Market Overview

BrightView Reports Strong Third Quarter Fiscal 2018 Results and Record Revenues

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Third Fiscal Quarter Highlights

  • Record revenues of $630.3 million for the third fiscal quarter, up
    0.4% from the prior year period: 2.9% increase in Maintenance
    Services; 5.7% decline in Development Services due to revenues from
    certain large projects in the prior year.
  • Revenues for the nine months ended June 30, 2018 increased 6.8% from
    the prior year period to $1,771.8 million.
  • Net loss of $1.4 million for the third fiscal quarter; Adjusted EBITDA
    of $97.8 million for the third fiscal quarter; Adjusted Net Income of
    $33.2 million for the third fiscal quarter.
  • Net cash provided by operating activities for the nine months ended
    June 30, 2018 of $123.7 million; Adjusted Free Cash Flow of $77.5
    million, an increase of $54.2 million over the nine months ended June
    30, 2017 driven by improvements in working capital management.
  • Successfully completed the acquisition of two landscape services
    companies in the third fiscal quarter with combined annualized
    revenues of $73.2 million.

Initial Public Offering

  • Successfully completed an IPO on July 2, 2018, generating net proceeds
    of approximately $501.2 million for debt repayment.

BrightView Holdings, Inc. (NYSE:BV) ("BrightView" or the "Company")
today reported results for the third fiscal quarter ended June 30, 2018.

BrightView Chief Executive Officer, Andrew Masterman stated: "Our third
quarter was another strong period for us. We successfully grew top-line
revenue from the same period of 2017, recognizing $630.3 million in
revenues which is the highest revenue generating quarter in our history,
led by growth in our Maintenance Services segment. We generated Adjusted
EBITDA of $97.8 million during the quarter and had a 15.5% Adjusted
EBITDA Margin. We also continue to execute on our ‘strong-on-strong'
acquisition strategy, successfully acquiring two landscape service
companies during the quarter enabling us to further expand our business.
Since the quarter end we successfully completed our IPO, generating net
proceeds of $501.2 million. We are excited to embark on this new chapter
for the Company."

Unless indicated otherwise, the information in this release has been
adjusted to give effect to a 2.33839-for-one reverse stock split of the
Company's common stock effected on June 8, 2018.

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and
Adjusted Free Cash Flow are not measures recognized under generally
accepted accounting principles ("GAAP"). Please see "Non-GAAP Financial
Measures" and "Reconciliation of GAAP to Non-GAAP Financial Measures"
below for more information.

Third Fiscal Quarter Results

For the third quarter of fiscal 2018, the Company's consolidated
revenues increased 0.4% to $630.3 million compared to the same period in
2017 due to 2.9% revenue growth within the Maintenance Services segment
primarily driven by incremental revenues from businesses acquired of
$26.1 million. Revenues from the Development Services segment declined
5.7% compared to the same period last year due to winding down
production on certain large projects that reached substantial completion
during the quarter, coupled with the timing of commencing work on new
projects.

On a GAAP basis, net loss was $1.4 million, compared to net income of
$15.4 million for the third quarter of fiscal 2017, primarily driven by
an increase in equity-based compensation costs incurred in connection
with our IPO and other one-time IPO expenses.

Adjusted EBITDA for the third fiscal quarter was $97.8 million, compared
to $98.5 million for the third quarter of fiscal 2017. Adjusted Net
Income was $33.2 million, compared to $35.2 million in the 2017 period.

Net cash provided by operating activities for the nine months ended June
30, 2018 was $123.7 million, compared to $69.0 million for the same
period last year. Adjusted Free Cash Flow for the nine months ended June
30, 2018 was $77.5 million, an increase in cash generation of $54.2
million over the same period last year. The increases are reflective of
improvements in working capital management. For the nine months ended
June 30, 2018, capital expenditures were $71.7 million, compared with
$51.0 million last year, driven by the purchase of legacy ValleyCrest
facilities for $21.6 million in October 2017.

Recent Developments

On July 2, 2018, the Company completed an IPO in which it issued and
sold 24,495,000 shares of common stock at an offering price of $22.00
per share, which generated net proceeds of approximately $501.2 million
after deducting underwriting discounts and commissions and other
offering expenses.

