BrightView Q3 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: We delivered our highest ever adjusted EBITDA and margin, with trailing-twelve-month EBITDA of $344 million, a 15% gain over seven quarters.
  • Positive Sentiment: Frontline employee turnover has fallen by over 40% in 21 months, cutting hiring needs by ~6,000 and saving $10 million+ annually for reinvestment.
  • Positive Sentiment: Customer retention climbed to ~82%, up 190 bps on a trailing-twelve-month basis and 300 bps since fiscal 2023, driven by stronger service quality.
  • Positive Sentiment: Development and maintenance teams are boosting cross-sell conversions toward a 70% target, unlocking a $50 million+ recurring maintenance opportunity.
  • Negative Sentiment: Third-quarter revenue fell 4% to $780 million amid macro-driven discretionary spend pullbacks in maintenance and timing-related development project delays.
AI Generated. May Contain Errors.
Earnings Conference Call
BrightView Q3 2025
00:00 / 00:00

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Operator

Please note this call may be recorded.

Operator

I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Chris Stosco, Vice President of Finance and Investor Relations. Please go ahead, sir.

Chris Stoczko
Chris Stoczko
VP - Finance at BrightView

Good morning, and thank you for joining third quarter earnings call. Dale Asplin, BrightView's President and Chief Executive Officer and Brett Ervin, Chief Financial Officer are on the call. I'll now refer you to slide two of the presentation, which can also be found on our website and contains our Safe Harbor disclaimer. Our presentation includes forward looking statements subject to risks and uncertainties. In addition, during the call, we will refer to certain non GAAP financial measures.

Chris Stoczko
Chris Stoczko
VP - Finance at BrightView

Please see our press release and eight ks issued yesterday for a reconciliation of these measures. With that, I will now turn the call over to Dale.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Thank you, Chris, and good morning, everyone. Starting with slide four, as our results show, we continue to make great progress executing against our One BrightView strategy as we focus on transforming this business. We delivered our highest ever adjusted EBITDA and margin, and our trailing twelve month EBITDA is now $344,000,000 which is a $45,000,000 or 15% improvement in just seven quarters. This progress is not possible without the commitment of our 19,000 team members who deliver world class customer service on a daily basis.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Our continued momentum in key metrics, including employee turnover, customer retention, and development to maintenance conversions has us on track not only to deliver another record year of adjusted EBITDA, but also positions us to drive profitable top line growth in both the near and long term. Our objectives remain clear. Prioritizing our frontline employees drives to lower employee turnover and leads to improved customer retention, which are key fundamentals to drive top line growth, and ultimately leads to larger, more profitable branches. This coupled with leveraging our size and scale as the number one player in our industry and strategically allocating our capital will position us as the investment of choice. As I approach my two year anniversary, my primary focus is achieving consistent top line profitable growth.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

I remain encouraged in the progress we have made in such a short period of time, By continuing to prioritize our employees and customers, we have solidified the foundation for growth, which has positioned us to make investments back into our sales force by adding additional resources to achieve top line growth, all while realizing historic EBITDA margins. While we are still early in our transformation, I am confident that our winning formula is in motion and is the key to driving meaningful shareholder value. Moving on to slide five, we continue to see sequential improvements in frontline turnover and hiring needs. Taking care of our most valuable asset, our people has been front and center. Our frontline employees are the ones that touch our customers every single day.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

And we know that lower employee turnover drives higher customer retention. We've created a workplace where employees can thrive both personally and professionally. We have a highly tenured frontline workforce of greater than four years. However, when I joined, frontline employee turnover was nearly 100%. The bottom quarter of our workforce would turn four to five times in one year, creating inconsistent service for our customers, which ultimately led to lower customer retention rates and higher cost to rehire and retrain our workforce.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

We have reduced our hiring needs by over 40% in just twenty one months, a true testament to the investments we are making in our frontline workforce. This has led to savings in hiring, onboarding, and training new employees, which we have in turn invested back into more consistent service levels, newer fleet, and more robust benefits for our frontline. We continue to put our employees first and know that our success as a company depends upon our unified One BrightView culture. Turning to slide six. Again, this quarter, we have seen improvements in customer retention, which is now approximately 82%.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

This is an increase of 190 basis points on a trailing twelve month basis and 300 basis points since fiscal twenty twenty three, a testament to the world class service provided by our employees. As we know, improved employee satisfaction leads to higher quality service, which in turn leads to improved customer satisfaction and ultimately higher retention rates. What's even more encouraging is that we continue to see meaningful improvements in customer retention across our branch network. Since we outlined our branch segmentation during Investor Day, we have seen growth of five points in both the bottom and top quartiles as we continue to prioritize our employees and customers. It's clear that our strategy is gaining traction, and our employees are more focused than ever on delivering high quality service to our customers.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

As I have said from day one, prioritize our employees and customers continue to be the key foundation to drive sustainable top line growth. Now let's turn to slide seven. Our maintenance and development teams continue to collaborate to drive conversions of development work into reoccurring maintenance contracts, made possible by breaking down legacy silos and operating together. The previous fragmentation of our business resulted in single digit conversions. Since operating as a unified One BrightView, where development and maintenance work together, we've experienced continued success in cross selling and believe we can achieve conversions of approximately 70% as we progress on our journey, a $50,000,000 plus annual reoccurring maintenance opportunity.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

