BrightView Holdings, Inc. Common Stock 2026 Q3 Earnings Call

Please go ahead, sir. Good morning, and thank you for joining BrightView's third quarter 2026 earnings call.

Dale Asplund, BrightView's President and Chief Executive Officer, and Brett Urban, Chief Financial Officer, are on the call. I will now refer you to slide two of our presentation, which contains our safe harbor disclaimer. Our presentation includes forward-looking statements subject to risks and uncertainties. In addition, during today's call, we will refer to certain non-GAAP financial measures. Please see our press release in 8-K issued yesterday for reconciliation of these measures. I'll now turn the call over to Dale.

Thank you, Chris, and good morning, everyone. Our third quarter results reflect the continued progress of our ongoing transformation. The investments we've made in our employees, customer service, and operational excellence are translating into stronger operational performance and positioning BrightView for long-term success. The underlying fundamentals of our business continue to improve, and we are well-positioned to deliver sustainable, profitable growth over the long term. Q3 marked our second consecutive quarter of organic land maintenance revenue growth, with revenue increasing 2.3% year-over-year. This performance was underpinned by another quarter of growth in our land contract book of business, which has now grown 4% from Q2 2025 and represents 100 basis point improvement over the prior quarter. Growth in our contract book provides increased visibility into the trajectory of our highly resilient and predictable land maintenance business.

During the quarter, we experienced two non-routine expenses related items impacting our profitability. The first, as discussed on our last call, was heightened fuel cost. We are happy that we were able to offset a portion of that through mitigating efforts, which I will discuss in a few minutes. Secondly, as we continue to solidify the foundation of the business and position it for the long term, we have made the prudent decision to take a non-routine self-insurance adjustment, which Brett will talk about in more detail shortly. The basis of this adjustment is heavily weighted towards the adverse development of claims prior to 2024, and by addressing these issues now, this allows us to close out lingering claims that mask some of the progress we have been making.

Encouragingly, if you exclude the impact of the prior year self-insurance adjustment, our business was able to largely offset the non-comparable fuel headwinds while continuing to invest in our sales force. Before moving on, I'd like to take a moment to remind everyone that we continue to focus on managing this business for the long term. We have a resilient business model that is poised for sustained growth. The intense focus our team have on delivering best-in-class service to improve customer retention, coupled with our continued investment into our sales force, will continue to build momentum in our land maintenance business, which is why we are reaffirming our previously raised land revenue guidance of 2%-3%. Our outlook remains strong, and these efforts support sustainable, profitable top-line growth in both the near and long term, driving meaningful shareholder value and positioning BrightView as the investment of choice.

Turning to slide five. We continue to drive year-over-year improvement in both frontline turnover and customer retention in the quarter, with frontline turnover coming down about seven percentage points and customer retention improving about 250 basis points versus the previous year. Our transformation strategy is underpinned by investing in our employees, by focusing on safety, providing industry-leading benefits, and delivering consistent service hours. We've differentiated BrightView as the employer of choice. This has reduced turnover, enabling us to reinvest savings back into the business and continue strengthening our competitive advantage. Lower employee turnover translates into more consistent service delivering and quality of care for our customers, driving higher retention and supporting sustained growth in our contract book of business. We remain focused on managing this business for the long term. The recent macroeconomic pressures that have driven fuel prices higher does not change that approach.

Our commitment to our customers or our view of the long-term outlook of this company, we made the deliberate decision not to implement short-term fuel surcharges on existing contracts. Our priority remains preserving long-term customer partnerships rather than reacting to what we believe are temporary cost headwinds. As you can see on slide six, this strategy has delivered meaningful progress across our branch network, though there still is significant room for improvement. We've shown this slide in prior quarters using different retention quartiles, with the bottom tier below 70% and the top tier above 90%.

As we continue to improve performance across the portfolio, our expectations have positively evolved. Our focus is now on branches below 75% retention, while we increasingly looking to replicate the best practices of branches delivering greater than 95% retention. Typically, our branches grow when they achieve mid-80%+ retention. In 2024, just 40% of our branches were above this level, while only 5% of our branches were in the top quartile. Now, over half of our branches are above 85% retention. We continue to reduce the number of underperforming branches, shifting a higher number of branches to our top quartile. The momentum we built gives us confidence in our strategy. We believe there is still significant runway to improve as we continue transforming BrightView.

This is why we remain disciplined in our approach, keeping our customer at the center of everything we do rather than reacting to short-term pressures. We believe long-term customer relationships are built through consistency, and our customers know why they can count on BrightView to deliver for them in any economic environment. Turning to slide seven. We continue to emphasize the importance higher customer retention has on the ability to grow our land business. Looking at the chart on the right-hand side of the slide, you can see that branches with 95%+ retention are growing north of 10% on a trailing 12-month basis, and branches with 85%-95% retention are growing on average 6%. Conversely, branches with less than 75% retention are shrinking 10% on average.

We continue to evaluate those branches and have actively made changes over the past several quarters, which is why we believe there is still plenty of runway to drive overall company retention to 90%+. As previously mentioned, our focus remains on continuing to move our underperforming branches into the upper quartiles, as retention truly is a key catalyst for driving sustainable, profitable growth in the mid to upper single digits in 2027 and beyond. Moving to slide eight. We delivered another quarter of positive net new business, our fifth consecutive quarter since accelerating our sales force expansion in the second half of 2025. The equation at the top of the page captures the simple formula behind our growth. Higher customer retention, plus a larger and more productive sales force, drives growing net new sales, expands our contract book, and ultimately fuels revenue growth.

As shown in the chart on the left, we're seeing the benefit of the two key drivers of our growth strategy coming together. Continued improvements in customer retention, combined with a growing and increasingly productive sales force, have driven positive net new sales and 4% growth in our contract book of business since the second half of 2025. The third quarter also represents the highest net new results since the start of my tenure at BrightView. This growing contract book continues to translate into top-line results, with approximately one point of land maintenance revenue growth in the first half of the year and 2.3% growth in the third quarter. Looking at the components of that growth, contract revenue increased 3%, reflecting the growth in our contract book reported in the previous quarter. Ancillary revenue grew about 2% as we look to balance price with customer acceptance.

The progress we're making in improving the underlying drivers of our contract book positions us to continue growing land revenue in both the near and long term. On to slide nine. We continue to build momentum in our sales organization. As of the end of the third quarter, we have hired an incremental 200 net new sellers versus the end of 2024. As a reminder, this includes a mix of new business sellers responsible for going out and finding new land maintenance contracts and customer-facing sellers who focus on selling ancillary work to both existing customers and customers outside our base. Our first cohort of sellers have now reached the one-year mark, and we are seeing an acceleration in new contract sales, now up approximately 20% year to date versus the same time last year.

As previously mentioned, this continues to feed the top of the funnel, and our contract book of business has grown for five consecutive quarters, translating to top-line growth in our land business. Turning to slide 10. I'd like to spend a few minutes discussing the impact of elevated fuel prices during the quarter as they had an adverse effect on results, but we partially mitigated by a few proactive measures we took to reduce consumption and drive efficiency in our business. First, let's set the stage on the left. Back at our Q2 call in May, we disclosed that April fuel prices were about $1 higher than they were the previous year. We said, if that trend were to continue the entire quarter, we'd see about a $4.5 million impact on the P&L.