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BrightView Reports Second Quarter Fiscal 2019 Results

May 08, 2019

Total revenue of $596.6 million, or 1.1% higher versus prior year

GAAP Net Loss of $3.6 million, or ($0.04) per share, Adjusted EBITDA of $61.1 million and Adjusted Net Income of $15.6 million, or $0.15 per share

Adjusted EBITDA and Adjusted EBITDA margin were among the highest ever for the March quarter

Reaffirms full year fiscal 2019 guidance of $2.4 billion to $2.47 billion in Total Revenue and $310 million to $318 million in Adjusted EBITDA

BLUE BELL, Pa.--(BUSINESS WIRE)-- BrightView Holdings, Inc. (NYSE: BV) (the “Company” or “BrightView”), the leading commercial landscaping services company in the United States, today reported unaudited results for the second quarter ended March 31, 2019.

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(Graphic: Business Wire)

(Graphic: Business Wire)

Second Quarter Fiscal 2019 Highlights

  • Total Revenues for the quarter totaled $596.6 million, a 1.1% increase versus the prior year quarter, with 2.9% higher Maintenance Services Segment revenues and 5.4% lower Development Services Segment revenues;
  • Net Loss of $3.6 million, or ($0.04) per share, and a net loss margin of 0.6%, compared to Net Loss of $22.1 million, or ($0.29) per share, and a net loss margin of 3.7%, in the prior year quarter;
  • Adjusted EBITDA of $61.1 million, or 18.4% growth over the prior year quarter, with an Adjusted EBITDA margin of 10.2%, both of which were among the highest ever for the March quarter;
  • Adjusted Net Income of $15.6 million, or $0.15 per share, compared to Adjusted Net Income of $7.6 million, or $0.10 per share, in the prior year quarter.

Six Months Fiscal 2019 Highlights

  • Total Revenues for the six months totaled $1,122.7 million, a 1.6% decline versus the prior year period, with nearly flat Maintenance Services Segment revenues and 6.5% lower Development Services Segment revenues;
  • Net Loss of $12.4 million, or ($0.12) per share, and a net loss margin of 1.1%, compared to Net Loss of $2.7 million, or ($0.04) per share, and a net loss margin of 0.2%, in the prior year period;
  • Adjusted EBITDA of $111.2 million, or 5.8% below the prior year period, with an Adjusted EBITDA margin of 9.9%;
  • Adjusted Net Income of $26.0 million, or $0.25 per share, compared to Adjusted Net Income of $21.0 million, or $0.27 per share, in the prior year period.

“Strong Maintenance Segment revenue and profitability highlighted our second quarter results and drove growth at the consolidated level. In fact, we delivered one of our best ever March quarters, with notable performance in Adjusted EBITDA and Adjusted EBITDA margin. In addition to gains in our Maintenance business, the quarter included lower corporate expenses, and more normalized levels of snowfall,” said Andrew Masterman, BrightView President and Chief Executive Officer. “With the beginning of the ‘green’ season, we’re pleased with the trends in our Maintenance landscape revenue and have built a robust book of business for the remainder of the fiscal year in our Development Segment. We remain confident in our full-year outlook and are maintaining our guidance ranges for both total revenue and Adjusted EBITDA for the full-year fiscal 2019.”

Fiscal 2019 Results – Total BrightView

Total BrightView - Operating Highlights
  Three Months Ended March 31,   Six Months Ended March 31,
($ in millions, except per share figures)   2019     2018     Change   2019     2018     Change
Revenue   $ 596.6   $ 590.4   1.1%   $ 1,122.7   $ 1,141.5   (1.6%)
Net (loss) income   $ (3.6 )   $ (22.1 )   nm   $ (12.4 )   $ (2.7 )   nm
Adjusted EBITDA   $ 61.1   $ 51.6   18.4%   $ 111.2   $ 118.0   (5.8%)
Adjusted EBITDA Margin     10.2 %     8.7 %   150 bps     9.9 %     10.3 %   -40 bps
Adjusted Net Income   $ 15.6   $ 7.6   106.3%   $ 26.0   $ 21.0   24.1%
Earnings per Share, GAAP   $ (0.04 )   $ (0.29 )   nm   $ (0.12 )   $ (0.04 )   nm
Earnings per Share, Adjusted   $ 0.15   $ 0.10   54.6%   $ 0.25   $ 0.27   (6.9%)
Weighted average number of common shares outstanding     102.8     77.0   33.4%     102.6     77.1   33.2%
         