To further amplify this, we plan to continue leveraging the collaborative efforts by organically growing our development business in markets where maintenance already operates. In locations where we offer a full suite of services, we are able to better serve our customers, leading to higher cross selling opportunities and a better customer retention. More on that in a minute. Turning to slide eight. While we experienced development scheduled delays during the quarter, I want to be clear that the headwinds were timing related.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

As you can see on the left, we saw our development backlog grow during the quarter by $14,000,000 offsetting the revenue timing impact we saw within Q3. Our backlog remains robust, and we continue to sell into the back half of fiscal twenty twenty six and beyond. Development remains the tip of the spear and we remain highly focused on our ability to enhance our market position by leveraging our existing footprint through development cold starts. We have an industry leading construction business and plan to open 10 new development branches over the next twenty four months, which will increase market share and provide a runway for future growth and development. As you can see on the right, development currently operates in 20 of the 36 states where we have a maintenance presence, leaving us a considerable opportunity to organically expand in markets where we already service.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

This expansion will not only fuel the $1,200,000,000 development backlog that we expect to realize by 02/1930, but it will also be the foundation for future conversions that will provide reoccurring maintenance revenue. Moving on to slide nine. We have made great progress in solidifying the foundation for future growth in such a short period of time. But let me remind you, my focus is to achieve consistent top line profitable growth. It all starts with our employees and customers and coupled with investments in sellers and our focus on capturing more of our customers' share of wallet gives me confidence that the foundation we've laid down will provide a runway for growth and meaningful shareholder value in both the near and long term.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

With that, I will now turn the call over to Brett. Brett?

Brett Urban
Brett Urban
EVP & CFO at BrightView

Thank you, Dale, good morning everyone. Before I start with my prepared remarks, I share Dale's conviction, energy and enthusiasm in our transformation. We remain disciplined in executing our strategy and managing our business for the long term.

Brett Urban
Brett Urban
EVP & CFO at BrightView

Moving to slide 11, we are positioned to deliver yet another year of record adjusted EBITDA and margin, which has been made possible for the continued streamlining of our operating structure and efficiencies gained through our One BrightView strategy. Our trailing twelve month EBITDA is now $344,000,000 or two ten basis points better than fiscal twenty twenty three, all while reinvesting at record levels back into the business. Our concentration remains clear and we continue to drive operational efficiencies with a focus on centralization and unlocking our size and scale, which I will go into more detail on Slide 14. Let's move to Slide 12 to discuss our results in the quarter. Total revenue for the third quarter was $7.00 $8,000,000 which is a decrease of 4% due to macro related dynamics that have been driven delays in maintenance discretionary spending and development projects.

Brett Urban
Brett Urban
EVP & CFO at BrightView

As Dale outlined earlier, we continue to be highly encouraged by the underlying trends in our business. We remain confident that the early success we're seeing around our employees and customers will result in sustainable profitable top line growth. Turning now to profitability on slide 13. We delivered record total adjusted EBITDA for the third quarter of $113,000,000 an increase of $5,000,000 or 5% higher versus the prior year period. Adjusted EBITDA margins of 16% were also a Q3 record and expanded by 140 basis points, marking another consecutive quarter of year over year margin expansion on a company wide basis as we continue to transform this business for the long term.

Brett Urban
Brett Urban
EVP & CFO at BrightView

Operating efficiencies more than offset revenue flow through and we are now seeing the benefits from the record level of investments we have made into refreshing our fleet, centralization efforts of our procurement group and continued efficiencies in G and A. Important to note as well, we continue to make investments back into expanding our sales organization, which will be a key catalyst to achieving consistent top line growth. I will provide more details on each of these strategies on the next slide. Turning to slide 14, as previously mentioned, we are executing against three key strategies fleet management, leveraging our scale, and driving efficiencies. To start, we've invested over $250,000,000 of capital over the past two years and we'll continue to invest going forward to refresh our fleet of trucks, mowers, trailers, and other equipment, bringing down the average age of these assets considerably.

Brett Urban
Brett Urban
EVP & CFO at BrightView

We have seen the age of our core mowers go from over three years old to just fifteen months. Our core production vehicles went from over nine years old to less than six. This has not only driven sequential improvements on our cost of repairs, maintenance and equipment rental expense, but also higher employee satisfaction, improved customer service and enhanced brand reputation. As we focus on continuing to unlock our size and scale, we've set into motion a strategy to centralize our procurement function and partner with preferred vendors and ultimately drive cost efficiencies through favorable terms and fixed pricing. A small example of a recent success story relates to our safety glove category.

Brett Urban
Brett Urban
EVP & CFO at BrightView

Previously, we had over 100 vendors for safety gloves where individual branches were procuring gloves through various suppliers at different prices leading to significant cost inefficiencies. Now, we have streamlined all purchases through two vendors at fixed and preferred pricing. Additionally, the added benefit, we are now getting higher quality gloves, which are safer for our employees, all at a significantly lower cost. While this one small example has resulted in approximate 50% reduction in spend in this category, opportunities like this exist across our entire business. And as it relates to our cost structure, we have seen sequential improvements in our SG and A as a percentage of revenue by reducing redundancies through centralization and leveraging technology.

