Earnings Transcript for BV - Q1 Fiscal Year 2023

Operator: Good morning, and a warm welcome to the BrightView First Quarter Fiscal Year 2023 Earnings Conference Call. My name is Candice, and I will be your operator for today's call. [Operator Instructions] I would now like to hand you over to our host, Faten Freiha, Vice President of Investor Relations. Please go ahead.

Faten Freiha: Good morning. Thank you for joining BrightView's first quarter fiscal 2023 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.

Andrew Masterman: Good morning, and thank you all for joining us today. We are pleased to start fiscal 2023 with a strong first quarter underpinned by robust organic growth, acquisition benefits, disciplined cost management and a steadfast focus on executing our growth strategy to continue to drive momentum in our business. We delivered seventh consecutive quarter of land organic growth, and we grew our annual snow contracts in the mid-single digits. And our development business continued to deliver excellent organic growth. From a profitability standpoint, adjusted EBITDA exceeded the high end of our guidance, driven by the strength of our top line, pricing efforts, improved operating performance and disciplined cost management. Investments we made over the last few years in our sales force and technology are driving the strength and durability of our top line results, and these benefits are being realized in our profitability. Our priority is clear. We will continue to execute on our strategic plan to deliver solid organic growth, focusing on elements we can control, while implementing initiatives to mitigate against externally driven headwinds and improve profitability. Looking into fiscal year 2023, I would like to emphasize my conviction that despite the low snowfall, we intend to deliver strong organic growth and margin expansion in both our land and development businesses. Let me begin by reviewing the highlights for the first quarter on Slide 4. Revenue performance was supported by robust organic growth across maintenance and development as well as accretive M&A transactions. Land organic growth of 1.5% was driven by new sales growth, stabilized retention rates and ancillary growth. We benefited from additional hurricane cleanup revenue in the Fort Myers area, which was offset by significant rain across our coastal markets impacting ancillary installations. Our snow services business consists of annual contracts and our results vary based on actual snowfall realization. In Q1, our snow services revenue grew by 50% organically relative to the prior year, reflecting 6% growth in annual contracts and 44% in snow volume realization. It's important to note that in the prior year, we experienced significantly below average snowfall. Even with this quarter's growth, snowfall was about 15% below historical averages in our footprint for Q1 of fiscal 2023. The Development segment delivered 5.9% organic growth this quarter, underscoring a clear momentum in the business. Our team is working hard on expanding our customer base. And as a result, our backlog is extremely robust. Adjusted EBITDA for the quarter was $49 million, significantly above the high end of our guidance range of $44 million, driven by organic growth, pricing benefits as well as continued recovery in our development margins. Adjusted EBITDA certainly benefited from a snow increase. However, margin flow-through was lower than expected due to significantly below average snowfall in the Northeast and the Mid-Atlantic. Total consolidated adjusted EBITDA margin of 7.4%, reflects 20 basis points year-over-year improvement, underscoring our focus on profitability and supporting our long-term expectations of improving margins over time. From a balance sheet perspective, we entered into hedge agreements that effectively fixed interest rates on 70% of our total current debt or approximately $1 billion. Through these agreements, we kept our exposure to interest rate headwinds and structured a hedge that enables us to benefit with rates decline. Brett will have more details in his remarks about our debt management. And importantly, we remain disciplined stewards of capital and continue to manage capital expenditures prioritize select accretive acquisitions and target improving our leverage ratio through EBITDA growth. Before I get into a strategic update on the business, let's turn to Slide 5 to review snowfall data, the largest variable to our results for the first and second quarters. On the left-hand side, the slide showcases snowfall averages in our top three markets for the first quarter versus the prior year. As you can see, Denver snowfall came in above historical averages. While at the same time, snowball in Chicago and Boston were significantly below average. Across our footprint for the first quarter, snowfall was at 85% of the 30-year average compared to the 30% in the prior year. We experienced snowfall in the Midwest and Pacific Northwest. However, we saw little to no snow events in the Northeast and Mid-Atlantic, our two largest