This article originally appeared on LandscapeManagement.net on December 9, 2020. Greg Herring regularly writes for Landscape Management, providing financial analysis and insights tailored to landscape business owners.
BrightView closed its fiscal year on Sept. 30, 2020. In its annual Form 10K filing with the Securities and Exchange Commission and in its presentation to analysts and investors, BrightView discloses information that is both interesting and relevant to other landscape companies.
Statistical and Sales Information
- 240-plus branches
- 180-plus business developers
- 20-member sales team that is focused on targeting and capturing high-value, high-margin opportunities, including national accounts
- Implementing Salesforce.com, Zoominfo and GovSpend (municipal bid sourcing) for its business development efforts
- 700+ Account Managers who manage crew leaders and relationships with customers (In the year ended September 30, 2020, BrightView had $1.58 billion in total landscape maintenance revenue and $163 million in snow revenue or a total of $2.5 million in revenue per account manager.)
Acquisitions and Divestitures
- Acquired 22 companies with revenue of $300 million since January 2017.
- Acquired six companies with $99.5 million of revenue for $90.3 million in the year ended September 30, 2020
- Current acquisition pipeline totals $400 million in revenue
- Acquiring companies for 5x-7x EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
- Sold BrightView Tree Company, the tree nursery division, for $32.3 million, recognizing a loss of $22.2 million
Maintenance contract revenue grew 3% in the year ended September 30, 2020 as compared with the previous year.
Maintenance Services Revenue in year ended September 30, 2020 by type of customer:
- Corporate – 34%
- HOA – 40%
- Public Parks – 10%
- Hospitals – 5%
- Other – 11%
Top 10 customers accounted for 11% of revenue for the year ended 9/30/20.
- Paid bonuses of $6 million to 13,500 front line crew members (an average of $444 per crew member) due to work in COVID-19 conditions
- Spent $13.8 million (1.1% of revenue) on COVID-19 related costs response to the COVID-19 pandemic in the year ended September 30, 2020, principally temporary and incremental salary and related expenses, personal protective equipment and cleaning and supply purchases, and other.
- 1,100 seasonal workers in 2020, and approximately 1,555 seasonal workers in 2019, through the H-2B visa program
The table below shows long-term trends — the operating results for each of the past four fiscal years.
In its public reports, BrightView “adjusts” its earnings before interest, tax and depreciation and net income for certain expenses. I have used some of these adjustments for operating income. The idea is that these expenses are not part of ordinary operations. Historically, the adjustments include expenses associated with business transformation and integration, becoming a public company and defending shareholder lawsuits, and paying some employees partially through equity-based compensation. The most recent year also included an adjustment for $13.8 million in COVID-19 related expenses. In the table below, I did not adjust the results for COVID-19 expenses because they are a normal part of operations for landscape companies now. In addition, BrightView included an adjustment for the $22.2 million loss on sale of the BrightView Tree Company which I included as an adjustment in the year ended September 30, 2020. Finally, BrightView recorded an expense of $24.1 million to increase reserves related to its self-insurance program. Typically, a reserve is based on estimates from current and prior quarters, however, there is not sufficient information to determine the precise timing of when it should have been expensed. Therefore, I have included it as an adjustment. If the additional expense were spread over the prior two years, the net operating profit margin for those periods would have been reduced by approximately 50 basis points (0.5%).
For the accounting experts: Note that I have excluded from operating income the expense related to the amortization of intangible assets that were recorded as BrightView acquired other businesses. Since most landscape companies do not have amortization of intangible assets, I have excluded it, so they can compare their numbers to BrightView’s numbers.
|Qtr Ended Sep-19||Qtr Ended Dec-19||Qtr Ended Mar-20||Qtr Ended Jun-20||Qtr Ended Sep-20|
|Net service revenues||$624.8||$570.7||$559.1||$608.1||$608.1|
|Year-over-year growth rate||7.4%||8.5%||-6.3%||-7.5%||-7.5%|
|Cost of services||453.1||427.7||426.8||451.7||444.5|
|Gross profit margin||27.5%||25.1%||23.7%||25.7%||26.9%|
|Selling, general and administrative expenses||108.8||130.3||126.9||131.8||138.4|
|Ongoing selling, general and administrative expenses||98.1||112.2||111.9||92.0||103.2|
|Adjusted operating income||$73.6||$30.8||$20.4||$64.4||$60.4|
|Operating profit margin||11.8%||5.4%||3.6%||10.6%||9.9%|
To see short-term trends, the following table shows operating results for each of the past five quarters. Note the decline in revenue, gross profit margin and operating profit margin from the quarter ended September 30, 2019 to the quarter ended September 30, 2020.
|Year Ended Jun-18||Year Ended Jun-19||Year Ended Jun-20|
|Net service revenues||$2,338.8||$2,361.6||$2,362.7|
|Year-over-year growth rate||6.1%||1.0%||0.0%|
|Cost of services||1,720.1||1,729.4||1,759.3|
|Gross profit margin||26.5%||26.8%||25.5%|
|Selling, general and administrative expenses||431.3||467.8||497.8|
|Ongoing selling, general and administrative expenses||398.2||415.8||409.1|
|Adjusted operating income||$220.5||$216.4||$194.3|
|Operating profit margin||9.4%||9.2%||8.2%|