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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38579

 

BrightView Holdings, Inc.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

46-4190788

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

980 Jolly Road

Blue Bell, Pennsylvania

19422

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (484) 567-7204

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol

 

Name of exchange on which registered

Common Stock, Par Value $0.01 Per Share

 

BV

 

New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

The number of shares of Registrant’s Common Stock outstanding as of April 30, 2024 was 94,500,000.

 


Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

6

Item 1.

Financial Statements (Unaudited)

6

Consolidated Balance Sheets

6

Consolidated Statements of Operations

7

Consolidated Statements of Comprehensive Income (Loss)

8

 

Consolidated Statements of Stockholders’ Equity

9

Consolidated Statements of Cash Flows

10

Notes to Unaudited Consolidated Financial Statements

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

41

Item 4.

Controls and Procedures

41

PART II.

OTHER INFORMATION

42

Item 1.

Legal Proceedings

42

Item 1A.

Risk Factors

42

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 3.

Defaults Upon Senior Securities

42

Item 4.

Mine Safety Disclosures

42

Item 5.

Other Information

42

Item 6.

Exhibits

43

Signatures

 

 

2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains “forward-looking statements” within the meaning of the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. All statements, other than statements of historical facts included in this Form 10¬Q, including statements concerning our plans, objectives, goals, beliefs, business outlook, business trends, expectations regarding our industry, strategy, future events, future operations, future liquidity and financial position, future revenues, project costs, prospects, plans and objectives of management and other information, may be forward-looking statements.

Words such as “outlook,” “guidance,” “projects,” “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates,” “continues,” or “anticipates,” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, or guarantees of future performance and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved, and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-Q. Such risks, uncertainties and other important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth under the heading “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Some of the key factors that could cause actual results to differ from our expectations include risks related to:

general business, economic, and financial market conditions;
increases in raw material costs, fuel prices, wages and other operating costs, and changes in our ability to source adequate supplies and materials in a timely manner;
competitive industry pressures;
the failure to retain current customers, renew existing customer contracts and obtain new customer contracts;
the failure to enter into profitable contracts, or maintaining customer contracts that are unprofitable;
a determination by customers to reduce their outsourcing or use of preferred vendors;
the dispersed nature of our operating structure;
our ability to implement our business strategies and achieve our growth objectives;
the possibility that the anticipated benefits from our business acquisitions will not be realized in full or at all or may take longer to realize than expected;
the possibility that costs or difficulties related to the integration of acquired businesses’ operations will be greater than expected and the possibility that integration efforts will disrupt our business and strain management time and resources;
the potential impact on our revenues and profitability caused by any disposition of assets or discontinuation of business lines;
the seasonal nature of our landscape maintenance services;
our dependence on weather conditions and the impact of severe weather and climate change on our business;
disruptions in our supply chain and changes in our ability to source adequate supplies and materials in a timely manner;
any failure to accurately estimate the overall risk, requirements, or costs when we bid on or negotiate contracts that are ultimately awarded to us;
the conditions and periodic fluctuations of real estate markets, including residential and commercial construction;
the level, timing and location of snowfall;

3


our ability to retain or hire our executive management and other key personnel, and particularly reflecting competition for talent in light of non-compete rulemaking and legislation;
our ability to attract and retain field and hourly employees, trained workers, and third-party contractors and re-employ seasonal workers;
any failure to properly verify employment eligibility of our employees;
subcontractors taking actions that harm our business;
our recognition of future impairment charges;
laws and governmental regulations, including those relating to employees, wage and hour, immigration, human health, safety, transportation and the associated financial impact of such regulations;
environmental, health and safety laws and regulations, including regulatory costs, claims and litigation related to the use of chemicals and pesticides by employees and related third-party claims;
the distraction and impact caused by litigation, of adverse litigation judgments and settlements resulting from legal proceedings;
tax increases and changes in tax rules;
increase in on-job accidents involving employees;
any failure, inadequacy, interruption, security failure or breach of our information technology systems;
compliance with data privacy requirements;
our ability to adequately protect our intellectual property;
restrictions imposed by our debt agreements that limit our flexibility in operating our business;
increases in interest rates governing our variable rate indebtedness increasing the cost of servicing our substantial indebtedness;
our ability to generate sufficient cash flow to satisfy our significant debt service obligations;
our ability to obtain additional financing to fund future working capital, capital expenditures, investments or acquisitions, or other general corporate requirements;
risks related to counterparty credit worthiness or non-performance of the derivative financial instruments we utilize;
any future sales, or the perception of future sales, by us or our affiliates, which could cause the market price for our common stock to decline;
the ability of KKR BrightView Aggregator L.P., Birch-OR Equity Holdings, LLC and Birch Equity Holdings, LP, which collectively hold approximately 70.5% of our shares as of March 31, 2024, to exert significant influence over us;
the fact that the holders of our Series A Preferred Stock may have different interests from and vote their shares in a manner deemed adverse to, holders of our common stock;
the dividend, liquidation, and redemption rights of the holders of our Series A Preferred Stock;
occurrence of natural disasters, terrorist attacks, or other external events;
occurrence of a pandemic, epidemic or other public health emergency;
heightened inflation, geopolitical conflicts, recession, financial market disruptions and other economic conditions;
our ability to pursue and achieve our environmental, social and corporate governance goals and targets and the possibility that complying with such standards and meeting our goals may be significantly more costly than anticipated; and
costs and requirements imposed as a result of maintaining compliance with the requirements of being a public company.