regions with higher levels of self-performance and margins. Therefore, while our top line benefited from snow removal services, the benefit to our adjusted EBITDA was lower than expected. As we have noted in the past, snow margin is driven by many factors, including when, where, how much and how often it snows and will change every year. Looking ahead to Q2, it's prudent to call out that snowfall totals in January of 2023 are significantly below historical averages, particularly on the East Coast, which represents 60% of our total snow business. As you can see, snowball averages in January across our total footprint are down from the prior year. Furthermore, the elevated temperatures indicated that snow levels will likely remain low. As a result, we are guiding to a second quarter adjusted EBITDA range with the snow expectation that reflects this reality. Brett will provide the detailed guidance in his remarks. Let's move to Slide 6 to review our top line growth drivers, which remain unchanged. Our sales force is driving strong sales growth across our entire business. Their consistent execution drives the confidence behind our expectation for robust organic growth in fiscal year 2023. We continue to see solid customer demand in our contract-based business, ancillary penetration remains high, and our development pipeline remains robust. Importantly, we are not seeing any indications of a slowdown in our landscaping markets. On the technology front, our digital innovation across a number of platforms has helped drive net new growth, and it is one of the reasons we continue to enjoy organic growth that exceed industry rates. Our initiatives around digital implementation tools have a time horizon of several years as we continue to roll out enhancements based on customer feedback. Our streamlined customer engagement tool, BV Connect, enables us to continue to transform the industry and our business into a more digital and future-focused organization. Furthermore, our integrated suite of applications drives efficiency, seamless acquisition integration and robust data analytics. The net result being superior operational efficiencies with better service quality and safety over time, technology investments will drive enhanced customer engagement and retention as well as team member engagement. Let's turn to Slide 7 to discuss our strategic M&A, which remains a key growth pillar. Our acquisition strategy is focused on increasing our density and leadership positions in existing local markets, entering attractive new geographic markets, expanding our portfolio of landscape enhancement services and improving technical capabilities in specialized services. Most recently, we completed our acquisition of Smith’s Tree Care, a leading service provider based in Newport News, Virginia. In addition, we acquired Island Plant Company, or IPC, a leading commercial landscaping provider on the island of Maui and Hawaii. With IPC, we have further expanded our presence and strengthened our leadership position in this very attractive market. We believe BrightView is now the leading landscaping provider in Hawaii. In addition to the Hawaii market over the last two years, through attractive and accretive M&A deals, we have meaningfully expanded our presence and build a strong leadership position in Minnesota and Boise, Idaho to excellent high-growth MSAs. As we have said on our last call, we are focused on select strategic transactions at very attractive valuations that will add significant shareholder value over time. Importantly, our M&A pipeline remains robust, with more than $700 million of opportunity, enabling us to continue to execute on our expansion strategy and deliver robust free cash flow over time. Let's now move to Slide 8 to discuss our cost structure. We continue to take a disciplined and strategic approach to managing our costs as evidenced by our margin expansion in the first quarter. While we have seen strong top line growth in our business over the last two years, total profitability has been impacted by a number of externally driven factors, including variability in our snow business, historically high inflation rates and most recently, a spike in fuel prices. We are determined and focused on managing through these headwinds to enhance our profitability and better position the company for the long-term. And we have taken measures in each of our business segments to enhance and improve our profitability and - help offset these headwinds. In our land maintenance business over the last couple of years, wage rates and material costs have risen significantly. Through our pricing initiatives, which we began implementing in the second half of last year, we succeeded in offsetting these increases. In recent quarters, the pricing benefits we realized were masked by the unexpected spike in fuel costs. We took a balanced approach with customers, absorbed some of the incremental fuel costs while focusing on strategic pricing initiatives, improving ancillary penetration and attracting larger and more profitable clients. While