Proceeds from the IPO were used exclusively to pay down debt, resulting
in a total debt to Adjusted EBITDA leverage ratio post-IPO of 4.0x,
compared with 5.7x pre-IPO.

Conference Call Information

A conference call to discuss the third fiscal quarter 2018 financial
results is scheduled for August 9, 2018, at 10 a.m. Eastern Daylight
Time. The U.S. toll free dial-in for the conference call is 866-393-4306
and the international dial-in is 734-385-2616. The conference passcode
is 3147928. A live audio webcast of the conference call will be
available on the Company's investor website https://investor.brightview.com,
where presentation materials will be posted prior to the call.

A telephone replay will be available shortly after the broadcast through
Thursday, August 16, 2018, by dialing 800-585-8367 from the U.S., and
entering conference passcode 3147928. A replay of the audio webcast also
will be archived on the Company's investor website.

About BrightView

BrightView provides high-quality landscape services with an unwavering
commitment to client service. As the nation's leading commercial
landscaping services company, BrightView's 19,000 team members provide
services ranging from landscape maintenance and enhancements to tree
care and landscape development for thousands of client properties,
including corporate and commercial properties, homeowners' associations,
public parks, hotels and resorts, hospitals and other healthcare
facilities, educational institutions, restaurants and retail, and golf
courses. BrightView landscapes positively impact millions of lives every
day.

Forward Looking Statements

This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of
1934. These statements include, but are not limited to, statements
related to our expectations regarding the performance of our industry,
growth strategy, goals and expectations concerning our market position,
future operations, margins, profitability, capital expenditures,
liquidity and capital resources and other financial and operating
information. You can identify these forward-looking statements by the
use of words such as "outlook," "guidance," "believes," "expects,"
"potential," "continues," "may," "will," "should," "could," "seeks,"
"projects," "predicts," "intends," "plans," "estimates," "anticipates"
or the negative version of these words or other comparable words. Such
forward-looking statements are subject to various risks, uncertainties
and factors, including general economic and financial conditions;
competitive industry pressures; the failure to retain certain current
customers, renew existing customer contracts and obtain new customer
contracts; 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; acquisition and integration risks; the seasonal
nature of our landscape maintenance services; our dependence on weather
conditions; increases in prices for raw materials and fuel; product
shortages and the loss of key suppliers; the conditions and periodic
fluctuations of real estate markets, including residential and
commercial construction; our ability to retain our executive management
and other key personnel; our ability to attract and retain 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
and safety and transportation; environmental, health and safety laws and
regulations; the impact of any adverse litigation judgments or
settlements resulting from legal proceedings relating to our business
operations; increase in on-job accidents involving employees; any
failure, inadequacy, interruption, security failure or breach of our
information technology systems; any failure to protect the security of
personal information about our customers, employees and third parties;
our ability to adequately protect our intellectual property; occurrence
of natural disasters, terrorist attacks or other external events; 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; restrictions
imposed by our debt agreements that limit our flexibility in operating
our business; and increases in interest rates increasing the cost of
servicing our substantial indebtedness. Additional factors that could
cause BrightView's results to differ materially from those described in
the forward-looking statements can be found under the heading entitled
"Risk Factors" in our prospectus dated June 27, 2018, filed with the
Securities and Exchange Commission ("SEC") pursuant to Rule 424(b) of
the Securities Act on June 29, 2018, as such factors may be updated from
time to time in our periodic filings with the SEC, including our
quarterly report on Form 10-Q for the quarterly period ended June 30,
2018, which are accessible on the SEC's website at www.sec.gov.
Accordingly, there are or will be important factors that could cause
actual outcomes or results to differ materially from those indicated in
these statements. These factors should not be construed as exhaustive
and should be read in conjunction with the other cautionary statements
that are included in this release and in our filings with the SEC. We
undertake no obligation to publicly update or review any forward-looking
statement, whether as a result of new information, future developments
or otherwise, except as required by law.