For the second quarter fiscal 2019, total revenue increased 1.1% to $596.6 million due to an increase in Maintenance Services Segment revenue, partially offset by a decline in Development Services Segment revenue. Total Adjusted EBITDA increased 18.4% driven by an increase in the Maintenance Services Segment coupled with a reduction of corporate expenses, partially offset by a decrease in the Development Services Segment Adjusted EBITDA, as discussed further below.

For the six months ended March 31, 2019, total revenue decreased 1.6% to $1,122.7 million due to declines in both the Maintenance Services Segment and Development Services Segment revenues. Total Adjusted EBITDA was $111.2 million, down 5.8% versus the prior year, driven by lower revenues, partially offset by a reduction of corporate expenses.

Fiscal 2019 Results – Segments

Maintenance Services - Operating Highlights
  Three Months Ended March 31,   Six Months Ended March 31,
($ in millions)   2019     2018     Change   2019     2018     Change
Landscape Maintenance   $ 281.8   $ 270.0   4.4%   $ 626.1   $ 623.1   0.5%
Snow Removal   $ 191.5   $ 190.1   0.8%   $ 239.7   $ 243.7   (1.6%)
Total Revenue   $ 473.3   $ 460.1   2.9%   $ 865.8   $ 866.8   (0.1%)
Adjusted EBITDA   $ 65.0   $ 58.3   11.5%   $ 113.7   $ 118.9   (4.4%)
Adjusted EBITDA Margin     13.7 %     12.7 %   100 bps     13.1 %     13.7 %   -60 bps
Capital Expenditures $ 18.9   $ 12.8   47.8%   $ 30.0   $ 19.5   54.2%
 

For the second quarter fiscal 2019, revenue in the Maintenance Services Segment increased 2.9% to $473.3 million. Landscape Maintenance Services revenue increased 4.4%. Acquisitions added 8.4% but were partially offset by a 4.0% negative revenue contribution from commercial landscaping, including lower revenue due to Managed Exits as the Company strategically reduced a number of less profitable accounts established in previous years. Including revenue contribution from acquisitions, snow removal services revenue increased 0.8%.

Adjusted EBITDA for the Maintenance Services Segment in the quarter increased 11.5% to $65.0 million, with the Adjusted EBITDA margin increasing 100 basis points versus the prior year quarter. The increase in segment profitability was mainly a result of the increase in revenue described above, coupled with a continued focus on efficiency initiatives to reduce overhead, personnel and related costs across the Company’s core functions.

For the six months ended March 31, 2019, revenue in the Maintenance Services Segment remained relatively flat at $865.8 million. Landscape Maintenance Services revenue increased 0.5%. Acquisitions added 7.2% but were mostly offset by a 6.7% negative revenue contribution from commercial landscaping, including a difficult comparison with the revenue related to Hurricane Irma and Maria clean-up, the final impact from the prior-year turnover of national accounts, and lower revenue due to Managed Exits as the Company strategically reduced the number of less profitable accounts established in previous years. Snow removal services revenue decreased 1.6% due to lower year-over-year snowfall in key geographies, especially during the first quarter of fiscal 2019.

Adjusted EBITDA for the Maintenance Services Segment for the six months ended March 31, 2019 decreased 4.4% to $113.7 million, with the Adjusted EBITDA margin decreasing 60 basis points versus the prior year period. The decline in segment profitability was mainly a result of higher-margin hurricane clean-up activity in the first quarter of fiscal 2018 and a decline in the contribution from snow removal services due to timing and below average snowfall during the first quarter compared to the prior year quarter.

