunities that they're turning over to our development branch to make sure that we're getting that for new development work. Our development group had an amazing year last year, the growth that they showed, and we're predicting another strong year as we enter 2025. Like I said, this business is about taking care of customers. And when we do development, we have to keep Mesa Brightview customer and do the maintenance work. But, Brad, you want to add anything?

No, I would just echo how exciting it is to see that conversion grow, even small incremental amounts. And think about the opportunity ahead that, you know, that $50 to $60 million opportunity set that development kicks off into maintenance work. And the great thing about it, development had such a great year. and probably benefited one of the most in the business from moving to a one bright view culture and operating together and working together as one business in 2024. But the backlog remains very strong for 25, and we can even be a bit more selective now in development as we pursue new opportunities to make sure those opportunities kick off the right potential maintenance contracts at the end of the day. So we feel very bullish on the development business and what next year can bring in 25, as you can see in our guide. And that will just create more opportunities to continue to increase this conversion rate as we operate more effectively as one BrightView.

Super. Thanks so much, and congratulations again on the results and outlook.

Thanks, Bob. Thank you, Bob.

Thank you. Our next question will come from Tim Mulrooney with William Blair. Please go ahead.

Dale, Brett, good morning. I've got a couple of quick questions here. The first one's on your maintenance land business. It looks like the core maintenance land growth was down about 1% in the fourth quarter, but obviously that's better than what we saw in the third quarter and then the second quarter and the first quarter. So we're seeing nice progress here. I'm curious how you're thinking about the trajectory of that growth as you move through fiscal 2025.

Yeah, great. Good question, Tim. I think it's worth noting that steady progress has happened from the unwinding as we started to eliminate our BES business and get people focused on taking care of our core customers that we can self-perform the work. Now, Brett will walk through a little bit of the details in a second, but that's underpinned by that 200 basis point improvement that we're seeing in customer retention. We still have some work to do to eliminate some of the challenges that we had. Customers will spend more ancillary money with you as they build up trust in you. So the deeper we can get into 2025, the more we anticipate growth. My focus is to make sure as we exit 2025, we are going to be on a trajectory that creates mid single digit land growth. We are committed to land growth this year. We have a plan to get it done, and we're going to find a way to drive that. But, Brett, maybe you can add a little more on the financial side.

No, I mean, the credit goes to the 20,000 dedicated employees out there every day taking care of our customers, right? That's what drove the 200 basis point increase in customer retention, which really has been the first increase we've seen as a public company since going public in 18. So really positive that customer retention is starting to improve. And you think about the impact that has, Tim, and the timing on organic growth. You know, we saw about a year ago coming out of Q1, we saw our core organic business shrink about 4%. And then Q2, Q3, it shrunk about 3% each quarter, right? So we saw 4% go to 3%. And you mentioned it already, Q4 is that 1% shrink. So still a shrink, but we're seeing that trend start to shift tremendously in the right direction. And if you think about Q1 and Q2 of this year, you know, we're not providing quarterly guidance. We still have some noise in, you know, stepping over our BES unwind in the first two quarters. We still have some noise with selling U.S. lawns at the end of Q1 next year. But that core trend, which is going from, you know, negative to starting to really turn the corner in Q1, Q2, and Dale said it best. By the time we get to the second half of this year, we expect our core land organic to be growing and then to be exiting the year of 25 and the 26 on a on a much better pace.

Hey Tim, real quick, I just want to add, uh, I just want to remind everybody a year ago when I got in chair, our customer retention was at all time low levels. The progress we've seen with that 200 basis point improvement is the first improvement in any year since the company went public. So yes, that creates some ancillary challenges, but that momentum, that we felt this year and will continue into 2025 is why we are so confident that we're gonna drive this business with land growth and we're gonna be in a much better spot as we get into 2026.

Okay, thanks guys. This is exactly the detail that I was looking for. Appreciate all the color. I'll leave it there and hop back in queue. Thank you.

Thanks, Tim. Thanks, Tim. Thank you. Our next question will come from Greg Palm with Craig Hallam. Please go ahead.

Yeah, hey, good morning. I guess officially congrats on the breakout EBITDA year, but also just congrats on a really sort of successful time so far in the first year. So kudos to you and the team there.