4


We caution you that the risks, uncertainties, and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits, or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances, any change in assumptions, beliefs or expectations or any change in circumstances upon which any such forward-looking statements are based, except as required by law.

5


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

BrightView Holdings, Inc.

Consolidated Balance Sheets

(Unaudited)

(In millions, except par value and share data)

 

 

 

 

March 31,
2024

 

 

September 30,
2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

177.3

 

 

$

67.0

 

Accounts receivable, net

 

 

420.8

 

 

 

442.3

 

Unbilled revenue

 

 

112.2

 

 

 

143.5

 

Other current assets

 

 

88.3

 

 

 

89.3

 

Total current assets

 

 

798.6

 

 

 

742.1

 

Property and equipment, net

 

 

304.0

 

 

 

315.2

 

Intangible assets, net

 

 

112.7

 

 

 

132.3

 

Goodwill

 

 

2,015.7

 

 

 

2,021.4

 

Operating lease assets

 

 

84.2

 

 

 

86.1

 

Other assets

 

 

46.4

 

 

 

55.1

 

Total assets

 

$

3,361.6

 

 

$

3,352.2

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

131.4

 

 

$

136.2

 

Deferred revenue

 

 

103.5

 

 

 

68.2

 

Current portion of self-insurance reserves

 

 

52.6

 

 

 

54.8

 

Accrued expenses and other current liabilities

 

 

164.4

 

 

 

180.2

 

Current portion of operating lease liabilities

 

 

25.3

 

 

 

27.3

 

Total current liabilities

 

 

477.2

 

 

 

466.7

 

Long-term debt, net

 

 

880.4

 

 

 

888.1

 

Deferred tax liabilities

 

 

43.1

 

 

 

51.1

 

Self-insurance reserves

 

 

108.3

 

 

 

105.1

 

Long-term operating lease liabilities

 

 

65.2

 

 

 

65.1

 

Other liabilities

 

 

36.4

 

 

 

34.6

 

Total liabilities

 

 

1,610.6

 

 

 

1,610.7

 

Mezzanine equity:

 

 

 

 

 

 

Series A convertible preferred shares, $0.01 par value, 7% cumulative dividends; 500,000 shares issued and outstanding as of March 31, 2024 and September 30, 2023, aggregate liquidation preference of $512.0 and $503.2 as of March 31, 2024 and September 30, 2023, respectively

 

 

507.1

 

 

 

498.2

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued or outstanding as of March 31, 2024 and September 30, 2023

 

 

 

 

 

 

Common stock, $0.01 par value; 500,000,000 shares authorized; 107,900,000 and 106,600,000 shares issued and 94,500,000 and 93,600,000 shares outstanding as of March 31, 2024 and September 30, 2023, respectively

 

 

1.1

 

 

 

1.1

 

Treasury stock, at cost; 13,400,000 and 13,000,000 shares as of March 31, 2024 and September 30, 2023, respectively

 

 

(172.9

)

 

 

(170.4

)

Additional paid-in capital

 

 

1,523.4

 

 

 

1,530.8

 

Accumulated deficit

 

 

(118.0

)

 

 

(135.3

)

Accumulated other comprehensive income

 

 

10.3

 

 

 

17.1

 

Total stockholders’ equity

 

 

1,243.9

 

 

 

1,243.3

 

Total liabilities, mezzanine equity and stockholders’ equity

 

$

3,361.6

 

 

$

3,352.2

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

6


BrightView Holdings, Inc.