the spike in fuel has subsided, we remain diligent in balancing customer relationships, fuel surcharges and market dynamics. Turning now to our snow business, while this business is highly reliant on a mount and geography of snowfall, our goal remains to improve and stabilize the margin profile over time. As we have said in the past, we began the expansion of our self-performance snow business, self-performing snow management where services are performed through direct labor without subcontractors, secures' higher margins, eliminates the middleman and increases reliability. Furthermore, we are investing in our snow removal equipment to drive operational efficiencies. In summary, our snow leadership team is intently focused on rightsizing crews, converting our equipment to enable efficiencies and managing subcontractor usage more effectively. Due to lower snowfall, the benefit from these actions will be modest for fiscal year 2023. However, we believe these efforts will benefit total margins over time. Let's move to our development business, which has been historically impacted by the increase in material costs. As you know, we shifted contract lead times to allow 10 to 15 days of pricing commitments compared to three to six months historically. And this has resulted in significant improvement in our development margins in the last couple of quarters. Our development team is focused on targeting larger, high-margin projects to continue to drive margin expansion over time. As we look ahead to the second half of the year, we are extremely encouraged by our project pipeline, which has surpassed our expectations. As a result of these efforts, we continue to expect development margins to improve by approximately 40 to 60 basis points in total for fiscal 2023. Lastly, let's discuss our overhead and support team structure. We are intensely focused on optimizing our costs while continuing to invest in the growth of our business. The vast majority of our expenses are related to labor and material costs, which are variable. Importantly, our decentralized operational model provides ample flexibility in managing support and overhead expenses on a regional basis. From a fixed cost standpoint, our teams have done a great job managing expenses with an eye towards driving efficiencies and maintaining a disciplined approach. Brett will share more insight on this in his remarks. This fiscal year, we remain committed to very strict cost management protocols. We are curbing hiring, bringing outsourced operations in-house and thoroughly managing overhead expenditures. We're reducing T&E expenses, strategically managing marketing costs and reducing reliance on third quarter consultants. Importantly, these actions are manifesting in our results as we have kept our SG&A levels in line and scaled our corporate costs relative to business growth. Our prudent expense management supports our continued investments in business growth to further drive top line momentum. Before turning it over to Brett, let's move to Slide 9 to review our ESG efforts. As the company dedicated to designing, developing and maintaining the best landscapes on earth, prioritizing sustainable solutions is core to who we are. ESG is not only integral to our business strategy and deeply rooted throughout all aspects of our operations, but also a key component of our value proposition. On February 1, we published our second ESG report, highlighting our achievements for fiscal 2022 across environmental, social and governance pillars. From an environmental perspective, we continue to make progress against reducing our carbon footprint by investing in a cleaner fleet and converting our two-cycle gas powered equipment to rechargeable electric models. Let me further illustrate our progress with a couple of recent examples. First, we tested and deployed one of the first all-electric F 250 trucks in the U.S. and are excited to convert our fleet over time. Second, started - starting in January 2023, all new management vehicles ordered by the team members across our footprint will be either electric or hybrid. These initiatives will enable us to continue to make progress against our commitments and to reduce our reliance on fossil fuel. From a social perspective, we continue to diversify our workforce, and we accelerated our commitment to foster inclusion and belonging by launching a formal DE&I strategy. Over the past five years, the number of women managers increased by 60% and management team members identifying as Hispanic have more than doubled. Importantly, protecting our employees continues to be a top priority, our industry-leading safety record remains below the industry average. Inspiring people and nurturing landscapes is at the heart of what we do every single day at BrightView. Looking ahead, I believe our purposeful ESG strategy positions us for continued success, while supporting our team members and our clients' needs and sustainability objectives. I'll now turn the call over to Brett, who will discuss our financial performance in greater detail.