Thanks, Greg.

I want to dig into land growth a little bit more. And I'm not sure if you can kind of rank order the various levers, you know, whether it's kind of the development, you know, conversion, the customer retention. But, you know, maybe expand on that a little bit in terms of how you see that playing out this year. But also, you know, thinking about route density and maybe, you know, new customer growth as well and kind of where we are on that kind of strategic focus as well.

Yeah, good question. We know all the levers that we have to pull to drive land growth. Ancillary is one of them, and that's going to come as we continue to drive that customer retention number, you know, up as we go through 2025. That 200 basis point improvement, we continue to see that as an opportunity for us to work through in 2025 and see improvement. So long-term, the business, when we went public, we had stated before that Our customer retention was roughly 85%, and we exited last year below 80%. So we have a long way to go, but here's the exciting part. 85% should not be our goal. We are going to find a way to continue to make sure our customers feel all the value that we're going to place on them so we can get that number closer or even above 90%. We have branches above 90%, and those are the branches we're seeing growth. Obviously, the development conversion that we spoke about a minute ago is another lever we can pull. We've talked in the past, and I mentioned about how important communication is. Our customers don't leave us because of price. In an inflationary environment, we always have a little bit of an opportunity to get a little price to help us grow. Our customers leave us because we didn't do what we said we were going to do, and we didn't tell them what's going on when there's an issue with weather. So those are all in our control. So between those three items and we are putting a focus on new salespeople to get more people on the street. We've done a great job cutting overhead in this business to right size, the business support that we need to help our branches. And now we're going to fund more salespeople to go out there and help us get new accounts. We have so many levers that we are pulling right now. That's why I'm so confident. we are going to return to land growth in this business in 2025.

Yeah, Greg, I would just add, you know, you can sense the excitement on this side of the table here. I mean, we are, we are better positioned than ever to get back into our land growth and leverage our operating structure we have today. You know, we reduced SG&A in 2024 by almost $40 million, which in turn we're reinvesting back into the business, back into our frontline employees. back into new equipment with mowers and trucks. And if you think about where our position as a company, we have a balance sheet now that can support all the initiatives we're looking to do to drive growth, including investing in, you know, our Salesforce and sales technology. So we're better positioned to ever than to execute these strategies. And I think we've got a balance sheet that absolutely can support that. And just, you know, you think about this year, I have one more point on this, you know, We spent the most capital we've ever spent as a company in 2024, almost $130 million of gross capital. And if you look at our guide for 2025, we're going to do it again. So we have to continue to stay focused on the right priorities, taking care of our employees, getting them the right safety, getting them the right equipment to service our customers. We continue to do that. Everything Dale mentioned around customer retention, driving ancillary, development conversions, etc., that will all come to fruition. So we're better positioned ever to do that, and I think that's just an important point to note. That's why you've sent such excitement on this side of the table.

Yeah, makes sense. Appreciate that, Keller. And just kind of on the growth outlook, how does M&A fold into that? I'm just curious if your sense around timeline has changed at all in the last few months, and maybe give us a little bit of flavor of kind of what type of acquisitions – You know, you're looking at what's kind of the top of the list in terms of priorities.

So we don't have anything built into the guide for M&A. So any M&A we do will be accretive to the guidance that we placed out last night. So where we're focused, and this is the exciting part, we paused M&A 12 months ago when I joined, but we're ready. We've got a balance sheet that's ready. We have teams of people in the field that are ready. and they're starting to earn the right in many markets to ask for us to help supplement their business. And you heard me say, our new playbook is going to be drastically different than some of the M&A we did in the past. We're going to integrate them fast. We're going to get them to be part of One Bright View. We're going to make them part of this business, and we're going to help those businesses to grow. So short term, what do I think, Greg, we're going to focus on? I love specialty businesses. I love to make sure we can do things like tree care, like irrigation, like fertilization, even some type of aquatics in some markets where we can do pond maintenance for large HOAs. Those businesses I feel we could buy a smaller business and help grow it through our existing maintenance business. The other opportunity we'll look at is if we have markets we don't operate in today with maintenance land, we'll look at buying businesses in those markets and figure out a way that we can grow our business and grow to support customers that are national. What we probably won't be buying right now, and you saw our guide, we reduced snow guide because we want to go off realistic snow numbers and not count on 30-year average. So we won't be focused on businesses that primarily focus in snow maintenance or probably short-term with the great success we're having and getting maintenance to work with development. buying new development businesses, because if we feed those guys with capital, they're growing that business great. But, Brett, do you want to add anything?