Non-GAAP Financial Measures

To supplement the Company's financial information presented in
accordance with GAAP and aid understanding of the Company's business
performance, the Company uses certain non-GAAP financial measures,
namely "Adjusted EBITDA", "Adjusted EBITDA Margin", "Adjusted Net
Income" and "Adjusted Free Cash Flow". We believe Adjusted EBITDA,
Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Free Cash Flow
assist investors and in comparing our results across reporting periods
on a consistent basis by excluding items that we do not believe are
indicative of our core operating performance. Management believes these
non-GAAP financial measures are useful to investors in highlighting
trends in our operating performance, while other measures can differ
significantly depending on long-term strategic decisions regarding
capital structure, the tax jurisdictions in which we operate and capital
investments. Management regularly uses these measures as tools in
evaluating our operating performance, financial performance and
liquidity, while other measures can differ significantly depending on
long-term strategic decisions regarding capital structure and capital
investments. Management uses Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted Net Income and Adjusted Free Cash Flow to supplement comparable
GAAP measures in the evaluation of the effectiveness of our business
strategies, to make budgeting decisions, to establish discretionary
annual incentive compensation and to compare our performance against
that of other peer companies using similar measures. In addition, we
believe that Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net
Income and Adjusted Free Cash Flow are frequently used by investors and
other interested parties in the evaluation of issuers, many of which
also present Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net
Income and Adjusted Free Cash Flow when reporting their results in an
effort to facilitate an understanding of their operating and financial
results and liquidity. Management supplements GAAP results with non-GAAP
financial measures to provide a more complete understanding of the
factors and trends affecting the business than GAAP results alone.

Adjusted EBITDA: We define Adjusted EBITDA as net income (loss) before
interest, taxes, depreciation and amortization, as further adjusted to
exclude certain non-cash, non-recurring and other adjustment items.

Adjusted EBITDA Margin: We define Adjusted EBITDA Margin as Adjusted
EBITDA, defined above, divided by Net Service Revenues.

Adjusted Net Income: We define Adjusted Net Income as net income (loss)
including interest and depreciation, and excluding other items used to
calculate Adjusted EBITDA and further adjusted for the tax effect of
these exclusions and the removal of the discrete tax items.

Adjusted Free Cash Flow: We define Adjusted Free Cash Flow as cash flows
from operating activities less capital expenditures, net of proceeds
from the sale of property and equipment, further adjusted for the
acquisition of certain legacy properties associated with our acquired
ValleyCrest business.

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and
Adjusted Free Cash Flow are not recognized terms under GAAP and should
not be considered as an alternative to net income (loss) or the ratio of
net income (loss) to net revenue as a measure of financial performance,
cash flows provided by operating activities as a measure of liquidity,
or any other performance measure derived in accordance with GAAP.
Additionally, these measures are not intended to be a measure of free
cash flow available for management's discretionary use as they do not
consider certain cash requirements such as interest payments, tax
payments and debt service requirements. The presentations of these
measures have limitations as analytical tools and should not be
considered in isolation, or as a substitute for analysis of our results
as reported under GAAP. Because not all companies use identical
calculations, the presentations of these measures may not be comparable
to other similarly titled measures of other companies and can differ
significantly from company to company.

Please see "Reconciliation of GAAP to Non-GAAP Financial Measures"
below for reconciliations of non-GAAP financial measures used in this
release to their most directly comparable GAAP financial measures.

 

BrightView Holdings, Inc.

Consolidated Balance Sheets

(In thousands, except par value information)

 
 
    June 30,

2018

    September 30,

2017

(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 16,429 $ 12,779
Restricted cash 150 213
Accounts receivable, net 343,565 330,173
Unbilled revenue 102,305 88,907
Inventories 21,031 24,954
Other current assets   55,868   45,495
Total current assets 539,348 502,521
Property and equipment, net 260,536 245,534
Intangible assets, net 305,287 371,271
Goodwill 1,772,222 1,703,773
Other assets   41,839   35,521
Total assets $ 2,919,232 $ 2,858,620
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 84,001 $ 76,133
Current portion of long-term debt 14,600 14,600
Deferred revenue 76,665 58,221
Current portion of self-insurance reserves 38,019 56,079
Accrued expenses and other current liabilities   154,568   137,116
Total current liabilities 367,853 342,149
Long-term debt, net 1,643,142 1,574,882
Deferred tax liabilities 72,513 125,139
Self-insurance reserves 80,791 66,519
Other liabilities   33,564   53,670
Total liabilities   2,197,863   2,162,359
Stockholders' equity:

Common stock, $0.01 par value; 185,000 shares authorized; 77,895
and 77,083 shares issued and outstanding as of June 30, 2018 and
September 30, 2017, respectively

769 771
Additional paid-in-capital 912,027 894,089
Accumulated deficit (178,688 ) (178,015 )
Accumulated other comprehensive loss   (12,739 )   (20,584 )
Total stockholders' equity   721,369   696,261
Total liabilities and stockholders' equity $ 2,919,232 $ 2,858,620
 
 

BrightView Holdings, Inc.

Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

 
 
    Three Months Ended

June 30,

    Nine Months Ended

June 30,

2018     2017 2018     2017
Net service revenues $ 630,330 $ 627,490 $ 1,771,800 $ 1,658,864
Cost of services provided   454,753   451,064   1,311,441   1,220,945
Gross profit 175,577 176,426 460,359 437,919
Selling, general and administrative expense 119,246 104,093 356,840 330,977
Amortization expense   29,247   31,250   89,611   94,800
Income from operations 27,084 41,083 13,908 12,142
Other income 265 343 1,284 1,320
Interest expense   27,499   24,922   77,481   73,372
(Loss) income before income taxes (150 ) 16,504 (62,289 ) (59,910 )
Income tax (expense) benefit   (1,247 )   (1,102 )   58,150   22,037
Net (loss) income $ (1,397 ) $ 15,402 $ (4,139 ) $ (37,873 )
(Loss) earnings per share:
Basic and Diluted $ (0.02 ) $ 0.20 $ (0.05 ) $ (0.49 )
 
 

BrightView Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited) (In thousands)

 
 
    Nine Months Ended

June 30,

2018     2017
Cash flows from operating activities:
Net loss $ (4,139 ) $ (37,873 )
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation 56,642 60,740
Amortization of intangible assets 89,611 94,800
Amortization of financing costs and original issue discount 8,080 7,512
Deferred taxes (57,837 ) (36,551 )
Equity-based compensation 20,753 2,637
Hedge ineffectiveness and realized loss 7,338 12,468
Provision for doubtful accounts 1,137 2,752
Other non-cash activities, net 2,281 (1,812 )
Change in operating assets and liabilities:
Accounts receivable (1,597 ) (15,671 )
Unbilled and deferred revenue 4,219 (17,370 )
Inventories 4,290 8,096
Other operating assets (11,073 ) (29,131 )
Accounts payable and other operating liabilities   3,945   18,355
Net cash provided by operating activities   123,650   68,952
Cash flows from investing activities:
Purchase of property and equipment (71,743 ) (51,022 )
Proceeds from sale of property and equipment 3,946 5,327
Business acquisitions, net of cash acquired (104,377 ) (22,682 )
Other investing activities, net   (403 )   2,498
Net cash used in investing activities   (172,577 )   (65,879 )
Cash flows from financing activities:
Repayments of capital lease obligations (4,786 ) (2,572 )
Repayments of debt (64,820 ) (164,222 )
Proceeds from receivables financing agreement 70,000 150,000
Proceeds from revolving credit facility 55,000
Repurchase of common stock (2,916 ) (2,419 )
Proceeds from issuance of common stock   99  
Net cash provided by (used in) financing activities   52,577   (19,213 )
Net change in cash and cash equivalents 3,650 (16,140 )
Cash and cash equivalents, beginning of period   12,779   35,697
Cash and cash equivalents, end of period $ 16,429 $ 19,557
 
 

BrightView Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In millions)

 
 
    Three Months Ended     Nine Months Ended
(In millions) June 30,

2018

    June 30,

2017

June 30,

2018

    June 30,

2017

Adjusted EBITDA
Net (loss) income (1.4 ) 15.4 (4.1 ) (37.9 )
Plus:
Interest expense, net 27.5 24.9 77.5 73.4
Income tax provision (benefit) 1.2 1.1 (58.2 ) (22.0 )
Depreciation expense 17.8 19.9 56.6 60.7
Amortization expense 29.2 31.3 89.6 94.8

Establish public company financial reporting compliance (a)

0.6 0.4 3.4 2.4

Business transformation and integration costs (b)

