BrightView Holdings, Inc. Q4 FY2024 earnings call

Dale Asplund highlighted that in 2024, BrightView delivered breakout results while transforming the business, including unwinding BES, selling the U.S. lawns business, streamlining the operating structure, and snow being below original expectations. The company is positioned to grow EBITDA in 2025. There is a focus on prioritizing employees and customers to build the One BrightView culture. Brett Urban discussed the 2024 total revenue, the profitability with adjusted EBITDA growth and margin expansion, free cash flow of $145 million in 2024 compared to $80 million in the prior year, capital expenditures, and a net leverage of 2.3x which is the lowest in the company's history. For 2025, the guidance includes revenue and EBITDA ranges, expectations for land, snow, and development, margin expansion assumptions, and the elimination of the corporate segment with corporate expenses being allocated into the operating segments.

In the fourth quarter, total revenue was $729 million, with an approximate 2% increase when adjusting for the U.S. lawn sale and the unwinding of BES. Total adjusted EBITDA for the fourth quarter was $105.2 million, which was a $3.6 million increase or 4% higher compared to the prior year period. Adjusted EBITDA margins expanded by 70 basis points company-wide. The maintenance segment's adjusted EBITDA margin expanded by 110 basis points, and the development segment's adjusted EBITDA for the fourth quarter was $41 million, a record for the segment, with a 390 basis point expansion in its margin. For fiscal 2024, it was a breakout year with record EBITDA performance and a 110 basis point margin expansion from fiscal '22. Regarding 2025 guidance, revenue is expected to be in the range of $2.75 billion to $2.84 billion, and adjusted EBITDA is projected to be between $335 million and $355 million. For the land business, core land revenue is expected to increase by 1% to 3%, and including the impact of unwinding the BES business, total land revenue is expected to be flat to a 2% increase. Snow revenue is anticipated to be in the range of $160 million to $200 million, and development revenue is expected to increase by 3% to 6%. The maintenance segment's margins are expected to expand by 60 to 100 basis points, and the development segment's margins are expected to expand by 10 to 30 basis points.

For fiscal 2025, revenue is expected to be between $2.75 billion and $2.84 billion, and adjusted EBITDA is expected to be in the range of $335 million to $355 million. For the land business, core land revenue is projected to increase by 1% to 3%, and with the impact of unwinding the BES business, total land revenue is expected to be flat to a 2% increase. Snow revenue is anticipated to be $160 million to $200 million with strategic sales to reduce revenue volatility. Development revenue is expected to increase by 3% to 6%. The maintenance segment's margins are expected to expand by 60 to 100 basis points, and the development segment's margins are expected to expand by 10 to 30 basis points. Free cash flow is expected to be in the range of $40 million to $60 million, but when normalizing for the capital expenditure timing difference, the free cash flow range is $90 million to $110 million.

Potential risks include snow revenue volatility due to the implementation of strategic sales in the snow business and market conditions. There is also uncertainty related to the unwinding of the BES business and the sale of the U.S. lawns business, as well as market environment changes that could impact business growth.

Q: Bob Labick asked about incremental steps for employee and customer retention in 2025 and the development-maintenance collaboration.

A: Dale Asplund mentioned launching an employee engagement survey, focusing on hourly frontline employees with initiatives like better benefits, and Brett Urban added on streamlining the new operating structure and reinvesting in the front line.

Q: Tim Mulrooney inquired about the growth trajectory of the maintenance land business.

A: Dale Asplund and Brett Urban discussed the improvement in customer retention, the trend of core land growth shifting from negative to positive, and the expected growth in the latter part of 2025.

Q: Greg Palm asked about M&A in relation to land growth.

A: Dale Asplund stated the focus on specialty businesses and markets not currently operated in, and Brett Urban added on being ready with a balance sheet to execute when the right opportunity arises.

Q: Keen Fai Tong asked about the assumptions behind the snow revenue forecast.

A: Dale Asplund explained the use of a two-year average instead of a 30-year average, unwinding the BES business, and Brett Urban added on providing more realistic guidance.

Q: Harold Antor asked about the cadence of capital expenditures.

A: Dale Asplund and Brett Urban discussed the fleet strategy, the timing difference in capital expenditures, and the normalized free cash flow.

Q: Jeffrey Stevenson asked about the maintenance margin expansion.

A: Dale Asplund and Brett Urban discussed growth, route density, customer retention, and operating leverage contributing to margin expansion.