Consolidated Statements of Operations

(Unaudited)

(In millions, except per share data)

 

 

 

Three Months Ended
March 31,

 

 

Six Months Ended
March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net service revenues

 

$

672.9

 

 

$

650.4

 

 

$

1,299.6

 

 

$

1,306.3

 

Cost of services provided

 

 

520.9

 

 

 

503.3

 

 

 

1,013.7

 

 

 

1,011.6

 

Gross profit

 

 

152.0

 

 

 

147.1

 

 

 

285.9

 

 

 

294.7

 

Selling, general and administrative expense

 

 

125.0

 

 

 

138.7

 

 

 

255.0

 

 

 

276.4

 

(Gain) on divestiture

 

 

(43.9

)

 

 

 

 

 

(43.9

)

 

 

 

Amortization expense

 

 

8.7

 

 

 

11.0

 

 

 

18.8

 

 

 

22.9

 

Income (loss) from operations

 

 

62.2

 

 

 

(2.6

)

 

 

56.0

 

 

 

(4.6

)

Other (income)

 

 

(0.8

)

 

 

(0.6

)

 

 

(1.9

)

 

 

(1.4

)

Interest expense, net

 

 

16.0

 

 

 

27.7

 

 

 

33.0

 

 

 

50.9

 

Income (loss) before income taxes

 

 

47.0

 

 

 

(29.7

)

 

 

24.9

 

 

 

(54.1

)

Income tax expense (benefit)

 

 

13.3

 

 

 

(7.7

)

 

 

7.6

 

 

 

(13.2

)

Net income (loss)

 

$

33.7

 

 

$

(22.0

)

 

$

17.3

 

 

$

(40.9

)

Less: dividends on Series A convertible preferred shares

 

 

8.9

 

 

 

-

 

 

 

17.8

 

 

 

-

 

Net income (loss) attributable to common stockholders

 

$

24.8

 

 

$

(22.0

)

 

$

(0.5

)

 

$

(40.9

)

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings (loss) per share

 

$

0.17

 

 

$

(0.23

)

 

$

(0.01

)

 

$

(0.44

)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

7


BrightView Holdings, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In millions)

 

 

 

Three Months Ended
March 31,

 

 

Six Months Ended
March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net income (loss)

 

$

33.7

 

 

$

(22.0

)

 

$

17.3

 

 

$

(40.9

)

Net derivative gains (losses) and other costs arising during the period, net of tax expense (benefit) of $2.9; $0.4; $(0.9); and $0.4, respectively (1)

 

 

8.0

 

 

 

1.2

 

 

 

(2.6

)

 

 

1.2

 

Reclassification of (gains) into net income (loss), net of tax (expense) of $(0.9); $(0.4); $(1.4); and $(1.0), respectively

 

 

(1.9

)

 

 

(0.9

)

 

 

(4.2

)

 

 

(3.3

)

Other comprehensive income (loss)

 

 

6.1

 

 

 

0.3

 

 

 

(6.8

)

 

 

(2.1

)

Comprehensive income (loss)

 

$

39.8

 

 

$

(21.7

)

 

$

10.5

 

 

$

(43.0

)

 

(1)
Other costs include the effects of foreign currency translation adjustments which were immaterial during the periods presented.

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

8


BrightView Holdings, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

Three and Six Months Ended March 31, 2024 and 2023

(Unaudited)

(In millions)

 

 

Stockholders’ Equity

 

Mezzanine Equity

 

 

Common Stock

 

Additional
Paid-In

 

Accumulated

 

Accumulated
Other
Comprehensive

 

Treasury

 

Total
Stockholders’

 

Preferred

 

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Income (Loss)

 

Stock

 

Equity

 

Shares

 

Amount

 

Balance, December 31, 2023

 

107.8

 

$

1.1

 

$

1,527.4

 

$

(151.7

)

$

4.2

 

$

(172.9

)

$

1,208.1

 

 

0.5

 

$

507.1

 

Net income

 

 

 

 

 

 

 

33.7

 

 

 

 

 

 

33.7

 

 

 

 

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

6.1

 

 

 

 

6.1

 

 

 

 

 

Capital contributions and issuance of common stock

 

0.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

4.9

 