 
Development Services - Operating Highlights
  Three Months Ended March 31,   Six Months Ended March 31,
($ in millions)   2019     2018     Change   2019     2018     Change
Revenue   $ 124.0   $ 131.0   (5.4%)   $ 258.4   $ 276.2   (6.5%)
Adjusted EBITDA   $ 11.0   $ 12.9   (14.3%)   $ 28.1   $ 33.3   (15.8%)
Adjusted EBITDA Margin     8.9 %     9.8 %   -90 bps     10.9 %     12.1 %   -120 bps
Capital Expenditures $ 3.5   $ 0.9   302.1%   $ 6.7   $ 1.8   275.6%
 

Revenues for the Development Services Segment decreased 5.4% to $124.0 million for the second quarter fiscal 2019. Project revenue derived from acquisitions coupled with commencement of work on new projects contributed to offset a decrease driven by the timing of work performed on certain large projects during the prior year period.

Adjusted EBITDA for the Development Services Segment decreased 14.3% to $11.0 million in the quarter, negatively affected by the decrease in net revenue described above, as well as an increase in selling, general and administrative expense, which was the result of a cash collection in the second quarter of fiscal 2018 on a previously reserved receivable.

Revenues for the Development Services Segment decreased 6.5% to $258.4 million for the six months ended March 31, 2019. Project revenue derived from acquisitions coupled with commencement of work on new projects partially offset a challenging comparison with revenues generated from work performed on certain large projects in the prior year period.

Adjusted EBITDA for the Development Services Segment decreased 15.8% to $28.1 million during the six months ended March 31, 2019, negatively affected by the decrease in net revenue described above, as well as an increase in selling, general and administrative expense as described above.

 
Total BrightView Cash Flow Metrics
  Six Months Ended March 31,
($ in millions)   2019   2018   Change
Cash Provided by Operating Activities     $ 64.7   $ 79.2   (18.3%)
Adjusted Free Cash Flow     $ 25.1   $ 58.2   (56.9%)
Capital Expenditures   $ 42.6   $ 44.1   (3.4%)
 

Net cash provided by operating activities for the six months ended March 31, 2019 was $64.7 million, compared to $79.2 million for the prior year. The decrease was primarily due to an increase in accounts receivable due to timing of collections, partially offset by an increase in deferred revenue. Adjusted Free Cash Flow for the six months ended March 31, 2019 was $25.1 million, a decrease in cash generation of $33.1 million versus the prior year. The decrease is reflective of the decrease in net cash provided by operating activities as well as an increase in capital expenditures excluding the fiscal 2018 purchase of legacy ValleyCrest facilities of $21.6 million.

For the six months ended March 31, 2019, capital expenditures were $42.6 million, compared with $44.1 million last year. The prior year period included the aforementioned purchase of legacy ValleyCrest facilities. The Company also generated proceeds from the sale of property and equipment of $3.0 million and $1.5 million in the first half of fiscal 2019 and 2018, respectively. Net of the legacy asset purchase and the proceeds from the sale of property and equipment in each year, capital expenditures represented 3.5% and 1.8% of revenue in the first half of fiscal 2019 and 2018, respectively.

 
Total BrightView Balance Sheet Metrics
($ in millions)   March 31, 2019     December 31, 2018     September 30, 2018
Total Financial Debt1   $ 1,185.3   $ 1,179.1   $ 1,184.4
Total Cash & Equivalents   $ 11.2   $ 17.1   $ 35.2
Total Net Financial Debt2 to Adjusted EBITDA ratio   4.0x   4.1x   3.8x
1Total Financial Debt includes total long-term debt, net of original issue discount, and capital lease obligations
2Total Net Financial Debt equals Total Financial Debt minus Total Cash & Equivalents
 

As of March 31, 2019, the Company’s Total Net Financial Debt was $1.174 billion, an increase of $24.9 million compared to $1.149 billion at the fiscal year end. The Company’s Total Net Financial Debt to Adjusted EBITDA ratio was 4.0x as of March 31, 2019, compared with 4.1x as of December 31, 2018.

Recent Developments

New Independent Board Members
On April 15, BrightView announced the appointment of Jane Okun Bomba, President of Saddle Ridge Consulting, and Mara Swan, Executive Vice President of Global Strategy and Talent at ManpowerGroup, as independent members of its Board of Directors. The appointments of Ms. Okun Bomba and Ms. Swan expands the size of the board to eight members, four of whom have been determined to be independent.

