Hello, and welcome to today's BrightView Holdings, Incorporated Fourth Quarter Fiscal 2022 Results Call. My name is Bailey, and I'll be the moderator for today's call. [Operator Instructions] I would now like to pass the conference over to today's host, Faten Freiha, Vice President of Investor Relations. Please go ahead. Your line is now open.

Thank you, operator, and good morning, everyone. Thank you for joining BrightView's fourth quarter and full year fiscal 2022 earnings conference call. Andrew Masterman, Chief Executive Officer; and Brett Urban, Chief Financial Officer, are on the call. Please remember that some of the comments made today, including responses to questions and information reflected on the presentation slides are forward-looking, and actual results may differ materially from those projected. Please refer to the company's SEC filings for more detail on the risks and uncertainties that could impact the company's future operating results and financial condition. Comments made today will also include a discussion of certain non-GAAP financial measures. Reconciliations to comparable GAAP financial measures are provided in today's press release. Disclaimers on forward-looking statements and non-GAAP financial measures apply both to today's prepared remarks as well as the Q&A. I'll now turn the call over to BrightView's CEO, Andrew Masterman.

Thank you, and good morning, everyone. As I reflect in the last couple of years, I couldn't be prouder of the BrightView team's efforts during this difficult and unique environment. The challenges we overcame and improvements we made showcased the strength of our fundamentals and resiliency of our business, built on an 80-year legacy of providing best-in-class landscape and services. We transformed the company through investments in sales force and technology to drive consistent and sustainable organic growth. We strategically expanded our footprint through accretive acquisitions that further accelerated our top line. In the last two years, we have grown total revenue by more than $425 million, approximately the size of our largest competitor. Let's now turn to Slide 4 and review our performance for fiscal 2022. We ended fiscal year 2022 with a record $2.8 billion in revenue despite historical low snowfall, particularly in the first quarter. We delivered land organic growth of 4.4%, exceeding our long-term plans and significantly outpacing projected industry growth of less than 1%. Development organic growth of 10.2% reflects our robust backlog and clear business momentum. Our Strong-on-Strong M&A execution contributed $140 million to the top line, $75 million in maintenance and $65 million in development. All of this resulted in total revenue growth of 8.7% for the year, supported by total organic growth of 3.2%. Turning now to profitability, our profitability for fiscal 2022 was impacted by various external factors, including the low average snowfall, particularly in the first quarter, a rise in labor and material costs as well as an unexpected spike in fuel costs. We have implemented various mitigating actions, including proactive pricing initiatives, shortened development project pricing commitments and other technology enhancements. These initiatives mainly offset the anticipated rise in labor and material costs. As we look ahead, we are…

Thank you, Andrew, and good morning to everyone. I'm thrilled to be here this morning and excited to report on a strong quarter. Our solid financial performance and growth momentum are powered by the dedication of our team members who are executing at the highest levels. I'm thankful and proud of their efforts. Our priorities remain the same, consistently growing our business, improving our profitability, enhancing our balance sheet and executing on capital allocation plans that create long-term shareholder value. With that, let me now provide more details on Q4 results and our outlook for fiscal '23. Moving to Slide 12 total revenue for the fourth quarter increased by 7.4%, reflecting a, 3.4% total organic growth, maintenance revenues increased by 4.8%, driven by 2.2% land organic growth and M&A contributions of $14 million. As Andrew noted, Hurricane Ian and significant rainfall at the end of the quarter impacted our land ancillary services. Excluding this impact, land organic growth would have been approximately 3% and in line with our guidance. Lastly, our pricing strategy contributed about 50 basis points to land organic growth, net of scope reductions as expected. Development revenues increased by 16.3% compared to the prior year. The increase was driven by a combination of strong organic growth of 8.5% and M&A contributions of $13 million. We remain optimistic about our development business in the near and long-term. We serve a diverse mix of end markets, and we're seeing growth across these verticals, most notably in private work and commercial construction projects. Turning to the details on Slide 13, total adjusted EBITDA for the fourth quarter was $91 million, up 2% compared to the prior year. Total net fuel headwind for the quarter was $5 million. Hurricane Ian and the significant rainfall at the end of the quarter impacted…