 

 

 

 

 

 

 

4.9

 

 

 

 

 

Series A Preferred Stock dividends

 

 

 

 

 

(8.9

)

 

 

 

 

 

 

 

(8.9

)

 

 

 

 

Balance, March 31, 2024

 

107.9

 

$

1.1

 

$

1,523.4

 

$

(118.0

)

$

10.3

 

$

(172.9

)

$

1,243.9

 

 

0.5

 

$

507.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2023

 

106.6

 

$

1.1

 

$

1,530.8

 

$

(135.3

)

$

17.1

 

$

(170.4

)

$

1,243.3

 

 

0.5

 

$

498.2

 

Net income

 

 

 

 

 

 

 

17.3

 

 

 

 

 

 

17.3

 

 

 

 

 

Other comprehensive (loss), net of tax

 

 

 

 

 

 

 

 

 

(6.8

)

 

 

 

(6.8

)

 

 

 

 

Capital contributions and issuance of common stock

 

1.3

 

 

 

 

0.4

 

 

 

 

 

 

 

 

0.4

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

10.0

 

 

 

 

 

 

 

 

10.0

 

 

 

 

 

Repurchase of common stock and distributions

 

 

 

 

 

 

 

 

 

 

 

(2.5

)

 

(2.5

)

 

 

 

 

Series A Preferred Stock dividends

 

 

 

 

 

(17.8

)

 

 

 

 

 

 

 

(17.8

)

 

 

 

8.9

 

Balance, March 31, 2024

 

107.9

 

$

1.1

 

$

1,523.4

 

$

(118.0

)

$

10.3

 

$

(172.9

)

$

1,243.9

 

 

0.5

 

$

507.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

Mezzanine Equity

 

 

Common Stock

 

Additional
Paid-In

 

Accumulated

 

Accumulated
Other
Comprehensive

 

Treasury

 

Total
Stockholders’

 

Preferred

 

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Income (Loss)

 

Stock

 

Equity

 

Shares

 

Amount

 

Balance, December 31, 2022

 

106.4

 

$

1.1

 

$

1,516.5

 

$

(146.5

)

$

(0.4

)

$

(169.4

)

$

1,201.3

 

 

 

$

 

Net (loss)

 

 

 

 

 

 

 

(22.0

)

 

 

 

 

 

(22.0

)

 

 

 

 

Other comprehensive (loss), net of tax

 

 

 

 

 

 

 

 

 

0.3

 

 

 

 

0.3

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

6.3

 

 

 

 

 

 

 

 

6.3

 

 

 

 

 

Balance, March 31, 2023

 

106.4

 

$

1.1

 

$

1,522.8

 

$

(168.5

)

$

(0.1

)

$

(169.4

)

$

1,185.9

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2022

 

105.7

 

$

1.1

 

$

1,509.5

 

$

(127.6

)

$

2.0

 

$

(168.2

)

$

1,216.8

 

 

 

$

 

Net (loss)

 

 

 

 

 

 

 

(40.9

)

 

 

 

 

 

(40.9

)

 

 

 

 

Other comprehensive (loss), net of tax

 

 

 

 

 

 

 

 

 

(2.1

)

 

 

 

(2.1

)

 

 

 

 

Capital contributions and issuance of common stock

 

0.7

 

 

 

 

1.4

 

 

 

 

 

 

 

 

1.4

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

11.9

 

 

 

 

 

 

 

 

11.9

 

 

 

 

 

Repurchase of common stock and distributions

 

 

 

 

 

 

 

 

 

 

 

(1.2

)

 

(1.2

)

 

 

 

 

Balance, March 31, 2023

 

106.4

 

$

1.1

 

$

1,522.8

 

$

(168.5

)

$

(0.1

)

$

(169.4

)

$

1,185.9

 

 

 

$

 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

9


BrightView Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In millions)

 

 

 

Six Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

17.3

 

 

$

(40.9

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

51.7

 

 

 

54.5

 

Amortization of intangible assets

 

 

18.8

 

 

 

22.9

 

Amortization of financing costs and original issue discount

 

 

1.3

 

 

 

1.8

 

Deferred taxes

 

 

(7.2

)

 

 

(17.2

)

Equity-based compensation

 

 

10.0

 

 

 

11.9

 

Realized (gain) on hedges

 

 

(5.6

)

 

 

(4.3

)

Gain on divestiture

 

 

(43.9

)

 