Brett Urban: Thank you, Andrew, and good morning to everyone. I'm pleased to start the year with a strong first quarter, anchored by robust top line growth and margin improvement. I'm thankful to our team members who continue to execute at the highest levels to support our business and drive solid financial performance. Our priorities remain the same

Andrew Masterman: Thanks, Brett. Now let's turn to Slide 20 to wrap up. 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 the investments behind digital services and sustainability. 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. Secular trends, including moving towards electrical equipment and limiting water usage are in our favor and position us well competitively. We have invested heavily in our capabilities in these areas to be able to address our customers' needs. We have multiple opportunities, organic and M&A that will power our growth and drive long-term profitability. Importantly, we are executing against our growth initiatives and driving strong momentum in our business. We are close to delivering on two years of consecutive quarter-over-quarter land organic growth. Our strong business fundamentals and strategic plans give us confidence that we continue to be poised for long-term profitable growth. In summary, we are pleased with our results and proud of our financial and strategic progress amid a dynamic environment. We are executing on our key growth drivers investing in our sales team and technology, which power net new customers and improve the ancillary penetration, leading to solid organic growth. At the same time, we are maintaining a prudent approach to managing our SG&A expense, which is currently in line with fiscal year 2019 levels despite the inflationary environment. Our M&A strategy continues to be a reliable and sustainable source of growth and our disciplined pricing efforts build on that expansion and support our ability to offset cost headwinds. Our disciplined cost management has enabled us to continue to invest in the business through sales force and technology investments to continue to drive growth. Importantly, we are dedicated to positioning the business to thrive in the face of external macro headwinds, changing secular trends and regulatory requirements. I am confident that our efforts will continue to position us for success over the near and long-term. I remain as optimistic as ever about our future, and I thank our teams for their dedicated response to the winter storms and 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.

Operator: Thank you [Operator Instructions] So our first question comes from the line of Bob Labick of CJS Securities. Your line is now open. Please go ahead.

Bob Labick: Thank you, good morning, thanks for taking our questions.

Andrew Masterman: Good morning, Bob.

Brett Urban: Good morning.

Bob Labick: Hi, so I wanted to start with the spring contract renewal environment. Last year, you were able to get some reasonable pricing to offset some of the headwinds at that time, headwinds had shifted. There's - fuel is different, everything else. How does the contract renewal environment? And what are your thoughts on getting some price given the rapidly changing macro environment?

Andrew Masterman: Yes, Bob it is quite a dynamic environment out there. And as we sit here today, fuel costs are about where they were last year at the same time. And so some of those headwinds we face towards the second and third quarter last year subsided to a certain degree all that being said, we're in the midst of those negotiations across the board in all of our regions. And I am happy to say that recently, we just did a review over our January results, and we're actually seeing good acceptance by our customers and actually are ahead of where we were last year and making sure that we're getting price covering the inflationary trends we're seeing in the marketplace.

Bob Labick: Okay, that sounds super. So - and you gave some comments, not numbers in terms of guidance, but in terms of margin growth for the year, is that - you're expecting EBITDA margin growth in the second half or is that the full year number? Or I wasn't entirely sure how to interpret the EBITDA margin growth comment for the year? Go ahead, sorry.

Andrew Masterman: Yes, sure, sure. And let me kind of a couple it between our two segments. If we start out with the maintenance segment, there's no variable out there. We just don't know exactly how much it's going to snow. So I can't really guide specifically on what's going to happen for the entire segment. What I can say is that in the land portion of that segment is we're going to unquestionably see margin expansion there. That will be evidenced and very clear as you look at Q3 and Q4 results because those won't have any snow in them. We see the underlying position that you saw in Q1 of land margin expanding. And yes, we said that snow was better. We also said that the snow margins actually weren't quite where we thought they would be. And it was land, which we really helped us out on the maintenance side of the business. In development, again, we saw in Q1, expansion of margins happen. We know as we look out with not only top line growth helping propel that in the second half of the year. But overall, our development segment, we're expecting to see margin expansion in that segment as well, giving us in total in the land portion non-snow of maintenance and the development segment, we're expecting to see margin expansion in both of those areas.

Bob Labick: Okay super. Last one from me, I'll get back in queue. Can you just talk about the labor and staffing environment out there? Are you - how are you doing in terms of your, I guess, utilization your staffing? Are you having to pay overtime because of lack of labor availability or what's the environment like and how is that - how are you expecting it to play out for the rest of the year?

Andrew Masterman: Right now, sitting here in February, this is not our peak time of employment, and we really are going to be coming up on that as we get into April and May as we bring more people on board. So right now, we are not seeing a significant problem in attracting folks across the entire business. And typically, every year, in the April to May period, we bring on over 5,000 people as we ramp up. One thing to note is that we believe that this year with some of the changes that have done in the H2B program sponsored by the government that we're actually seeing a higher degree of reliability in securing H2B labor in advance of the season, which is going to help us as we look at filling those positions with the growth that we see coming our way.

Bob Labick: Okay, that sounds great. Thank you.

Operator: Thank you. Our next question comes from the line of Tim Mulrooney of William Blair. Your line is now open. Please go ahead.

Tim Mulrooney: Andrew, Brett, good morning.