Thank you, Brett. We are very pleased with our results for the fourth quarter, which marks our sixth consecutive quarter of land organic growth. For full year fiscal 2022, we delivered solid organic growth in every single quarter showcasing our unwavering focus on driving organic growth. In addition, we executed on our M&A strategy which was a solid contributor to our top line for the year. Our development business began to recover in the fourth quarter, and we expect margins to improve in fiscal 2023. Despite the inflationary environment, we are able to offset labor and material inflation costs with our pricing efforts across our business. These results showcase the resiliency of our model and our ability to execute at the highest level in a very challenging and dynamic environment. It is clear that we have a strong, resilient and agile business. We are leaders in our industry with an unparalleled customer value proposition, supported by investments behind digital services and sustainability. We are executing against our growth initiatives and driving strong momentum in our business. Our future is bright, and we are confident that we have the right strategy and the right culture within our business to further accelerate our performance. Importantly, our business remains poised for long-term growth, and let me outline the main reasons. First, commercial landscaping is a strong business that has withstood various economic cycles and environments. Second, we serve marquee customers across various end markets. Our business and customer mix give us the, agility to continue to thrive in a rapidly changing environment. Third, we have a differentiated customer value proposition, powered by technology, sustainability and an unparalleled network of expertise. Fourth, secular trends, including moving towards electrical equipment and limiting water usage are in our favor and position us very well competitively. We have invested heavily in our capabilities in these areas to be able to address our customer needs. Lastly, we have multiple opportunities, organic and M&A that will power our growth and drive long-term profitability. In closing, I'd like to thank our customers for their support and partnership in working with us on managing the current inflationary environment. Also, I'm thankful for our teams for their continued attention to designing, creating, maintaining and enhancing the best landscapes on earth. Thank you for your interest and for your attention this morning. We'll now open the call for your questions.

Thank you [Operator Instructions] Our first question today comes from the line of George Tong from Goldman Sachs. Please go ahead, your line is now open.

Hi thanks, good morning. Hurricane Ian and heavy rainfall impacted ancillary services demand in the quarter. Do you expect weather to have any lingering impact on fiscal 1Q revenue performance?

Good morning, George. We did - the timing of the hurricane as far as Q4 was perfectly aligned with the end of our quarter. And so that last week, it was really rained up and down the Eastern seaboard from Florida, all the way up to Boston. What we're going to be seeing, as we get into this quarter, is actually a flip side, a positive impact that we expect from hurricanes, which is the cleanup and the repair. We expect that to start in the first quarter. And then cascade it frankly, into the second and third quarters as we continue to rebuild and retain. We believe in Q1, we'll have at least a $5 million positive impact on revenue and could be more as we work our way through the quarter.

That's helpful. And then as you think about snowfall activity for next year, what would normal snowfall mean for snow revenue growth in fiscal 2023?

Yes, and that's where we're sitting today. Still normal snow will clearly be at a higher level. If you looked at the slide that we put there, the historical kind of averages if you look - and snow coming in at around $55 million or little from that on a normal snow quarter. Our guidance right now assumes the low end, no snow. We just need to say that's the reality of what could happen and the high end - is slightly below average. But certainly, if you look at historical trends, it could be significantly higher than our current guide.

Right. I guess just to quickly follow-up on that. As you think about the full year, just at a high level, what percentage would correspond to regular snowfall, what percentage snow revenue growth?

Yes,. I mean if you look at the base that we have, and again, kind of looking at the slides last year, and if you refer back to the snow slide that showed the overall position on an average year, that number would have been closer on an annual basis, right, up in the 260 range or something like that. Again, you look back to fiscal '21 that was a year where - we had above average Q2 - sorry yes, Q2 and average Q1, we posted north of 280 that was above average. So if you look back at 260-ish or so being an average year, we've got some acquisitions since then. And we believe strongly that organic growth will continue in our snow book and should grow somewhere between 2% to 3%. So yes, 256 kind of, if you look on here, 260, 280 towards the high end, growing at mid-single digits is probably where you could expect a normal snow year.

Got it, that's helpful. Thank you.

Thank you. The next question today comes from the line of Tim Mulrooney from William Blair. Please go ahead, your line is now open.