Brett Urban
Brett Urban
EVP & CFO at BrightView

The savings we've realized through this strategy are being reinvested back into our sales force with the goal of rebalancing G and A from approximately 80% to 65% of total SG and A. This reinvestment is part of the engine that will drive future top line growth. Now let's turn to slide 15 to review our adjusted free cash flow and leverage. 2025 will be another year of sequential free cash flow and conversion improvement, all while investing at record levels back into our business. For reference, our free cash flow reconciliation appears in the appendix on slide 25.

Brett Urban
Brett Urban
EVP & CFO at BrightView

These investments are a testament to prioritizing both our employees and customers. Adjusted free cash flow is expected to grow approximately 27% year over year and adjusted free cash flow conversion is expected to be approximately 34 at the midpoint of this guidance, a 500 increase. While we have ample cash on hand that can be used for opportunistic acquisitions, our priority is on achieving organic top line profitable growth. And net leverage at the end of the third quarter came in at 2.3 times, which compares to 2.4 times in the prior year period. This was driven by lower debt levels, improved profitability and improved liquidity.

Brett Urban
Brett Urban
EVP & CFO at BrightView

Now let's turn to slide 16 to review our outlook for fiscal twenty twenty five. We are reaffirming the full year guidance we issued in July. As mentioned earlier, we expect another year of record EBITDA and margins, the highest in company history since going public. These results are a testament to the hard work and dedication of all 19,000 team members working together to provide best in class service to all of our customers. We expect the continuation of healthy cash flow generation driven by improved operating performance.

Brett Urban
Brett Urban
EVP & CFO at BrightView

Our outlook reflects our momentum on broad based initiatives to reinvest in the business. With the recent passage of the tax bill, we expect to invest these cash savings into continued acceleration of our fleet strategy, all while managing our free cash flow range of $60,000,000 to $75,000,000 Finally, we are holding our revenue range of 2,680,000,000.00 to 2,730,000,000.00 This reflects no assumptions of $210,000,000 for the year, while both land and development ranges remain unchanged. For reference, our revenue guidance reconciliation appears in the appendix on Slide 24. Before turning the call back over to Dale, I want to again express my appreciation to our BrightView team members. Without their support and commitment along with their ability to adapt, our ongoing success would not be possible.

Brett Urban
Brett Urban
EVP & CFO at BrightView

With that, let me turn the call back to Dale to wrap up on slide 17.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Thanks, Brett. As I approach my two year mark, I'd like to thank our employees for embracing our culture and driving meaningful transformation within our business. Our long term commitments remain unchanged. As I have said from day one, this all begins with our people, and I am incredibly proud of our dedicated team members who provide world class service to our customers on a daily basis.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Our One BrightView culture is resonating and we have made great progress in solidifying the foundation. But now, my focus is achieving consistent top line profitable growth. Combined with unlocking our size and scale and allocating our capital strategically, will position our company as the investment of choice. With that, operator, you can open the call for questions.

Operator

Thank you, sir. We'll We'll go first this morning to Tim Mulrooney of William Blair.

Tim Mulrooney
Group Head–Global Services at William Blair

Dale, Brett, good morning. Hey, morning. So it looks like that our organic decline in your land maintenance business was a combination of lower contract services and ancillary services. I think that's what it said in the press release. We were thinking that the decline was related more to the discretionary side of the business rather than that contract business.

Tim Mulrooney
Group Head–Global Services at William Blair

Can you talk about that contract business in a little more detail? Because I know that's a bigger piece of maintenance land and I think largely regarded as less discretionary.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Yeah, great question, Tim. Yeah, first, I want to start by saying we're going to do this call today from our branch in Dallas. So we're joined by our team members in Dallas. And it's hot down here, so they're making sure our employees are safe. But in your question, like I closed out the last statement, we are 100% focused on growth.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

If you look at what we said for our Q3 results, they are primarily driven by the reduction of what we call discretionary spend. That comes in two buckets. It's people that have made the decision to perhaps push off some of their ancillary work, which is 100% discretionary, but then it also has a bucket that in some of our Southern markets where customers have a little more per occurrence contract work, where they can make the decision that they want to try to stretch out between service levels and avoid some cost. So, Tim, we did see a little bit of that per occurrence revenue is why we have to call it contract revenue. But primarily, it was discretionary.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

It was based on our customers' decision to try to avoid, but it wasn't as a result of us feeling like we are making backwards headway, let's call it, on the key metrics. You saw in the deck, we continue to see retention improve for our customers, which is the long term lever that's going to drive continued growth in contract. Brett, you want to add anything?

Brett Urban
Brett Urban
EVP & CFO at BrightView

Yeah, no, I think Dale hit us spot on. I think it's discretionary spend in nature, which is really what we talked about at the end of last quarter and in our release in early July.

Brett Urban
Brett Urban
EVP & CFO at BrightView

As you think about the good news and what we're excited about here in the business is all the underlying fundamentals of the business and KPIs we see moving in the right direction, as you think about employee retention improving, which we know directly leads to customer retention improvement, which over the last twenty one months has now gone up by over 300 basis points. So we feel great about the underlying fundamentals of the business, Tim, and really improvement that we're seeing in those key KPIs.

Tim Mulrooney
Group Head–Global Services at William Blair

Okay. That's really helpful. I was trying to square all that math because I saw retention rates going up, but then you mentioned lower contract revenue, but it was the per occurrence work, which I assume can, if you're reducing the scope quickly, you can the customer can increase the scope pretty quickly as well, like that can bounce back quickly as well, correct?

