Illuminated viewturnover increases again. Landscaping revenue increased 8.1% in the three months ended March 31, 2022, compared to the quarter of the previous yearwithout the impact of acquisitions.
The company expects landscape maintenance growth of 3-4% for the next six months. Thereafter, he expects growth of 2 to 3% without the impact of acquisitions. Part of this growth will be caused by price increases.
The acquisition pipeline includes companies with total revenue of $600 million.
From an earnings perspective, BrightView forecasts adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin of 10.8% with the intention of increasing it to 13% within two to three years, despite rising fuel prices. For comparison, the adjusted EBITDA margin was 12.4% for the 12 months ending December 31, 2019. It fell to 9.9% for the 12 months ending March 31, 2022. The table below below shows a similar decline in adjusted operating income. profit margin. In the calculations below, operating profit equals EBITDA minus depreciation expense.
Price increases and fuel surcharges
On its call with analysts, management said: “As with many other companies, we have introduced fuel surcharges across our business and expect to continue to do so as long as fuel prices remain lower. higher than in previous years.
Management indicated that the main response from customers was a willingness to engage in a discussion about price increases or scope reductions or both. They also said that some customers have reacted by putting the contracts in competition. As a result, the company experienced a slight reduction in its retention rate.
Over the years, I wrote about BrightView’s large debt. Recently, this debt has increased because the company purchased BrightView shares held by MSD Partners, a BrightView investor for 15 years. BrightView manages its relationship with its lenders quite well. In April 2022, the company refinanced its term loan, extending the maturity to April 2029, and its revolving line of credit, extending the maturity to April 2027. The combined borrowing capacity increased from 1 $.3 billion to $1.5 billion, providing BrightView with plenty of cash. for future acquisitions as part of their growth strategy.
BrightView plans to convert 35,000 2-stroke gasoline equipment to rechargeable power sources by 2025 as part of its ESG commitment.
BrightView focuses on technology as a strategic enabler. An example is the creation of a client portal for its HOA clients. Recently, the company’s Client Technology Advisory Board, a group of its top 10 HOA Connect users, suggested that BrightView add a service confirmation feature via SMS or email. The company added this feature to its software and launched a pilot in April 2022.
Summary of the income statement
In its public reports, BrightView “adjusts” its earnings before interest, taxes, depreciation and amortization and net income for certain expenses. I have used some of these adjustments for operating profit in the tables below. The idea is that these expenses are not part of ordinary operations. Historically, adjustments have included expenses associated with business transformation and integration, going public and defending shareholder lawsuits, partial payment of certain employees through compensation based on shares and other unusual expenses. The last four quarters also included a $22 million adjustment to COVID-19 related expenses. In the table below, I have not adjusted the results for COVID-19 related expenses as they are now part of the normal operations of landscape businesses.
For accountants: note that I have excluded from operating income the expenses related to the amortization of intangible assets that were recorded when BrightView acquired other businesses. Since most landscape companies don’t have amortization of intangible assets, I’ve excluded it, so they can compare their numbers to BrightView’s numbers.
To see short-term trends, the following table shows operating results for each of the last five quarters:
|Quarter ended March 21||Quarter ended June 21||Quarter ended Sept 21.||Quarter ended December 21||Quarter ended March 22|
|Snow removal services||226.0||3.4||(0.3)||36.0||208.2|
|Net service income||651.9||673.6||673.7||591.8||711.9|
|Year-over-year growth rate||9.2%|
|Cost of benefits||493.8||494.6||493.6||451.9||554.8|
|Selling, general and administrative (SG&A) expenses||127.9||123.1||133.7||134.9||133.4|
|Current expenses SGA&A||116.4||110.3||120.5||124.2||126.4|
|SG&A as % of revenue||17.9%||16.4%||17.9%||21.0%||17.8%|
|Adjusted operating income||$41.7||$68.7||$59.6||$15.7||$30.7|
|Operating profit margin||6.4%||10.2%||8.8%||2.7%||4.3%|
To see long-term trends, the following table shows operating results for each of the last four years:
|Year ended March 19||Year ended March 20||Year ended March 21||Year ended March 22|
|Snow removal services||248.3||163.5||286.8||247.3|
|Net service income||2,334.8||2,411.8||2,422.5||2,651.0|
|Year-over-year growth rate||3.3%||0.4%||9.4%|
|Cost of benefits||1,715.5||1776.2||1810.8||1,994.9|
|Selling, general and administrative (SG&A) expenses||473.0||480.0||521.4||525.1|
|Current SG&A expenses||403.6||430.2||423.3||481.4|
|SG&A as % of revenue||17.3%||17.8%||17.5%||18.2%|
|Adjusted operating income||$215.6||$205.4||$188.4||$174.7|
|Operating profit margin||9.2%||8.5%||7.8%||6.6%|