I think we're all set. We're in a better position than we've ever been. We're ready. We have operators that are ready. We have a balance sheet that can support. So we're in a great position. When the right opportunity comes up, we'll be ready to execute.

All right. Thanks, guys. I'll leave it there. Thanks, Greg.

Thank you. Our next question will come from George Tong with Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. You're assuming 160 to 200 million of snow revenue in fiscal 2025. You just mentioned you're not assuming a return to long-term averages. Can you elaborate more on the assumptions underlying your snow forecasts?

Yeah, great question, George. So when I joined the company a year ago, You know, there's always the opportunity to estimate how much snow you're going to get. It's tough because if you look at the 30-year averages and you look at what we forecasted last year, we had anticipated snow coming in between 210 and 270 million or at 240 million midpoint based on the book of business we had. Unfortunately, snow came in at 221 million of revenue for the year. The good news is the previous year came in at 209. So instead of using a 30 year average, we've said we're going to use a much more realistic two years average to come up with the number. Now we had talked in the past about unwinding our BES aggregator business. They had some snow that we were also looking at eliminating. So roughly about $25 million of the reduction is to eliminate that BES business. So if you think about it, George, take like 215. Minus $25 million, that gets you to the high end or just above the midpoint of that range. And then the other focus we have is we want to make sure we provide our customers who use us for land all year round care. If customers come to us, they don't want to use us for land and their request is just to have us do time and material or per occurrence type billing, we don't want to take those risks. Snow is roughly six to seven percent of our overall revenue it cannot be the reason why we disappoint our investors on an annual basis so the guide today george is much much more realistic to what we feel is the low end of snow and then if we do more snow than that for some reason we get back to those 30-year averages it'll just be upside for all of our investors

Brett, you want to add anything? Yeah, I'll just add, George, going over the days where we used snow as an excuse, you saw that in 2024, you know, snow came in at the very low end of our original guidance range, and we still held and delivered the midpoint of our guide every step of the way throughout the year, and I think, as I mentioned earlier on the call, just doing what we said we were going to do. We are not using snow as an excuse, and I think you saw that in 2024, and You know, 25 is, again, much more realistic on a two-year average. You take the two-year average of $215 million, you step down $25 million or so for BES, and then you look at how we're trying to move customers from more of a variable rate contract to a fixed rate contract. So you take all those things into account, you land right at the midpoint of our guidance. But we feel really, you know, really good about the strategy in this business. And, you know, if it snows a little more, like they all said, we should have a little bit of upside, but we're not going to go back to some you know, 1995 average on how much it's known, we're saying much more relevant and realistic.

Got it. That's helpful. And then you had a strong development growth of 6.7% in fiscal 2024, and you're guiding to development growth of 3% to 6% in fiscal 2025. Can you talk about the puts and takes behind your assumption of growth deceleration in your development business in the year ahead?

Yeah, I'll just say at a high level, George, There's huge demand. Our backlog for our development business right now, most of our branches are sold out into 2026. So we feel great about the backlog. I'm not sure our growth was about 6.7% last year. And at the top end of our range, we're 6%. And obviously, you know, we don't want anybody anchoring on the midpoint when we go through this process and just thinking that we're not going to grow at the top end. We feel great about the development business. We have huge demand, and the more we take care of those customers from the start of the project in development to ongoing maintenance, the more those customers are going to see a value use in Brightview. But, Brett, I'll let you add.