Hi, this is Sam Kusswurm on for Tim. Andrew and Brett, hope you are doing well?

Doing well, thanks Sam.

Yes, I'll jump right in here. In your development business, I know you shifted to 10 to 15-day pricing commitments instead of historical three to six months. I guess I'm wondering if you could share how customers have responded to this change and if your competitors have also shifted the strategy or still holding to a longer lead time. And if they are holding to a longer lead time, does this create any sort of disadvantage during the bidding process?

Yes, pretty much the industry itself has shifted. I mean they see - the competitive nature of the market. They have their own - they're not immune to the cost inflation than we are. So I think customers are accepting kind of our shortened lead times. Competition has also adjusted their lead times. So kind of more of a normal industry practice now is going to be a shorter window for quoting until we see some type of long-term shift in stability in material rates.

Great, that's helpful. Maybe switching gears a little bit here then. I think you mentioned last quarter, a majority of your customers have accepted the fuel surcharges, but you remain thoughtful about the rollout and absorbing some costs yourself. Can you update us on this process? Have additional customers come on board to this - to the rollout? And then are the fuel surcharges prefixed or are you able to put some variability into these agreements?

Yes, fuel surcharge negotiations continued throughout the entire year of fiscal '22. As we now go into fiscal '23, what's happening with fuel surcharges, is actually we're shifting a surcharge into our pricing structures, right. And so that will manifest itself as we get into the green season in the May, June timeframe - and we're basing right now our pricing structures based on approximately current levels of roughly $4 gas. So as we forecast out there that kind of $4 level, that's where our pricing will be, and we'll be removing fuel surcharges as we embed that current level of fuel in our contracts.

Appreciate it that's helpful color. I'll leave there, thanks.

Thank you.

Thank you [Operator Instructions] The next question today comes from the line of Bob Labick from CJS Securities. Please go ahead, your line is now open.

Yes, hi good morning, it's Pete Lukas for Bob. Just in terms of the maintenance services revenue growth, how much of that would you say was due to price increases?

Yes, hi Pete, you look at net-net-net, it's about a 50 bps growth on overall maintenance due to price. When I say net-net-net that means we have price increases and we have scope adjustments. So actually price increases were higher. If we have, and I'll say, roughly 5% price increase, it means we have roughly 4.5% of scope adjustments. Both of them positively impacting margin, but ultimately resulting in only about a 50 bps top line benefit.

Great. And then shifting over to ancillary services, I know you mentioned the impact of the hurricane, but maybe if you could talk kind of ex that, would you say it's back to pre-pandemic level on an account basis? And what were the drivers of the ancillary per account be right now and any trends you're seeing there?

Sure, our contract maintenance and the contract part of the maintenance business rebounded very quickly off of pandemic. And so, we feel that, that actually came back to more of a normalized level early in '22 if not the end of '21. The ancillary services we have now are back - very strong at pre-pandemic levels for in a normalized state. And actually, when you see the hurricane coming in, that's going to only benefit that's going to be plus. That's going to be above historical ancillary services. And really, when it comes down to - it come back to a more normalized environment. When you go to hotel [ph] you're expecting to see different levels of ancillary power changes, things like that. When you go into homeowners associations and people are going to be there, you're going to be expecting a relatively tight look. And the reality is more and more people every day are going back to work in offices and the commercial complexes are - we're seeing the same levels of spend in our commercial properties that we saw back in 2019. So again, it's across the board. We only saw a dip of ancillary services of 5% to 10% throughput the pandemic. And so due to the resilient nature of the business, we see that rebound coming back and actually giving us a lot of confidence as we look out to 2023 with these elevated rates or more normalized rates, I should say, of ancillary penetration.

Very helpful thanks. I'll jump back in the queue.

Thank you. There are no additional questions waiting at this time. So I'd like to pass the conference back over to Andrew Masterman for any closing remarks. Please go ahead.

Yes, thank you, thank you Bailey. Once again, I want to thank everyone for participating in the call today and for your interest in BrightView. We look forward to speaking to you at upcoming events and when we report our first quarter results in February. Until then, stay safe, and be well.

This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.