New Corporate Headquarters in Blue Bell, Pa.
During the week of April 29, 2019, the Company relocated its Corporate Headquarters to a new facility in Blue Bell, Pennsylvania. The new headquarters consolidates various corporate work groups from around the country. It is also the new site of the BrightView National Training Center, which will offer an expanded curriculum and train a larger number of its field personnel across a number of topics designed to drive incremental sales, improve customer retention and develop the Company’s future leaders, among other initiatives.

Conference Call Information

A conference call to discuss the second quarter fiscal 2019 financial results is scheduled for May 8, 2019, at 10 a.m. Eastern Daylight Time. The U.S. toll free dial-in for the conference call is (877) 273-7124 and the international dial-in is (647) 689-5396. The conference passcode is 7885175. 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 May 15, 2019, by dialing 800-585-8367 from the U.S., and entering conference passcode 7885175. A replay of the audio webcast also will be archived on the Company’s investor website.

About BrightView

BrightView is the largest provider of commercial landscaping services in the United States. Through its team of approximately 20,000 employees, BrightView provides services ranging from landscape maintenance and enhancements to tree care and landscape development for thousands of customers’ properties, including corporate and commercial properties, HOAs, public parks, hotels and resorts, hospitals and other healthcare facilities, educational institutions, restaurants and retail, and golf courses, among others.

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; our ability to accurately estimate costs of a contract; 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 distraction and impact caused by litigation, of adverse litigation judgments or settlements resulting from legal proceedings; 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; increases in interest rates increasing the cost of servicing our substantial indebtedness; and counterparty credit worthiness risk or risk of non-performance with respect to derivative financial instruments. Additional factors that could cause BrightView’s results to differ materially from those described in the forward-looking statements can be found under “Item 1A. Risk Factors” in our Form 10-K for the fiscal year ended September 30, 2018, as such factors may be updated from time to time in our periodic filings with the SEC, 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. Any forward-looking statement made in this press release speaks only as of the date on which it was made. 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” “Adjusted Earnings per Share” and “Adjusted Free Cash Flow”. We believe Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings per Share 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. Management uses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings per Share 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, Adjusted Net Income per Share 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, Adjusted Earnings per Share 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 Earnings per Share: We define Adjusted Earnings per Share as Adjusted Net Income divided by the weighted average number of common shares outstanding for the period.

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, Adjusted Earnings per Share 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.

   
BrightView Holdings, Inc.
Consolidated Balance Sheets

(Unaudited)

 
March 31, September 30,
(in millions)* 2019 2018
Assets
Current assets:
Cash and cash equivalents $ 11.2 $ 35.2
Accounts receivable, net 353.1 317.1
Unbilled revenue 93.8 99.9
Inventories 24.5 23.8
Other current assets   52.5   55.2
Total current assets 535.1 531.2
Property and equipment, net 266.7 256.8
Intangible assets, net 274.6 290.5
Goodwill 1,799.2 1,766.8
Other assets   43.0   46.7
Total assets   2,918.6   2,891.9
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 94.6 $ 93.6
Current portion of long-term debt 10.4 13.0
Deferred revenue 100.1 72.5
Current portion of self-insurance reserves 42.9 34.5
Accrued expenses and other current liabilities   130.2   117.9
Total current liabilities 378.2 331.5
Long-term debt, net 1,147.5 1,141.3
Deferred tax liabilities 59.2 67.2
Self-insurance reserves 84.0 93.4
Other liabilities   25.8   31.2
Total liabilities   1,694.6   1,664.6
Stockholders’ equity:

Preferred stock, $0.01 par value; 50 shares authorized; no shares issued or outstanding as of December 31, 2018 and September 30, 2018

Common stock, $0.01 par value; 500 shares authorized; 105 and 104 shares issued and outstanding as of December 31, 2018 and September 30, 2018, respectively

1.1 1.0
Additional paid-in-capital 1,437.9 1,426.3
Accumulated deficit (203.2 ) (189.6 )
Accumulated other comprehensive loss   (11.8 )   (10.4 )
Total stockholders’ equity   1,224.0   1,227.3
Total liabilities and stockholders’ equity $ 2,918.6 $ 2,891.9
 

(*) Amounts may not total due to rounding.