Big, you know, George, development had a fantastic year. You talk about some of the changes that Dell has implemented under one Brightview, breaking down silos, operating together, working as one. I would say... Development benefited by far the most in 2024 from moving to a one bright new strategy. And kudos to the team. I mean, they had a fantastic year. Development in 2024, essentially from a margin perspective, is right back to pre-pandemic, pre-hyperinflation margin levels. All-time high margins in development. So kudos to that team. Just a fantastic year. 2025 setting up to have another year of growth. A lot of factors go into development, whether it's timing, weather, pushes, pulls, et cetera, but they will grow in development for sure. And the beauty of it is now with that business just operating so well, we can be a little bit more selective as we really look for those projects where development to spend their time on that will convert to long-term maintenance opportunities. So we are in this virtuous cycle as we think here today. And you know, we have a lot of credit for the development in 2024 results, and we, you know, we expect a lot to come in 2025.

Very helpful. Thank you.

Thank you, our next question. Thanks, George.

Thank you. Our next question will come from Stephanie Moore with Jeffries. Please go ahead.

Hello. This is Harold Anto on for Stephanie Moore. I guess just given the the CapEx, the 50 million CapEx expected to be paid. I guess, how should we think about the cadence of cash flow, free cash flow throughout the year?

So, yeah, Harold, first of all, send our congratulations to Stephanie and her baby, and we hope everything's going there, and thanks for joining the call. So, first, I want to comment. I'll let Brad talk about the cadence. I want to make sure everybody realizes we spent more gross capital When you add in that $51 million that we didn't pay for, that we will be paying for here in Q1 to 2024, then any year in the history of the company. I've said from day one, I believe there's a fleet strategy and we are implementing that. We brought in a new head of fleet. We are working with our branches. We're making sure we are upgrading that fleet. That is critical to making sure it represents our brand. So we made great progress last year, and I know there's some noise in timing, so let me let Brent comment on that. But I'm so proud of the team for how much fleet we were able to get as we went through 2024.

Great question. Look, I think there is a timing difference here in our financials, and hopefully we laid it out pretty clear in the slide deck. But if you look at really free cash flow this year at $145 million, We benefited from favorable negotiations with our fleet vendor where we received fleet in 2024, but we'll pay for that fleet in 2025. This happens pretty much every year, but given the enhanced fleet strategy, we felt important to call out a number of this side since it was very significant. If you think about our free cash flow, Harold, $145 million this year. Normalized for the 50th timing, it's right around $95 million. If you take our midpoint of our guide next year at 50, again, add back the timing that's going to happen in 25, that's about 100. So the last two years of free cash flow were right around $95 to $100 million. Great news is the last three years of free cash flow conversion is right around 30% when you think about our conversion, which is leaps and bounds ahead of where we were in 2022 when we had free cash flow conversion of almost zero. Fantastic progress in the balance sheet. We feel great about cash flow. And we're going to continue like Dale said to invest in our fleet, invest in our equipment and take care of our employees who in turn take care of our customers. Our balance sheet, Harold, is in the best shape it's ever been as a company. Our debt is almost 50% of where it was in 2022, 50% lower. Our leverage is greater than 50% lower. We've more than halved our leverage ratio. Our CapEx, all while doing those two things, is double. We're spending more in our fleet, more in our equipment to refresh that strategy, and we still have over $600 million of liquidity to reinvest back in the business. So we feel fantastic about where cash flow came in this year. Again, normalizing for that timing difference, we feel great about where it's going to come in next year and still investing and executing on our fleet strategy.

Thanks, guys. That's all from me.

Hey, thank you, Harold.

Thank you. Our next question will come from Jeffrey Stevenson with Loop Capital. Please go ahead.

Hey, thanks for taking my questions today, and congrats on the strong results this year. So it's great to see you're expecting another 60 to 100 basis points of maintenance margin expansion in fiscal 25. And is this being largely driven by an expected return to positive revenue growth related to your one bright piece strategy, or is there anything else that you would call out driving the stronger margin performance next year?

Look, I think it's a combination of multiple things. Growth organically is always the biggest lever, Jeff. If we can push more volume through our existing branches with our existing team members, that's always going to be the best business for us to grow. As you know, route density is something we are very focused on with our branches, making sure we're optimizing our ability to service customers effectively. So I think growth is a big part of it, but don't underestimate that ancillary revenue and that customer retention. The more we continue to improve customer retention, the better our relationships are with customers, the more they're going to be willing to spend on additional services. We've got to get away from having customers asking us questions about service and engaging on us on how to beautify their properties. So the more we spend servicing customers, the more customer retention goes up, the better off we're going to be. But Brett, you want to add anything?