2.5 2.6 21.4 10.8
Expenses related to initial public offering (c) 4.7 6.8
Equity-based compensation (d) 15.0 2.2 20.8 2.6
Management fees (e)   0.7   0.6   2.1   2.0
Adjusted EBITDA $ 97.8 $ 98.5 $ 215.9 $ 186.8
Adjusted Net Income
Net (loss) income $ (1.4 ) $ 15.4 $ (4.1 ) $ (37.9 )
Plus:
Amortization expense 29.2 31.3 89.6 94.8

Establish public company financial reporting compliance (a)

0.6 0.4 3.4 2.4

Business transformation and integration costs (b)

2.5 2.6 21.4 10.8
Expenses related to initial public offering (c) 4.7 6.8
Equity-based compensation (d) 15.0 2.2 20.8 2.6
Management fees (e) 0.7 0.6 2.1 2.0
Income tax adjustment (f)   (18.1 )   (17.4 )   (85.8 )   (40.7 )
Adjusted Net Income $ 33.2 $ 35.2 $ 54.1 $ 34.0

Free Cash Flow and Adjusted Free Cash Flow

Cash flows from operating activities $ 44.5 $ 0.2 $ 123.7 $ 69.0
Minus:
Capital expenditures 27.6 18.6 71.7 51.0
Plus:
Proceeds from sale of property and equipment   2.4   2.9   3.9   5.3
Free Cash Flow $ 19.3 $ (15.5 ) $ 55.9 $ 23.3
Plus:
ValleyCrest land and building acquisition (g)       21.6  
Adjusted Free Cash Flow $ 19.3 $ (15.5 ) $ 77.5 $ 23.3
 
 

BrightView Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In millions)
 
 
(a) Represents costs incurred to establish public company financial
reporting compliance, including costs to comply with the
requirements of Sarbanes-Oxley and the accelerated adoption of the
new revenue recognition standard (ASC 606 – Revenue from Contracts
with Customers), and other miscellaneous costs.
 
(b) Business transformation and integration costs consist of (i)
severance and related costs; (ii) vehicle fleet rebranding costs;
(iii) business integration costs and (iv) information technology
infrastructure transformation costs and other.
 
       
Three Months Ended Nine Months Ended
(In millions) June 30,

2018

    June 30,

2017

June 30,

2018

    June 30,

2017

Severance and related costs $ 1.1 $ 0.4 $ 3.3 $ 6.1
Rebranding of vehicle fleet 0.4 0.7 12.4 0.7
Business integration 0.2 0.2 0.4 0.4

IT infrastructure transformation and other

  0.8   1.4   5.3   3.6

Business transformation and integration costs

$ 2.5 $ 2.6 $ 21.4 $ 10.8
 
 
(c) Represents expenses incurred in connection with the IPO.
 
(d) Represents equity-based compensation expense recognized for stock
plans outstanding.
 
(e) Represents management fees paid pursuant to a monitoring agreement.
 
(f) Represents the tax effect of pre-tax items excluded from Adjusted
Net Income and the removal of the applicable discrete tax items,
which collectively result in a reduction of income tax. The tax
effect of pre-tax items excluded from Adjusted Net Income is
computed using the statutory rate related to the jurisdiction that
was impacted by the adjustment after taking into account the impact
of permanent differences and valuation allowances. Discrete tax
items include changes in laws or rates, changes in uncertain tax
positions relating to prior years and changes in valuation
allowances. The nine months ended June 30, 2018 amount includes a
$41.4 million benefit recognized as a result of the reduction in the
U.S. corporate income tax rate from 35% to 21% under the U.S. Tax
Cuts and Jobs Act.
 
       
Three Months Ended Nine Months Ended
(in millions) June 30,

2018

    June 30,

2017

June 30,

2018

    June 30,

2017

Tax impact of pre-tax income adjustments

$ 17.7 $ 17.5 $ 43.7 $ 40.8
Discrete tax items   0.4   (0.1 )   42.1   (0.1 )
Income tax adjustment $ 18.1 $ 17.4 $ 85.8 $ 40.7
 
 
(g) Represents the acquisition of legacy ValleyCrest land and buildings
in October 2017.
 

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