 

 

Other non-cash activities

 

 

2.1

 

 

 

0.9

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

16.8

 

 

 

(17.2

)

Unbilled and deferred revenue

 

 

67.4

 

 

 

37.5

 

Other operating assets

 

 

4.3

 

 

 

23.3

 

Accounts payable and other operating liabilities

 

 

(23.5

)

 

 

(18.2

)

Net cash provided by operating activities

 

 

109.5

 

 

 

55.0

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(22.7

)

 

 

(42.7

)

Proceeds from sale of property and equipment

 

 

2.6

 

 

 

3.6

 

Business acquisitions, net of cash acquired

 

 

 

 

 

(13.8

)

Proceeds from divestiture

 

 

51.6

 

 

 

 

Other investing activities

 

 

0.8

 

 

 

1.1

 

Net cash provided (used) by investing activities

 

 

32.3

 

 

 

(51.8

)

Cash flows from financing activities:

 

 

 

 

 

 

Repayments of finance lease obligations

 

 

(15.5

)

 

 

(14.7

)

Repayments of term loan

 

 

 

 

 

(6.0

)

Repayments of receivables financing agreement

 

 

(9.5

)

 

 

(279.5

)

Repayments of revolving credit facility

 

 

 

 

 

(33.5

)

Proceeds from receivables financing agreement, net of issuance costs

 

 

0.5

 

 

 

298.0

 

Proceeds from revolving credit facility

 

 

 

 

 

33.5

 

Debt issuance and prepayment costs

 

 

(0.4

)

 

 

 

Proceeds from issuance of common stock, net of share issuance costs

 

 

0.6

 

 

 

0.7

 

Repurchase of common stock and distributions

 

 

(2.5

)

 

 

(1.2

)

Contingent business acquisition payments

 

 

(4.7

)

 

 

(9.6

)

Net cash (used) by financing activities

 

 

(31.5

)

 

 

(12.3

)

Net change in cash and cash equivalents

 

 

110.3

 

 

 

(9.1

)

Cash and cash equivalents, beginning of period

 

 

67.0

 

 

 

20.1

 

Cash and cash equivalents, end of period

 

$

177.3

 

 

$

11.0

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

Cash (received) paid for income taxes, net

 

$

4.1

 

 

$

(21.8

)

Cash paid for interest

 

$

35.3

 

 

$

37.2

 

Non-cash Series A Preferred Stock dividends

 

$

8.9

 

 

$

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

10


BrightView Holdings, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(In millions, except per share and share data)

 

1. Business

BrightView Holdings, Inc. (the “Company” and, collectively with its consolidated subsidiaries, “BrightView”) provides landscape maintenance and enhancements, landscape development, snow removal and other landscape related services for commercial customers throughout the United States. BrightView is aligned into two reportable segments: Maintenance Services and Development Services. Prior to its initial public offering completed in July 2018 (the “IPO”), the Company was a wholly-owned subsidiary of BrightView Parent L.P. (“Parent”), an affiliate of KKR & Co. Inc. (“KKR”). The Parent and Company were formed through a series of transactions entered into by KKR to acquire the Company on December 18, 2013 (the “KKR Acquisition”). The Parent was dissolved in August 2018 following the IPO.

Basis of Presentation

These consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim reporting and are unaudited.

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, including normal, recurring accruals that are necessary for a fair presentation of the Company’s operations for the periods presented in conformity with GAAP. All intercompany activity and balances have been eliminated from the consolidated financial statements. The consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year.

The Consolidated Balance Sheet as of September 30, 2023, presented herein, has been derived from the Company’s audited consolidated financial statements as of and for the fiscal year ended September 30, 2023, but does not include all disclosures required by GAAP, for annual financial statements. For a more complete discussion of the Company’s accounting policies and certain other information, refer to the audited consolidated financial statements and the notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2023, filed with the Securities and Exchange Commission (“SEC”).

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. On an ongoing basis, management reviews its estimates, including those related to allowances for doubtful accounts, revenue recognition, self-insurance reserves, estimates related to the Company’s assessment of goodwill for impairment, useful lives for depreciation and amortization, realizability of deferred tax assets, and litigation based on currently available information. Changes in facts and circumstances may result in revised estimates and actual results may differ from estimates.