Yeah, Jeff, I think a lot is underpinned by growth. And we're better positioned today than we've ever been from an operating leverage perspective. Our SG&A on a TTM basis is down almost 100 basis points. So if you think about the size and scale advantage of advantages of bright view and being able to use that operating leverage as an advantage as we grow, dropping significant margins in the bottom line, I think that that's a big piece of it, but there's a lot of factors that go into, we're going to reinvest in the business. We're going to make sure we're taking care of our frontline employees. We're going to reinvest in the sales force. We've got some investments we're going to make this year too, but all that's incorporated into our guide. And, you know, yes, we're, we're getting back to where we went public. You know, it was, 2018, we went public at about 12.5% margins. You know, Dale said, I think his first month in the chair, two or three years, we'll be back there. Well, it's two years, and if we hit this guy, we'll essentially be back there at the end of 25. So we feel great about the progress the company's making and, you know, huge excitement in 2025.

That's great to hear. And then have you seen, you know, sequential improvement in ancillary maintenance demand as we move through, you know, the back half of the year from, you know, the increased customer retention rates and then benefits from, you know, commodity-based deflation as well with, you know, previously delayed projects moving forward. And then also as we look in the next year, are you expecting any, you know, benefit from the cleanup efforts related to the recent hurricanes? And would that be incremental to your guidance?

Yeah, yeah, great question. First of all, first and foremost, our employees are safe and our hearts are out for all the people affected by the named storms. that occurred almost back to back across the state of Florida. And the first one, obviously all the way up into the Carolina. So, uh, we didn't build much into our guide. We had got some early indication with the first storm of some opportunities, but I would tell you, Jeff, as soon as we started quoting work, all of a sudden that second storm came in and it caused even more damage, which created even more cleanup for us to do so. a lot of our customers asked us to come out and re-quote. So we do see an opportunity for us to continue to see upside in that. And, you know, I think Brett can comment on the trend that we've seen because it ties to what we're seeing in that, you know, core business shrinkage. But we are seeing, as we improve retention, customers requesting more and more ancillary work. But, Brett, I'll let you comment.

Yeah, Jeff, I'll comment again on this. I mean, I think it's important just to – drive home this point that the trend in the underlying core organic land business is really starting to turn the corner. You know, Q1 of last year, we shrunk 4%. Q2, Q3 shrunk 3%. And I think Tim mentioned earlier, Q4 shrunk about 1%. So 4 went to 3, went to 1. And you look at kind of Q1, Q2, we got some noise to step over in BES and lawns. But, you know, we expect that 1 to shrink in Q1 in the core and get something You know, closer to flat, closer to flat in Q2. Keep in mind, there's only about a third of our land business happens in the first half of the year. By the time we get to Q3, Q4, really the bulk of our land business, that's when we expect that trend to turn the corner and just continue to focus on taking care of our employees who take care of our customers, driving that customer retention, investing in our sales force, focus on development conversions. We know the levers, as Dale mentioned earlier. We do that. We feel very confident that come Q3, Q4, we'll see that land growth engine starting to take off.

Great. Thank you. Thank you. Thanks, Jeff.

Again, for a final reminder, if you would like to ask a question at this time, please press star 1. And we'll pause just a moment to allow any additional questions to queue. And at this time, I'm showing no further questions. I'd like to turn the call back over to Mr. Asplund for closing remarks.

Thank you, operator. I'll close by reiterating that we have a growing level of confidence regarding the initiatives we have in place and the impact they will have on revenue growth and the broader transformation of Brightview. On February 19th, we will share additional details during an investor day in New York City to elaborate on this, as well as look at some long-term outlooks. In closing, our objectives are clear, and we remain committed to becoming one Brightview, growing profitably, and creating meaningful shareholder value. Thank you, operator.

And with that said, you can now end the call.

Thank you. This does conclude the Brightview fourth quarter and full year 2024 earnings call. Please disconnect your line at this time and have a wonderful day.