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Yeah, yeah, Tim. Look, we feel and we're going to do what's best for our customers. We've worked so hard over the last twenty one months to show our customers we're a great partner to them. So when our customers ask us to work with them, we're going to do it. Even if the contract requests us to do something different, I've told all of our branch leaders and market leaders, put the customer first at everything we do.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

I would say, Tim, and this is, I think, an important statement to make, we definitely feel the headwinds we felt as we worked our way through Q3, and the worst of it is behind us. We feel like some of that unknown that was created in early April and lingered through April, May, and June, Based on what we're seeing and we're hearing from our operators, customers are becoming more receptive to some of these. These changes, Tim, even on the contract, they are short term decisions. They're not adjusting our contracts. They're just saying, Can you guys only service us three times this month instead of four to try to save themselves a little money while we work through these uncertain times?

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

But by no means are our customers saying, We want to readjust the long term contract relationship we have. They know what world class service needs to look like to keep their facilities looking good. But I do believe we've made significant progress as we work through Q3, and as we start Q4, we have great optimism that the worst is behind us, and we're starting to make progress returning this business, as I've said, the long term profitable top line growth. Brett, you want to add anything?

Brett Urban
Brett Urban
EVP & CFO at BrightView

No, think Dale said it.

Brett Urban
Brett Urban
EVP & CFO at BrightView

We're still early in Q4 here. We're through basically one month of our quarter July. And I think we're starting to see some of those trends, especially around discretionary spend rebound. Keep in mind, Tim, and I know you know this, but the last time we kind of went through a big macro change here was back in COVID era, which is five years ago or so. But we saw contract, some of this per occurrence work in contract take a very small 2% dip of par.

Brett Urban
Brett Urban
EVP & CFO at BrightView

We went to basically 98% of par in the first quarter. And then pretty quickly after that, returned right back to 100% of par ninety days later. So, we're starting to see some of those trends, as Dow mentioned, start to come back to more normal levels here in early Q4.

Tim Mulrooney
Group Head–Global Services at William Blair

Understood. Sounds promising. Thanks for the color, guys.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Thanks, Tim.

Brett Urban
Brett Urban
EVP & CFO at BrightView

Thank you, Tim.

Operator

Thank you. We'll go next now to Bob Labick of CJS Securities.

Bob Labick
President at CJS Securities

Good morning. Thanks for taking our questions.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Good morning, Bob.

Bob Labick
President at CJS Securities

Yeah. So I wanted to start so you obviously have been hitting on your key metrics and focusing on profitable growth. And one of the keys to getting this growth is winning new business, not just retaining the business you have, but you also have to win stuff as well. And you've talked about in the past the need to grow the sales force to increase the S in SG and A. I think you may have alluded to it a little on slide 13, but the question is kind of where do you stand in the sales force, I guess, development and growth?

Bob Labick
President at CJS Securities

And how should we see that process unfold and how long does that take to see new accounts and sales grow from there?

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Yeah, great question, because it's an important lever for us to drive profitable top line growth. So what we said at our Investor Day in late February, we gave some details that we said we had roughly 1,000 sellers in our business that interact with our customers on a daily basis. And that breaks into two buckets. It's our new sales group that sells into new accounts to get new customers, and then the team of account managers we have that partner with our customers to work on that ancillary business. Where we sit today is, since that time that we announced that, we've grown that group by roughly 6%.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

So we've already added roughly 60 of those frontline people interacting with our customers on a daily basis. Now, the ancillary work, we know we have headwinds there, but our account managers are getting up to speed with our customers to talk about what they can do, and we continue to put quotes out on the street. Our new salespeople, this is much longer to take hold, Bob. And traditionally, what we've seen is new sales reps in the first year are about onethree as productive as what they'll be by year three. So while we've had some get up to speed a little quicker, traditionally, it takes anywhere from ninety days to the full twelve months to really create some new revenue production by these sales reps.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

So we feel great. Our branches are working with these new reps. We're talking to new potential accounts. And all the investments we're making, as we noted, dollars 2,000,000 in the quarter, and we're lucky that we can pay for that The improvements we've made in other parts of the business has given us the ability to get these people on board, get them working with our teams, talk to new customers, and that's just going to fuel that growth well into 'twenty six and beyond for us. Brett, do want to add anything?

Brett Urban
Brett Urban
EVP & CFO at BrightView

Yeah, I would just add, Bob, and it's a great question on ramping up the sales force. I would just add that as you think through the business two years ago, we had much higher employee turnover, much lower customer retention. And as you think about adding to the sales force at that point in time, it really wasn't the right time. Anything we were putting in the top of the funnel was walking out the back end of the funnel. So, now that the last really twenty one months has been focused on the long term foundation of the business around our employees and customers.

Brett Urban
Brett Urban
EVP & CFO at BrightView

Now is the time where we're really starting to add to that sales force. And like you could see on Slide 13 in the deck, it's a rebalancing of our SG and A spend, right? It's the savings we're getting from the size and scale unlocked through centralization, through our procurement initiatives, through centralizing functions, back of the house functions that really support our branches. And those efficiencies are allowing us to start that investment in sales as we speak. I think as you go forward, you're going to see that number tick up.