   
BrightView Holdings, Inc.
Consolidated Statements of Operations

(Unaudited)

 
Three Months Ended Six Months Ended
March 31,

2019

  March 31,

2018

March 31,

2019

  March 31,

2018

(in millions)*
Net service revenues $ 596.6 $ 590.4 $ 1,122.7 $ 1,141.5
Cost of services provided   450.6   448.1   844.7   856.7
Gross profit 146.1 142.2 278.0 284.8
Selling, general and administrative expense 119.4 117.8 229.6 237.6
Amortization expense   13.8   29.3   28.9   60.4
Income (loss) from operations 12.8 (4.9 ) 19.5 (13.2 )
Other income (expense) 1.2 - (0.3 ) 1.0
Interest expense   18.9   25.1   36.1   50.0
Loss before income taxes (4.9 ) (29.9 ) (16.9 ) (62.1 )
Income tax benefit   1.3   7.9   4.5   59.4
Net loss $ (3.6 ) $ (22.1 ) $ (12.4 ) $ (2.7 )
Loss per share:
Basic and Diluted $ (0.04 ) $ (0.29 ) $ (0.12 ) $ (0.04 )
           
BrightView Holdings, Inc.
Segment Reporting

(Unaudited)

 
Three Months Ended Six Months Ended
March 31,

2019

  March 31,

2018

March 31,

2019

  March 31,

2018

(in millions)*
Maintenance Services $ 473.3 $ 460.1 $ 865.8 $ 866.8
Development Services 124.0 131.0 258.4 276.2
Eliminations   (0.7 )   (0.7 )   (1.6 )   (1.6 )
Net Service Revenues $ 596.6 $ 590.4 $ 1,122.7 $ 1,141.5
Maintenance Services $ 65.0 $ 58.3 $ 113.7 $ 118.9
Development Services 11.0 12.9 28.1 33.3
Corporate   (14.9 )   (19.5 )   (30.5 )   (34.2 )
Adjusted EBITDA $ 61.1 $ 51.6 $ 111.2 $ 118.0
Maintenance Services 18.9 12.8 30.0 19.5
Development Services 3.5 0.9 6.7 1.8
Corporate   2.9   0.6   5.9   22.9
Capital Expenditures $ 25.3 $ 14.3 $ 42.6 $ 44.1
 

(*) Amounts may not total due to rounding.

 
BrightView Holdings, Inc.
Consolidated Statements of Cash Flows

(Unaudited)

 
Six Months Ended
March 31,

2019

  March 31,

2018

(in millions)*
Cash flows from operating activities:
Net loss $ (12.4 ) $ (2.7 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 41.0 38.8
Amortization of intangible assets 28.9 60.4
Amortization of financing costs and original issue discount 1.9 5.3
Deferred taxes (7.6 ) (59.9 )
Equity-based compensation 11.5 5.8
Hedge ineffectiveness and realized gains 0.7 4.8
Provision for doubtful accounts 1.0 0.7
Other non-cash activities, net (0.9 ) 3.7
Change in operating assets and liabilities:
Accounts receivable (33.5 ) (0.3 )
Unbilled and deferred revenue 31.9 18.6
Inventories (0.8 ) 2.9
Other operating assets 4.0 (4.5 )
Accounts payable and other operating liabilities   (0.8 )   5.5
Net cash provided by operating activities   64.7   79.2
Cash flows from investing activities:
Purchase of property and equipment (42.6 ) (44.1 )
Proceeds from sale of property and equipment 3.0 1.5
Business acquisitions, net of cash acquired (49.3 ) (44.7 )
Other investing activities, net   1.3   (0.4 )
Net cash used in investing activities   (87.7 )   (87.7 )
Cash flows from financing activities:
Repayments of capital lease obligations (2.8 ) (3.2 )
Repayments of debt (92.8 ) (46.2 )
Proceeds from issuance of common stock, net of share issuance costs 0.1
Proceeds from receivables financing agreement, net of financing costs 84.6 55.0
Proceeds from revolving credit facility 10.0
Repurchase of common stock and distributions     (0.5 )
Net cash (used in) provided by financing activities   (1.0 )   5.3
Net change in cash and cash equivalents (24.0 ) (3.2 )
Cash and cash equivalents, beginning of period   35.2   12.8
Cash and cash equivalents, end of period $ 11.2 $ 9.5
 

(*) Amounts may not total due to rounding.