Andrew Masterman: Good morning, Tim.

Brett Urban: Hi, Tim good morning.

Tim Mulrooney: Just a couple of clarification questions from me on the guide. So first, on maintenance land so your business grew, I think, 1.5% organically in the first quarter, and your guide assumes a pickup in the second quarter, I think, like to 2.5% despite the harder comparisons with last year. So can you just walk us through the various factors that are helping to drive this expected acceleration on a tougher comp?

Andrew Masterman: Sure yes, Tim, what we're seeing is out there, and we're seeing it every single quarter is what we call our net new measurement, which gives us confidence about going forward. And that net new is a combination of new contracts, minus losses, and then increasing price and scope kind of all mixed together. And as we see that, we're seeing continued acceleration into the quarters, which gives us a lot of confidence about that as we see going forward. Of course, you have to have ancillary penetration if it comes along with that contract, that's the one variable we can't specifically tell exactly what that's going to be in a given quarter. But in the contract base, which is the kind of the bedrock of the company, we're seeing that solid growth coming in, which gives us that confidence to be able to forecast that higher level of growth as we get to the back half.

Tim Mulrooney: Thanks Andrew. Yes, I know that net new is a key KPI for you guys. So it's good to hear that is moving in the right direction. I'll let someone else ask about ancillary. I want to stick to the guide here. So now moving to your cost section I mean, you noted that SG&A on an LTM basis is near 2019 levels as a percentage of sales. My question is, is that your expectation for fiscal 2023, somewhere in that low 17% range because our model is closer to 18%. So I just want to make sure we all get our models right here?

Andrew Masterman: Yes, we expect that to continue. Now the variables, obviously is going to be is how much it snows or not. And so that's going to change the numerator, right, depending on what the sales are.

Tim Mulrooney: Right.

Andrew Masterman: Actually there, I should say [ph]. So outside, I think when you look at our overall dollar levels of spend, you take that percentage and kind of look at, that is kind of more the trajectory that we're going at as a business.

Tim Mulrooney: Got it, that's very helpful, one more quick, one from me. You lowered your CapEx projection by $10 million to $15 million. Can you just talk about what investments you're planning to make that you no longer think it's necessary to make this year, just we always think about, are they cutting in the growth CapEx or what's going away so anything there? Thank you.

Brett Urban: Yes, hi Tim, it's Brett. And I just think this shows kind of the resilience of our business and one of the levers we can pull when we kind of see a low snow quarter coming, we look at the balance sheet and determine what leverage we can pull CapEx being one of them, right? I think if you look at kind of the minimum level of CapEx of the business, just maintaining our equipment is probably around 2.5%. So we're still guiding to 3%, 3.25% which I would say we're still investing in some growth on top of that while maintaining. But I think the key point is really this is the lever we can use to offset some of the cash that we're going to potentially lose from low snow to kind of pull down that CapEx level a bit in years like that.

Andrew Masterman: Yes, Tim, we don't expect this to impact the business. In fact, if you look at the investments we've made over the course of the last five or six years, we've actually improved the age of our fleet by about a year over that period of time. So whenever we see a downturn or shift in any part of our business, these are the kinds of things that we can do on a short-term basis without really affecting any of the growth initiatives that we have in place.

Tim Mulrooney: Understood on that kind of cyclical cash flows and thank you very much.

Brett Urban: Thanks Tim.

Operator: Thank you. Our next question comes from the line of Phil Ng from Jefferies. Your line is now open. Please go ahead.

Unidentified Analyst: Hi guys, this is Maggie on for Phil. My first question on the 2Q guide, the sales number makes sense. But on the decline in EBITDA dollars and margins, can you kind of parse out how much of that is loss of new volume versus some of those development timing headwinds you called out or any other incremental headwinds baked in there?

Andrew Masterman: Yes, Maggie, you can basically take the entire shortfall in our guide relative to prior expectations it is almost 100% to a shortfall in snow. And that's really what it is. If you can think about - back in 2020, we talked about some of the drop-through rates that we have on revenue. It's the same situation where a shortfall in revenue drops through at about a negative 30% on margins. So it reached $1 million [ph] that's about $300,000 less of EBITDA relative to the snow levels. So if you just take that kind of calculation that really pretty much takes into consideration. The other aspects of our business are actually doing quite well. And so as you look at the underlying land performance, the underlying margin performance and development, we're seeing good momentum there. It's just masked by the fact that the snow levels are happening.