Brett Urban
Brett Urban
EVP & CFO at BrightView

You're going to see us really start to put the gas pedal down on sales investments. And like you said, it's going to be a combination of customer retention improvement and now new sales coming in the top of the funnel.

Bob Labick
President at CJS Securities

Okay, great. That's exciting. And then just one real quick clarification, I guess. You mentioned, I think, obviously, free cash flow guidance was maintained, but I think you're getting a benefit from accelerated depreciation. And I think you said you're reinvesting that, but anyway, if you could just clarify your free cash flow, your CapEx spending and the reconciliation bill benefit to you.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Look, I'll let Brad add some color, Bob, but as I travel our branches, and like I said, I'm in Dallas this week, you would not believe the cultural impact, the $250,000,000 of new fleet that we've given these people has created. Seeing new trucks leaving our yards so we can provide quality service to our customers is critical. And when we had the opportunity, and we're fortunate enough today to have it, to be able to take some of these tax savings that I'll let Brett do the math for you and reinvest that even to more fleet that we can service our customers at the quality levels that we need, we're going to take that. But Brett, why don't you give Bob the math?

Brett Urban
Brett Urban
EVP & CFO at BrightView

No, it's Bob, great question.

Brett Urban
Brett Urban
EVP & CFO at BrightView

Look, as Dale mentioned, I think the new fleet and what that does for our employee satisfaction, customer satisfaction, brand reputation, that kind of has been speaking for itself and the underlying KPIs. But from a specific cash flow guidance standpoint, one, we feel great where the ability of this business to generate cash is, especially in the last couple of years. We feel great where our leverage is at this point at 2.3 times as a company. And that tax bill will help us. Our previous cash tax guidance was us a taxpayer of about 25,000,000 to $30,000,000 Now, we're saying that guidance is 5,000,000 to $10,000,000 So, we're going to save about $20,000,000 in really federal taxes.

Brett Urban
Brett Urban
EVP & CFO at BrightView

But what we're doing is we're increasing our capital guide. We're seeing those benefits from fleet and the quicker and faster we can accelerate the fleet strategy, not only the better or the satisfied our employees and customers will be, But as you see on slide 13, we're getting EBITDA and margin benefits from that early days. So, the quicker we can get the fleet refreshed, the better off we'll be from both employees, customers and margin standpoint. So, we're basically taking that money, Bob, and reinvesting it right back in the fleet. And important to note, just as you're thinking about what the impact of that is next year, we expect with our continued investment in our fleet and that bonus depreciation that's now 100%, we don't expect to pay federal taxes next year either.

Brett Urban
Brett Urban
EVP & CFO at BrightView

So, that's going to be another 20 of benefit that we could put back into accelerating our fleet strategy.

Bob Labick
President at CJS Securities

All right, super. Thank you so much.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Thanks Bob.

Brett Urban
Brett Urban
EVP & CFO at BrightView

Thank you Bob.

Operator

We'll go next now to Greg Palm of Craig Hallum.

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

Yes. Good morning. Thanks. What really kind of stood out to us was the operating leverage here and just the absolute SG and A spend in the quarter coming down as much as it did. Just in terms of the cost structure, where are you seeing the most benefit?

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

I mean, of the greatest amount of cost savings, any way to bucket out the various impacts on a year over year basis because it's pretty remarkable, just given the lower level of revenue?

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Yes, great question, Greg. I think you can see that we've been able to reduce G and A, and as we laid out back at Investor Day, we believe there's a significant opportunity. Breaking down those legacy silos that add redundancy happening across our markets, across our regions, even across our business units, has given us the ability to reinvest some of that money back into the business. Centralization is something the business never took advantage of in the past, that today we're trying to leverage our size and scales and get more non value added work away from our branches. And yes, we are investing a portion of that in our sales force, but we're also investing some of that G and A benefit back into the hours to service our customers on the front line.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Over the last year, we've continued to make sure our employees have adequate time to service our customers, and we're going to continue to do that. And that's created a little offset to some of those G and A savings, and we will continue to invest. But, look, less fleet issues, more procurement benefit, and just trying to leverage our G and A better has been the biggest driver across those three buckets. Brett, you want to add?

Brett Urban
Brett Urban
EVP & CFO at BrightView

I'd only add that we said this last call, we said it in our early July release that this macro headwind that we're facing here in the markets and some of our customers are not immune to, yes, it stinks that we have to get on a call and talk about some of that, but that's somewhat out of our control.

Brett Urban
Brett Urban
EVP & CFO at BrightView

The things within our control that allow us to expand that quality earnings and allow us to feel confident in what we're guiding to for EBITDA margin in Q4, as you think about 2026 and beyond, this is just the beginning stages of these strategies. We're really starting to see this one BrightView initiative, like Dale said, around our fleet, around procurement centralization, around our centralization size and scale unlock around G and A. I mean, we gave one small example of procurement with safety glove category, which is a small amount of our spend, it's a few million dollars and we're saving 50% in one small category. Opportunities like that exist across the entire business. And now that we have development and maintenance working together, we centralize that function as an example, we expect to see significant margin improvement as we move forward just by really unlocking the size and scale power of BrightView.

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

Okay. That's great. And then just more of a clarifying question on what you're seeing quarter to date, just to be clear, are you did you actually see an improvement in the results in July? Or just are you feeling better about kind of what you're kind of hearing and seeing out there from customers?