     
BrightView Holdings, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

 
Three Months Ended

March 31,

Six Months Ended

March 31,

(in millions)* 2019   2018 2019   2018
Adjusted EBITDA
Net loss $ (3.6 ) $ (22.1 ) $ (12.4 ) $ (2.7 )
Plus:
Interest expense, net 18.9 25.1 36.1 50.0
Income tax benefit (1.3 ) (7.9 ) (4.5 ) (59.4 )
Depreciation expense 21.7 17.7 41.0 38.8
Amortization expense 13.8 29.3 28.9 60.4
Establish public company financial reporting compliance (a) 1.3 0.2 1.7 2.8
Business transformation and integration costs (b) 4.7 2.1 8.9 18.9
Expenses related to initial public offering (c) 2 2
Equity-based compensation (d) 5.6 4.3 11.5 5.8
Management fees (e)     0.7     1.3
Adjusted EBITDA $ 61.1 $ 51.6 $ 111.2 $ 118.0
Adjusted Net Income
Net loss $ (3.6 ) $ (22.1 ) $ (12.4 ) $ (2.7 )
Plus:
Amortization expense 13.8 29.3 28.9 60.4
Establish public company financial reporting compliance (a) 1.3 0.2 1.7 2.8
Business transformation and integration costs (b) 4.7 2.1 8.9 18.9
Expenses related to initial public offering (c) 2.1 2.1
Equity-based compensation (d) 5.6 4.3 11.5 5.8
Management fees (e) 0.7 1.3
Income tax adjustment (f)   (6.2 )   (9.1 )   (12.6 )   (67.7 )
Adjusted Net Income $ 15.6 $ 7.5 $ 26.0 $ 21.0

Free Cash Flow and Adjusted Free Cash Flow

Cash flows from operating activities $ 58.3 $ (3.3 ) $ 64.7 $ 79.2
Minus:
Capital expenditures 25.3 14.3 42.6 44.1
Plus:
Proceeds from sale of property and equipment   1.2   0.8   3.0   1.5
Free Cash Flow $ 34.2 $ (16.8 ) $ 25.1 $ 36.6
Plus:
ValleyCrest land and building acquisition (g)         21.6
Adjusted Free Cash Flow $ 34.2 $ (16.8 ) $ 25.1 $ 58.2
 

(*) Amounts may not total due to rounding.

 

BrightView Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)
 
(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 (ASU 2014-09 – 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

March 31,

Six Months Ended

March 31,

(in millions)* 2019     2018 2019     2018
Severance and related costs $ 1.0 $ (0.4 ) $ 1.5 $ 2.2
Rebranding of vehicle fleet 0.1 1.9 0.4 12.1
Business integration 2.7 0.2 3.7 0.2
IT Infrastructure transformation and other   0.9   0.4   3.3   4.4
Business transformation and integration costs $ 4.7 $ 2.1 $ 8.9 $ 18.9
 
(c) Represents expenses incurred for the Company’s initial public offering (“IPO”)
 
(d) Represents equity-based compensation expense recognized for equity incentive plans outstanding, including $3.1 million and $7.0 million related to the IPO in the three and six months ended March 31, 2019.
 
(e) Represents fees paid pursuant to a monitoring agreement terminated on July 2, 2018 in connection with the completion of the IPO.
 
(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 six months ended March 31, 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 Tax Act.
        Three Months Ended

March 31,

    Six Months Ended

March 31,

(in millions)* 2019     2018 2019     2018
Tax impact of pre-tax income adjustments $ 6.1 $ 7.9 $ 11.9 $ 25.9
Discrete tax items   0.1   1.2   0.7   41.8
Income tax adjustment $ 6.2 $ 9.1 $ 12.6 $ 67.7
 
(g) Represents the acquisition of legacy ValleyCrest land and buildings in October 2017.
 

(*) Amounts may not total due to rounding.

INVESTOR RELATIONS CONTACT:
Daniel Schleiniger, VP of Investor Relations
484.567.7148
Daniel.Schleiniger@BrightView.com

MEDIA CONTACT:
Fred Jacobs, VP of Communications & Public Affairs
484.567.7244
Fred.Jacobs@BrightView.com

Source: BrightView Landscapes

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