2. Recent Accounting Pronouncements

Reference Rate Reform

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting which provides optional expedients and exceptions for the accounting for contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. In January 2021, the FASB issued ASU 2021-01 to clarify the scope of certain optional expedients for derivatives that are affected by the discounting transition. In December 2022, the FASB issued ASU 2022-06 to defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. As of March 31, 2024, the Company was not party to any contracts, hedging relationships, or other transactions affected by reference rate reform.

Segment Reporting

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount

11


and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The purpose of the guidance is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. The amendment is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. The Company is in the process of evaluating the impact of ASU No. 2023-07 on its consolidated financial statements.

Income Taxes

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU expands public entities tax disclosures including improving disclosures surrounding the company's rate reconciliation, cash taxes paid, and disaggregation of income tax expense (or benefit) from continuing operations. The amendment is effective for annual periods beginning after December 15, 2024. The Company is in the process of evaluating the impact of ASU No. 2023-09 on its consolidated financial statements.

3. Revenue

The Company’s revenue is generated from Maintenance Services and Development Services. The Company generally recognizes revenue from the sale of services as the services are performed, typically ratably over the term of the contract(s), which the Company believes to be the best measure of progress. The Company recognizes revenues as it transfers control of products and services to its customers. The Company recognizes revenue in an amount reflecting the total consideration it expects to receive from the customer. Revenue is recognized according to the following five step model: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenues when a performance obligation is satisfied. The Company determined that for contracts containing multiple performance obligations, stand-alone selling price is readily determinable for each performance obligation and therefore allocation of the transaction price to multiple performance obligations is not necessary. The transaction price will include estimates of variable consideration, such as returns and provisions for doubtful accounts and sales incentives, to the extent it is probable that a significant reversal of revenue recognized will not occur. In all cases, when a sale is recorded by the Company, no significant uncertainty exists surrounding the purchaser’s obligation to pay.

Maintenance Services

The Company’s Maintenance Services revenues are generated primarily through landscape maintenance services and snow removal services. Landscape maintenance services that are primarily viewed as non-discretionary, such as lawn care, mowing, gardening, mulching, leaf removal, irrigation and tree care, are provided under recurring annual contracts, which typically range from one to three years in duration and are generally cancellable by the customer with 30-90 days’ notice. Snow removal services are provided on either fixed fee based contracts or per occurrence contracts. Both landscape maintenance services and snow removal services can also include enhancement services that represent supplemental maintenance or improvement services generally provided under contracts of short duration related to specific services. Revenue for landscape maintenance and snow removal services under fixed fee models is recognized over time using an output based method. Additionally, a portion of the Company’s recurring fixed fee landscape maintenance and snow removal services are recorded under the series guidance. The right to invoice practical expedient is generally applied to revenue related to landscape maintenance and snow removal services performed in relation to per occurrence contracts as well as enhancement services. When use of the practical expedient is not appropriate for these contracts, revenue is recognized using a cost-to-cost input method. Fees for contracted landscape maintenance services are typically billed on an equal monthly basis. Fees for fixed fee snow removal services are typically billed on an equal monthly basis during snow season, while fees for time and material or other activity-based snow removal services are typically billed as the services are performed. Fees for enhancement services are typically billed as the services are performed.

Development Services

Development Services revenues are generated primarily through landscape architecture and development services. These revenues are primarily recognized over time using the cost-to-cost input method, measured by the percentage of cost incurred to date to the estimated total cost for each contract, which we believe to be the best measure of progress. The full amount of anticipated losses on contracts is recorded as soon as such losses can be estimated. These losses are immaterial to current and historical operations. Changes in job performance, job conditions, and estimated profitability, including final contract settlements, may result in revisions to costs and revenue and are recognized in the period in which the revisions are determined.

 

12


Disaggregation of revenue

The following table presents the Company’s reportable segment revenues, disaggregated by revenue type. The Company disaggregates revenue from contracts with customers into major services lines. The Company has determined that disaggregating revenue into these categories depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. As noted in the business segment reporting information in Note 12 “Segments”, the Company’s reportable segments are Maintenance Services and Development Services.