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Yes. It's a great question. And I'll try to refrain from giving inter quarter guidance. But Greg, I would tell you, I think as much as the financial people tell us what's happening, it's the tone that I get from my SVPs and my market leaders, and when I visit branches, just the optimism that they're feeling. So what I can tell you is more quantitatively, I feel like people are more optimistic than what they've been without me giving you specific inter quarter numbers.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

I would say, if you look at our guidance update on page 24, there's numbers that are implied in there. And like I said earlier, we believe Q4 will show improvements over the headwinds we saw in Q3, and the worst of it's behind us. So that's probably a high level to try to answer your question without giving inter quarter numbers.

Greg Palm
Senior Research Analyst at Craig-Hallum Capital Group LLC

Yeah, fair enough. Okay, thanks for the color.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Thanks, Greg.

Brett Urban
Brett Urban
EVP & CFO at BrightView

Thank you, Greg.

Operator

We'll go next now to Toni Kaplan of Morgan Stanley.

Toni Kaplan
Toni Kaplan
Executive Director & Lead Analyst - Equity Research at Morgan Stanley

Thank you. Just wanted to start with the headwinds that you saw in the quarter. Were there any customer end markets that were being hit worse than others or customer types like HOAs, or end markets like leisure, hotels, or any sort of pattern to the hesitancy in demand?

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Yeah, so I don't want to broad base everything. Let me give you Tony, it's a good question. So let me try to provide a little bit of color on where we felt some of maybe more of the headwinds. Obviously, as many people remember in Q2, we reported that we saw snow in areas that was very untypical. So kind of across the Carolinas and Virginia, markets that traditionally didn't get as much snow as what they traditionally did.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

And when you're dealing with an HOA that has a budget, or in many cases businesses that have budgets, those markets can get headwinds when people talk about their discretionary spend, where they try to offset those snow spends that they had over the winter to make sure that their facilities were clean and safe. So there are market drivers to that. The other area that I would note, and I don't think we feel like any overall segment, Obviously, as many people's businesses know, there have been impact on the cost of insurance in some markets. And there, again, when you look across areas that have been the hardest hit, let's take the areas that were impacted by the hurricanes and HOAs in those markets that saw insurance go drastically up. Those can kind of create some headwinds where our customers are asking us to be a little more flexible, and of course, the horrific events that occurred out in California with the fires last year and some of the insurance that those people are dealing with.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

So I don't want to say every HOA or home association is saying that they don't want to spend money. It's really driven by what's occurred over the last twelve months across our portfolio. But that's the best part. The closer we get to our customers and the better we partner with them and the longer they stay, they know they can address it with us, and we're in this for the long run. Everything we're doing is about long term partnerships and growing this business, not short term gains.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

So it's different areas in the part of the country, and I feel good that every time a customer asks us for help, they feel like they have a partner that they can find a way to work with. So that's probably the way I'd describe it, but a great question.

Toni Kaplan
Toni Kaplan
Executive Director & Lead Analyst - Equity Research at Morgan Stanley

Great. And while this business doesn't totally lend itself to AI, I know you do have a couple of AI tools around predicting customer retention and around vehicle safety. I'd also imagine you could get some back office efficiencies from AI as well and maybe supply chain efficiencies. So just wanted to understand how you've been thinking about AI and the potential benefits from it. I know it's not going to be as much as the fleet strategy, but just wanted to get some thoughts there. Thanks.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Great question. I think let's just take AI and talk about technology as the baseline. I think our business drastically underinvested in technology in general. We recently brought in two leaders to help me shore up those functions. We've made significant investments in a new platform with an HRIS system that's going to allow us better manage our number one resource, our employees.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

And then our biggest expense, labor, we're deploying a new field service management tool as we speak across the country. While they use some AI in both those systems, it's really just the platforms of technology that will allow us to use data better. Yes, today we do do some work with our current customers that give us indications, maybe customers that are at risk of potentially leaving us. I even get reports every week of customers of a specific size and above that I want to make sure whatever their issue may be that my market leaders know, I'm here to support them. So yeah, look, I think getting our IT platforms up to speed, and we've made the investment in leaders to help us do that, And then long term, using that data better, it's just more of that $100,000,000 of unlock that we talked about in G and A.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

We have to be better as a public company with the number one player in our industry to leverage technology to better support our branches. Every day that I can move work away from our branches, it's more time they can spend with our customers. There's going to be a day where our branches can hopefully spend 95% of their time out with clients and not behind computers at the office.

Toni Kaplan
Toni Kaplan
Executive Director & Lead Analyst - Equity Research at Morgan Stanley

Thank you.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Thanks, Tony.

Operator

Thank you. We go next now to Jeffrey Stephenson of Loop Capital.

Jeffrey Stevenson
VP - Equity Division at Loop Capital Markets LLC

Dale and Brad, thanks for taking my questions today.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Hey, Jeff. Good morning.

Jeffrey Stevenson
VP - Equity Division at Loop Capital Markets LLC

Good morning. I just wanted to ask if you've seen any improvement as we move through July from project delays on the development side of the business, which sounds were largely concentrated in some larger projects? Are you expecting the majority of these delays to be pushed back into fiscal 'twenty six?