Brett Urban: Yes and I would be a little bit more specific. I think it's exactly right. Almost 100% of the change in guide is snow related. And if you look at snow last Q2, we had $208 million of snow revenue posted last Q2. This quarter, the midpoint of the guide is $120 million of snow revenue. So an $88 million decline in snow revenues at the midpoint of the guide. If you apply around the 30% margin to that guide, it's an additional $26 million. So the midpoint of our guide, with the same amount of snow revenue last year, it would have been in the mid-60s from an EBITDA perspective and showing margin improvement of almost 100 basis points. And if you kind of look at our guide now, and I'll just echo Andrew's comment, it is 100% snow-driven, and really just the lack of snowfall specifically in the Northeast and Mid-Atlantic region.

Unidentified Analyst: Okay, okay that's very clear. And then my second question, how do the development headwinds in 2Q impact how you're thinking about the segment for the full year? And can you kind of remind us how much visibility you have to those projects flowing through and maybe how that's driving your confidence in the 10% organic growth you're talking about in the back half?

Andrew Masterman: Yes, we have very good visibility, let's say, six months out with our development pipeline. And the situation we're at right now in Q2 is really just the timing of projects. As you know, these projects come in, they come out. They're just depending on when the subcontractors before us get done. And so the timing of these projects that we're seeing in Q2 is slightly less than it was the prior Q2. But we know right now that as we look at our backlog and this is a book backlog - this is not forecast backlog. These are projects that are signed. And frankly, from where we're at in landscaping, we're the last one of the projects. So these buildings are being constructed as we speak. These landscaping projects are going to happen, and we're very confident that 10% plus organic growth in the back half of the year will happen, which will give us kind of that mid to high single-digit total organic growth for development in the fiscal '23.

Unidentified Analyst: All right, thanks guys.

Operator: Thank you. Our next question comes from the line of George Tong of Goldman Sachs. Your line is now open. Please go ahead.

George Tong: Hi thanks, good morning.

Andrew Masterman: Good morning.

George Tong: January snowfall is now tracking below historical levels hi, as you noted. Can you elaborate on the assumptions around February and March snowfall that you're embedding into your guidance? And overall, how much conservatism is baked into your outlook?

Andrew Masterman: Yes, so George, as you look at the range, we factored in clearly January, no snow at all on the I-95 corridor. As we look at February, we're factoring in the range frankly at the midpoint is a very low snowfall in the I-95 corridor. At the low end of our range, we are factoring in no snow environment in I-95 with continuing performance in the Midwest and Rocky Mountains, which we've seen, historically happened. So in summary, at the low end of the range is continued no snow in the corridor with average though in the Midwest in Rocky Mountains and at the high end of the range, says that actually in the second half of February and into March, there is a return to kind of normalized snow in that I-95 corridor.

George Tong: Got it, that's helpful. And then diving into the land business, perhaps ancillary services, can you talk a little bit - about the uptake there, how trends are performing and especially given potentially the macro sensitivity of ancillary in the more discretionary in nature of ancillary services, if you expect to see any volatility there or any pullback in spend as we potentially head into a macro slowdown?

Andrew Masterman: Yes, we're not seeing any indications of our customers reducing their amount of inquiries on ancillary spending from the properties. And in fact, as you're seeing increasing return to work happening out in the marketplace and in commercial buildings, you're seeing increasing travel for hospitality type areas. We're actually seeing continued investment in properties and external environments that really fuel our ancillary part of our business. And so, we don't see that happening as we're at sit here today. And also, frankly well, this may be a temporary situation due to the lack of snowfall, the budgets that typically were allocated towards snow removal will likely be able to be freed up to a certain point to be allocated towards ancillary services as we move into the spring.

George Tong: Got it, very helpful. Thank you.

Operator: Thank you. Our next question comes from the line of Justin Hauke of Robert W. Baird. The line is now open. Please go ahead.

