BrightView's Q3 2025 Earnings Call: Contradictions Emerge on Discretionary Spending, Sales Force Productivity, and Retention Strategies

Date of Call: August 07, 2025

Financials Results

• Revenue: $708 million, down 4% YOY

Guidance:

• Reaffirming FY2025 revenue range of $2.68B to $2.73B (assumes no $210M acquisition impact).
• Free cash flow guidance $60M–$75M; adjusted FCF expected to grow ~27% YOY and conversion ~34% at midpoint.
• Expect another year of record adjusted EBITDA and margins (Q3 adjusted EBITDA $113M; trailing 12-month EBITDA $344M).
• Net leverage ~2.3x at Q3; cash tax guidance lowered to $5M–$10M, freeing ~ $20M to reinvest in fleet.
• Plan to open 10 new development branches over next 24 months to drive future growth.

Business Commentary:

* Financial Performance and EBITDA Improvement: - BrightView reported adjusted EBITDA of $113 million for the third quarter, up 5% compared to the prior year, marking a record for the company. - The improvement was driven by operational efficiencies, cost management, and strategic investments in fleet and technology.

• Customer Retention and Employee Turnover:
• The company's customer retention rate improved to 82%, a 190 basis points increase year-over-year.

• This improvement was attributed to reduced employee turnover, which declined by over 40% within 21 months, indicating a more stable workforce and better customer service.

• Investment in Sales Force:

• BrightView has grown its sales team by approximately 6%, adding 60 new sellers, with plans to further increase this number.
• The expansion is part of a strategic effort to drive top-line growth by capturing more market share and increasing customer share of wallet.

* Fleet Management and Procurement Efficiencies: - Over $250 million has been invested in fleet management, reducing the average age of core equipment, which has positively impacted customer satisfaction and operational costs. - Streamlining procurement processes through centralization has resulted in significant cost savings, particularly in categories like safety gloves, where costs were reduced by 50%.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 'highest-ever adjusted EBITDA and margin' and Q3 adjusted EBITDA of $113M (up $5M, +5% YOY) with adjusted EBITDA margin of 16% (Q3 record, +140 bps YOY). They reaffirmed FY25 guidance and noted trailing 12-month EBITDA of $344M (15% improvement in 7 quarters), emphasizing confidence in continued margin and cash-flow improvement.

Q&A:

• Question from Timothy Mulrooney (William Blair): Your organic decline in land maintenance — was it contract work or discretionary spending? If per-occurrence scope was reduced, could that bounce back quickly?
  Response: Management said the decline was primarily discretionary/per‑occurrence reductions (customers temporarily trimming service), not a loss of long‑term contracts, and they expect the worst is behind them with rebounds beginning in early Q4.

• Question from Bob Labick (CJS Securities): Where do you stand in growing the sales force (development and account managers) and how long until new reps drive revenue? Also, clarify free cash flow, CapEx and the tax bill benefit.
  Response: They've grown the seller population ~6% (~60 hires); new reps ramp slowly (meaningful productivity by year 3, partial contribution within 90–365 days); tax bill cuts free cash tax to $5–$10M (vs prior $25–$30M), freeing ~ $20M to accelerate fleet CapEx while maintaining FCF guidance.

• Question from Greg Palm (Craig-Hallum): With SG&A down markedly despite lower revenue, which cost buckets are driving the benefit and are July trends improving?
  Response: Savings are coming from fleet (lower repair/rental), centralized procurement and G&A centralization; those efficiencies are being partly reinvested into sales/frontline, and management reports improving customer tone and early July signs of discretionary spend normalization.

• Question from Toni Kaplan (Morgan Stanley): Were particular end markets or customer types hit worse by the headwinds? How are you thinking about AI/technology benefits?
  Response: Headwinds were geographically driven (e.g., markets offsetting snow or higher insurance costs affecting HOAs); tech/AI investments (new HRIS and field service management) are focused on back‑office efficiency and retention analytics to free branch time and improve customer outcomes.

• Question from Jeffrey Stevenson (Lupe Capital): Are development project delays expected to push into fiscal 2026 and will One BrightView margin benefits persist into FY26?
  Response: Delays are timing‑related (Q3 backlog grew $14M, ~half tied to three large projects) and some work may slip into late '25/early '26; One BrightView efficiencies (fleet, procurement, centralization) are durable and expected to continue contributing to margin expansion.

• Question from Stephanie Benjamin Moore (Jefferies): Any real‑time labor availability or wage trends to note?
  Response: Turnover is down ~40% (≈6,000 fewer hires needed), annual wage increases for this workforce are near the low end (~3%), and savings from fewer hires are being reinvested in frontline benefits/hours to improve retention and service.

Contradiction Point 1

Discretionary Spending and Contract Revenue

It directly impacts expectations regarding customer spending and contract revenue, which are key indicators for future growth and financial stability.

The decline in your land maintenance business is linked to discretionary spending rather than contract services. Could you elaborate on your contract business? - Timothy Mulrooney (William Blair)

2025Q3: The decline was primarily due to discretionary spending as customers delayed maintenance discretionary spending due to economic uncertainties. The contract revenue was minimal, and the focus remains on growing long-term key metrics, with improved customer retention as a positive sign for future growth. - Dale Asplund(CEO)

What drives improved performance in core land over the next two quarters? - George Tong (Goldman Sachs)

2025Q2: In Maintenance, we continue to see better customer retention across multiple end markets, which is translating to more ancillary revenue. This is again another proof point of our strategy working. - Dale Asplund(CEO)

Contradiction Point 2

Sales Force Development and Productivity

It involves differing expectations and timeframes regarding the growth and productivity of the sales force, which is crucial for driving revenue and market penetration.

Can you provide details on sales force development and the timeline for new account acquisition and sales growth? - Bob Labick (CJS Securities)

2025Q3: The company has added 6% (60) new salespeople, focusing on new sales and account management. New sales reps typically take 90 days to a year to become fully productive, and investments continue to fuel growth into 2026 and beyond. - Dale Asplund(CEO)

Can you provide an update on the sales force ramping initiative? - Zack Pacheco (Loop Capital)

2025Q2: We are progressing well on growing our sales force by 50%. We've hired and are now focused on training to enhance productivity. - Dale Asplund(CEO)

Contradiction Point 3

Customer Retention and Sales Force Expansion

It involves the company's strategy for improving customer retention and expanding its sales force, which are key factors in driving organic growth and revenue.

If the decline in contract revenue is due to customers postponing discretionary work, is the scope expected to increase rapidly? - Timothy Mulrooney (William Blair)

2025Q3: Customer retention is a key focus...We are pushing hard to improve retention. - Dale Asplund(CEO)

How far along is the customer retention progress, and is there more room to run? - Tim Mulrooney (William Blair)

2025Q1: Customer retention is critical as it drives our ability to grow organically. Although retention has improved, we are far from where we want to be, aiming to surpass the 85% retention level achieved before going public. We have room to improve. - Dale Asplund(CEO)

Contradiction Point 4

Sales Force Growth and Timing

It involves differing statements about the timeline for new salespeople to become productive, which impacts expectations for growth and revenue recognition.

Can you elaborate on sales force expansion plans and the timeframe for new account acquisition and sales growth? - Bob Labick (CJS Securities)

2025Q3: New sales reps typically take 90 days to a year to become fully productive. - Dale Asplund(CEO)

What steps will you take in 2025 to improve employee and customer retention? - Bob Labick (CJS Securities)

2024Q4: We expect the hiring of those 86 new salespeople to become productive more quickly than in previous years. - Dale Asplund(CEO)