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Yeah. So good question, Jeff. And I think part of that, being in the construction industry for many years, you're right. I think our definition of how it could bleed from '25 to '26 as everybody knows, we're reporting our third quarter today, and our fiscal year end is the September. But by no means is that the end of the annual construction cycle.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

So when we look at it, Jeff, yes, stuff could continue to bleed right up until November when the weather starts changing and some of the projects slow down. So whether it's going to get pushed well into 'twenty six, early 'twenty six, we'll see how that determines. I think earlier you made the statement that a lot of that delay and we showed everybody our backlog grew by the amount that we saw kind of the delay in revenue of $14,000,000 which, let me add, Jeff, typically in Q3 and Q4, which are our largest revenue producing periods for development, those are typically periods we consume part of our backlog, and then we see the growth again in Q1 and Q2, as we don't do as much working ground. But when I think about that $14,000,000 of delay, I don't want to share the public names, Jeff, but let me just say this. Almost half of that $14,000,000 was with three large customers.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

We are currently working on over 1,000 projects across our branch network, and three specific projects were the ones that actually caused half of that development backlog delay. One of the jobs, what I would say, we are now targeting to complete the end of next summer, and the original target date to complete was May. That particular job, we've only recognized 40% of our overall revenue that we expect to recognize over the full life of the project. Nothing on that job has been shut down. Nothing on that job has been removed from our scope of work.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

It is 100% timing. So we understand there's a lot of subs out there. We understand that we can be the very end of the tail on most construction jobs being the last thing with landscaping, But we also understand that people have made the commitments to get these jobs done, and we're going to work with the customer to do the work when they need us to do it. But Brett, do you want to add anything?

Brett Urban
Brett Urban
EVP & CFO at BrightView

Yeah, I would just add, timing.

Brett Urban
Brett Urban
EVP & CFO at BrightView

As Dale mentioned, it's purely timing. You look at our backlog growth in quarter and you look at our revenue shrink in quarter and some of the projects Dale mentioned that could push you out is really the question is we get a question a lot, Jeff, are these still going to happen the way you expected them at the same value? And the answer is yes. And sometimes at a higher value given change orders and rushes at the end of the project. So, it is purely timing.

Brett Urban
Brett Urban
EVP & CFO at BrightView

I would just say what we're doing about that, as you think about development, I mean, we feel extremely bullish that we have the best development team by far in the industry. And as you think about development moving forward, that is the tip of the spear to growing that reoccurring maintenance contract as you think about conversions. And we show on slide seven a couple of years ago that conversion rate development to maintenance was about 5%. Now, it's getting close to 20%. So, we feel like that's ticking up in the right direction.

Brett Urban
Brett Urban
EVP & CFO at BrightView

And you see on slide eight, we have 16 states currently where we have a maintenance presence, we have real estate, we have a brand reputation, but we don't have a development business. We are going to start adding those development businesses into these states. We're planning open up 10 over the next twenty four months in states where we already have a maintenance presence. That's going to create more of the brand reputation. That's going to create more of that pipeline for development conversion into maintenance.

Brett Urban
Brett Urban
EVP & CFO at BrightView

So, as you think about the long term health of both segments of the business, opening up those development branches, again, we can do it on our own. We don't need M and A to do this. We do it cold start with the expertise we have in the business already. That's just going to fuel that future long term growth.

Jeffrey Stevenson
VP - Equity Division at Loop Capital Markets LLC

Thanks for all the additional details. Super helpful. And then you reported a nice step up and maintenance margins due to one BrightView initiative such as your fleet management and centralized procurement, beginning to show up maybe earlier than even anticipated in results. And should we expect these benefits to continue contribute meaningfully to margins as we move into fiscal 'twenty six?

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Look, I think as we had outlined in the past, there is so much opportunity for us to leverage the size and scale of this business. And I've seen what happens when people work together and we leverage the valuable capital we deploy and the spend we have every year. So yes, Jeff, I think the luxury we have is the fleet improvements we've made, the procurement improvements we've made, and the centralization work we've done have allowed us to pay for additional resources in sale. And I expect us to continue to invest in sales. We said we added 6% or 60 resources.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

We're going to keep on that path knowing those investments take time to pay off to drive top line growth. But those numbers that we shared that we were able to generate, we expect those to continue and eventually continue to grow. So this is the first quarter we've been getting smaller benefits as we've worked through the first two quarters of the year, but in Q3 we wanted to share with you so you could see. And probably on that EBITDA bridge, Jeff, the biggest thing I would note, when we get this business growing that top line, you can see that that was the headwind that we had this quarter costing us $6,000,000 of EBITDA based on revenue. So as we return to growth, then we can even fund more for all those investments.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

So, it's very exciting, but I would definitely expect it to continue to reoccur. And Brett, you want to add?

Brett Urban
Brett Urban
EVP & CFO at BrightView

No, Dale said it great. Look, I'll keep this simple. We are focused, like Dale said, on the long term health of this business, And the early wins from our One BrightView strategy are allowing us, Jeff, to make sure we stay diligent in reinvesting back in the business, right?

Brett Urban
Brett Urban
EVP & CFO at BrightView

Not just with frontline reinvestment into our workforce, but also now, as you see on slide 13, starting to put the gas pedal down on adding sellers to the business. So, we're fortunate that we've put these strategies in place and they're paying early dividend.