Justin Hauke: Hi good morning. Most of my questions have been answered. I've got kind of two technical ones here. I guess first, congrats on the putting the hedge in place and on so much of your debt and saving the cash interest expense, that's great. But I guess I wanted to ask, so the gains on that hedge, it looks like there was about $3 million in the quarter? And I don't see that backed out of your EBITDA reconciliation. And so I'm just clarifying whether that is backed out and what we should expect, how you would treat that going forward since there's such a large hedge in place now?

Brett Urban: Yes, Justin hi, this is Brett. You look at our Q1 results should be backed out of interest - interest related. We did have a hedge about $0.5 billion hedges that rolled off the last quarter was Q1 of this quarter we just finished. And essentially, I have to comment. I mean if you think about the headwind is entered into about 70% of our total debt, we feel very excited about that. Not only that, it's going to essentially save $10 million of cash interest on an annual basis. But since we've done that, we've actually seen rates pick up slightly from the time we put that hedge in. So we feel great that we've made that move and it's essentially capping our maximum amount of interest for the year and giving us some opportunity given the floor that we have in one of the hedges to share some upside if rates were to revert course.

Justin Hauke: Okay. So I guess, the $3 million gain in the P&L is adjusted to the interest expense and reconciliation, okay?

Brett Urban: That's correct.

Justin Hauke: Okay all right, just want to make sure. And then my second question is, if you could just give us an update on the amount of acquisition revenue in total you're assuming now for the year based on the wrap from the acquisitions last year and then plus you've done another three so far year-to-date. So just to kind of - obviously, you always - there's more that could come in, but just what you have already in place on the '23 number?

Brett Urban: Yes, I'll take that again. This is Brett. If you look at our first quarter results, and we did have a significant amount of acquisitions we did in years past, but thinking back to our guide in Q4 - our statements in Q4. This year, we're looking at about 2% acquisition growth in the company. That would be around $40 million. In years past, we've kind of guided more towards 3%. And then we've outpaced that 3%. Look, we're continuing to be strategic and opportunistic in acquisitions We've made 3 so far in fiscal '22. I will say we've spent significantly less on that line through kind of Q1, Q2 combined, wherein prior years, we've spent upwards of $50 million to $60 million through two quarters. And now, we're south of $15 million. So we're balancing our debt levels and our acquisitions. We're going to continue to be opportunistic in doing that. But we're guiding to about 2% growth in total in the P&L through acquisition this year.

Justin Hauke: Okay great. So no change there either, all right. I guess that will do it from me. Thank you.

Brett Urban: Thank you.

Operator: Thank you. Our final question comes from Andrew Steinerman of JPMorgan. Your line is now open. Please go ahead.

Andrew Steinerman: Hi Andrew, I know predicting snowfall is difficult and you just gave us your sense of this winter. But do you feel like we might be in a situation with temperatures warming over time where kind of lower snowfall is the more typical situation kind of over the winters ahead?

Andrew Masterman: Yes, it's a clear question. This year was the third year in a row of a La Nina effect, which caused the situation where you have lower snowfall in the East Coast and higher in the West. I think if we talk to someone who lives in California or folks who live in the Seattle or Nevada, they did not experience a lower snowfall. In fact, they've experienced a higher average snowfall. And that's not where our primary footprint is. But I do believe as we look out into years where potentially we're going to see a non La Nina effect is that you should see some return to more of a normalized pattern. You did see it two years ago in February, where we had actually the highest level of snow ever recorded in February of '21. So while, certainly, this has been a tough year and - unprecedented low situation in snow in that I-95 corridor, I think it's too early to call to say that, that's any kind of a permanent type of a situation reducing profile. But certainly, it's something that we're constantly monitoring and studying as much as we can about those weather trends.

Andrew Steinerman: Thank you, that's well said, appreciate it Andrew.

Operator: As there are no additional questions waiting at this time. I'd like to hand the call back over to management team for closing remarks.

Andrew Masterman: Great, thank you very much. And once again, I'd like to thank everyone for participating in the call today for your interest in BrightView, and we look forward to speaking with you when we report our second quarter results. Stay safe and be well.

Operator: Ladies and gentlemen, this concludes BrightView's first quarter fiscal 2023 earnings conference call. Have a great day ahead. You may now disconnect your lines.