 

 

 

Three Months Ended
March 31,

 

 

Six Months Ended
March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Landscape Maintenance

 

$

337.4

 

 

$

359.0

 

 

$

740.1

 

 

$

780.5

 

Snow Removal

 

 

173.1

 

 

 

138.8

 

 

 

212.7

 

 

 

200.6

 

Maintenance Services

 

 

510.5

 

 

 

497.8

 

 

 

952.8

 

 

 

981.1

 

Development Services

 

 

164.4

 

 

 

155.6

 

 

 

349.7

 

 

 

329.9

 

Eliminations

 

 

(2.0

)

 

 

(3.0

)

 

 

(2.9

)

 

 

(4.7

)

Net service revenues

 

$

672.9

 

 

$

650.4

 

 

$

1,299.6

 

 

$

1,306.3

 

Remaining Performance Obligations

Remaining performance obligations represent the estimated revenue expected to be recognized in the future related to performance obligations which are fully or partially unsatisfied at the end of the period.

As of March 31, 2024, the estimated future revenues for remaining performance obligations that are part of a contract that has an original expected duration of greater than one year was approximately $519.1. The Company expects to recognize revenue on 52% of the remaining performance obligations over the next 12 months and an additional 48% over the 12 months thereafter.

Contract Assets and Liabilities

When a contract results in revenue being recognized in excess of the amount the Company has invoiced or has the right to invoice to the customer, a contract asset is recognized. Contract assets are transferred to Accounts receivable, net when the rights to the consideration become unconditional. Contract assets are presented as Unbilled revenue on the Consolidated Balance Sheets.

There were $92.4 of amounts billed and $61.1 of additions to our unbilled revenue balance during the six month period ended March 31, 2024.

Contract liabilities consist of payments received from customers, or such consideration that is contractually due, in advance of providing the product or performing services such that control has not passed to the customer. Contract liabilities are presented as Deferred revenue on the Consolidated Balance Sheets.

Changes in Deferred revenue for the six month period ended March 31, 2024 were as follows:

 

 

 

Deferred
Revenue

 

Balance, September 30, 2023

 

$

68.2

 

Recognition of revenue

 

 

(511.4

)

Deferral of revenue

 

 

547.6

 

Divestiture (Note 6)

 

 

(0.9

)

Balance, March 31, 2024

 

$

103.5

 

Practical Expedients and Exemptions

The Company offers certain interest-free contracts to customers where payments are received over a period not exceeding one year. Additionally, certain Maintenance Services and Development Services customers may pay in advance for services. The Company does not adjust the promised amount of consideration for the effects of these financing components. At contract inception, the period of time between the performance of services and the customer payment is one year or less.

As permitted under the practical expedient available under ASU No. 2014-09, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the

 

13


series guidance and (iii) contracts for which the Company recognizes revenue at the amount which we have the right to invoice for services performed.

4. Accounts Receivable, net

Accounts receivable of $420.8 and $442.3, is net of an allowance for doubtful accounts of $9.0 and $5.1 and includes amounts of retention on incomplete projects to be completed within one year of $60.8 and $58.7 as of March 31, 2024 and September 30, 2023, respectively.

5. Property and Equipment, net

Property and equipment, net consists of the following:

 

 

 

Useful Life

 

March 31,
2024

 

 

September 30,
2023

 

Land

 

 

$

44.7

 

 

$

44.7

 

Buildings and leasehold improvements

 

2-40 yrs.

 

 

46.7

 

 

 

45.6

 

Operating equipment

 

2-7 yrs.

 

 

350.4

 

 

 

338.8

 

Transportation vehicles

 

3-7 yrs.

 

 

356.6

 

 

 

351.9

 

Office equipment and software

 

3-10 yrs.

 

 

75.7

 

 

 

68.7

 

Construction in progress

 

 

 

4.1

 

 

 

7.7

 

Property and equipment

 

 

 

 

878.2

 

 

 

857.4

 

Less: Accumulated depreciation

 

 

 

 

574.2

 

 

 

542.2

 

Property and equipment, net

 

 

 

$

304.0

 

 

$

315.2

 

Construction in progress includes costs incurred for software and other assets that have not yet been placed in service. Depreciation expense related to property and equipment was $26.1 and $27.4 for the three months ended March 31, 2024 and 2023, respectively. Depreciation expense related to property and equipment was $51.7 and $54.5 for the six months ended March 31, 2024 and 2023, respectively.

6. Intangible Assets, Goodwill, Acquisitions, and Divestitures

Intangible Assets

Identifiable intangible assets consist of acquired customer contracts and relationships, trademarks, and non-compete agreements. Amortization expense related to intangible assets was $8.7 and $11.0 for the three months ended March 31, 2024 and 2023, respectively. Amortization expense related to intangible assets was $18.8 and $