Jeffrey Stevenson
VP - Equity Division at Loop Capital Markets LLC

Great. Thank you.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Thank you.

Brett Urban
Brett Urban
EVP & CFO at BrightView

Thanks, Jeff.

Operator

Thank you. And ladies and gentlemen, we do have time for one more question this morning. We'll take that now from Stephanie Moore of Jefferies.

Stephanie Moore
Stephanie Moore
SVP - Equity Research at Jefferies

Hi, good morning. Thanks, guys. Hey there. Wanted to and actually, Dale can't believe it's been two years already. That's that's crazy to think about.

Stephanie Moore
Stephanie Moore
SVP - Equity Research at Jefferies

I wanted to touch a little bit about the availability of labor, maybe the cost of labor. Anything that you can call out in terms of just kind of real time labor trends, anything that you're dealing with in this environment would be helpful. Thank you.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Yeah, good question. It's been, I think, twenty one months, as Brett likes to remind me, going on two years. It'll be two years October 1. But time flies when you're having fun, Stephanie, and it's been an enjoyable experience as we work with our branches. If you talk about labor, labor is obviously a big expense for us.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

It's 40% of our cost to service our maintenance customers. But it comes down, when I think about our labor costs, and you've seen on slide five the trend that we've been able to produce. And what was once 100% turnover, we've dropped 40%. That's 6,000 less hires needed to support the service we give our customers. Now, the 6,000 less people is going to save me anywhere between 10,000,000 and $12,000,000 every year in G and A costs to actually get those people onboarded.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

What have we done with that money? We put that back into those frontline employees by making sure that they can work their forty hours to service their customers. We've added PTO, as we've told everybody. All those things create better stickiness with your employees and is a benefit for that team of employees that traditionally weren't getting those benefits. Our labor increases have been somewhat nominal.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

They've been below 3% over the past year, but if you look at all the benefits that they've received, it's probably much greater, but we've been fortunate that we could pay for those benefits for those employees, and it keeps driving down that turnover. So at the end of the day, it's not just the average wage they get that we can quickly measure, it's the overall benefit. But the great part is, if we can keep more of those employees, and it costs us less to continue to onboard them, it's money well spent, and they deserve to share in that benefit the longer we keep people. And as we've said, it is a direct correlation between the longer tenure we have of employees and lower turnover, the more customer retention have at a branch, and the more customer retention, the more we can grow those branches. Brett, do you want to add anything?

Brett Urban
Brett Urban
EVP & CFO at BrightView

I think that I'll hit the nail on the head. If you think about 6,000 less employee hires at about $2,000 or so a piece, it's significant savings for hiring, onboarding, training of new employees that we can reinvest directly back into the business. And just a reminder for everyone on the call, we are fully e verified workforce and the more we take care of our domestic employees and keep those folks staying with us, that has a direct correlation to the cost as well. We've said publicly typical wage is somewhere between 35% a year increase at this population of the employee count. But we're kind of seeing wages right towards the lower end of that range here, Stephanie.

Brett Urban
Brett Urban
EVP & CFO at BrightView

So, towards the 3% range. But it all comes down to what's on page five of reinvesting back into that front line, not just from a wage standpoint year over year increase, but making sure they get their forty hours a week. Giving them PTOs, so when they have personal situations come up, they can take time off and feeling like they're truly valued in the business. That's what we've really been focused on over the last twenty one months or so.

Stephanie Moore
Stephanie Moore
SVP - Equity Research at Jefferies

Great. Well, really appreciate the time. Thanks everybody.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Thanks Stephanie.

Brett Urban
Brett Urban
EVP & CFO at BrightView

Thanks Stephanie.

Operator

Thank you. And at this time, I'd like to turn things back to you Mr. Astellin for any closing or concluding remarks.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

Thank you, operator. And we continue to see great interest and demand in the company, and we apologize for anybody who wanted to get in the queue and not ask a question. And by all means, you can follow-up directly with Chris Stosco with any questions you may have. But I want to close by reiterating the great progress that we've made, but we'll remind everyone that we are still very much in the early days of transforming this business. We've made great strides in solidifying our foundation and driving efficiencies.

Dale Asplund
Dale Asplund
President, CEO & Director at BrightView

But let me reiterate, I am 100% focused on achieving long term profitable top line growth, which will ultimately position us as the investment of choice. With that, operator, you may now end the call. Thank you.

Operator

Thank you, gentlemen. Again, that will conclude today's BrightView earnings call. Thanks again, ladies and gentlemen, for joining us today, and we wish you all a great remainder of your day. Goodbye.

Executives
    • Chris Stoczko
      Chris Stoczko
      VP - Finance
    • Dale Asplund
      Dale Asplund
      President, CEO & Director
    • Brett Urban
      Brett Urban
      EVP & CFO
Analysts
    • Tim Mulrooney
      Group Head–Global Services at William Blair
    • Bob Labick
      President at CJS Securities
    • Greg Palm
      Senior Research Analyst at Craig-Hallum Capital Group LLC
    • Toni Kaplan
      Executive Director & Lead Analyst - Equity Research at Morgan Stanley
    • Jeffrey Stevenson
      VP - Equity Division at Loop Capital Markets LLC
    • Stephanie Moore
      SVP - Equity Research at Jefferies
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