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© transcript Emily Beynon Thank you. . . .

Good day, everyone, and welcome to today's Brightview earnings call. At this time, all participants are in the listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. You may withdraw yourself from the queue by pressing the star and 2. Please note, this call may be recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Chris Stoczko, Vice President of Finance and Investor Relations. Please go ahead, sir.

Good morning, and thank you for joining Brightview's fourth quarter and fiscal 2026 earnings call. Dale Asplund, Brightview's President and Chief Executive Officer, and Brett Urban, Chief Financial Officer, are on the call. Please refer 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 8K issued yesterday for reconciliation of these measures. With that, I will now turn the call over to Dale.

Thank you, Chris, and good morning, everyone. We closed fiscal 26 with a third consecutive quarter of revenue growth in our reoccurring land maintenance business. Land revenue increased 3.3% in the quarter, or approximately $16 million year-over-year. A step up from the previous quarter as our transformation continues gaining momentum. This acceleration is a direct result of the journey we began more than three years ago, and the momentum we built gives us confidence as we look ahead. By prioritizing our employees and putting the customer at the center of everything we do, we have continued to reduce frontline turnover, strengthen our customers' retention, and reinvest back into our sales force. Thus solidifying the foundation of our business. The solidified foundation, alongside our unwavering focus to continue transforming our business, positions this highly resilient, reoccurring business to drive sustainable, profitable growth. The continued improvement in our leading indicators remains highly encouraging and underpins our forward trajectory. The fourth quarter marked our sixth consecutive quarter of positive net new sales. which has grown our reoccurring contract book of business. This growth was enabled by the solidified foundation in place in the investments we've made and will continue to make to strengthen our sales organization and position us for sustainable, profitable growth. Frontline turnover improved by approximately 600 basis points versus the prior year, and customer retention reached approximately 84.5%. and improvement of 150 basis points. While the improvements across these key metrics is highly encouraging, we still have plenty of runway ahead of us. On the development side of the business, we continue to navigate a volatile macroeconomic environment that is creating softness, particularly within the residential vertical. We remain focused on managing this business through these conditions while positioning it for the opportunities ahead. More on this in a bit. At the same time, the continued momentum in our reoccurring land maintenance business reinforces our confidence in the long-term trajectory of this highly resilient business and our ability to drive compound growth. That is why today we are pleased to introduce 2027 guidance that is underpinned by 3% to 4% growth in our reoccurring land business and a return to adjusted EBITDA margin expansion. The continued execution of our strategy and building momentum in our highly resilient and reoccurring land business gives us confidence in our ability to drive sustainable, profitable growth in 2027 and beyond. Turning to slide five. Our People First strategy continues to drive lower frontline turnover and higher customer retention. Frontline turnover improved by roughly 600 basis points versus fiscal 25. and has continued to improve sequentially since we began our journey over three years ago. Since day one, we have invested in and prioritized our crews, positioning Brightview as the employer of choice. The formula is simple. Lower turnover means more consistent and reliable service, better communication and more efficient, unified teams in front of our customers. The byproduct of this is reflected in our continued improvement in customer retention. Now we're approximately 84.5%, up over 550 basis points from where we began our journey three years ago. Improving customer retention is critical to preserving our existing book of business and providing a stronger base for which to grow in both the near and long term. The compounding cycle I mentioned just a bit ago. A recent example of this is our decision not to implement fuel surcharges on existing contracts as fuel prices elevated over the past six months, despite the near term cost pressures. While we continue to be disciplined in our pricing approach to protect margin, we believe preserving long term customer relationships and supporting retention will create greater value over time than reacting to potential short term headwinds. While we're pleased with our progress in retaining customers, There's still room for improving as we progress towards our goal of 90 plus percent retention across our branches. Our thoughtful approach to preserving customer relationships will be a catalyst towards accelerating retention and driving sustainable, profitable growth. Moving to slide six. Our net new sales momentum is accelerating land revenue growth. After land maintenance revenue shrunk in both fiscal 24 and 25, We returned to growth in fiscal 2026 with land revenue up nearly 2%. That growth accelerated to 3.3% in the fourth quarter. This acceleration was made possible by fixing the foundation of our business through a heightened focus on reducing employee turnover, improving customer retention, and ramping our sales force. Key fundamentals of our business that all continue to trend in the right direction. Over the past 18 months, We've ramped our sales force by taking cost savings through G&A efficiencies and reinvesting back into our sellers. We are highly encouraged to see both the tenure of our sales force and productivity levels improving. Both forward indicators that underpinned our expectations accelerating into 27 and beyond. All these initiatives have resulted in six straight quarters of positive net new sales, a key indicator of future growth. and we've seen the improvement compound and materialize in the results. Now three consecutive quarters of reoccurring land revenue growth. For fiscal 27, we expect to see continued improvement in this segment and are guiding to three to 4% land revenue growth, driven by two key factors. First, balancing customer retention with price and scope. We remain disciplined on pricing while protecting the customer relationships we worked hard to strengthen. Second, the continuation of our Salesforce hiring ramp. In 2027, we will continue our accelerated efforts to bolster our Salesforce. Additionally, as the sellers we're onboarded over the past 18 months continue ramping, we expect productivity levels to continue rising, driving compound growth in our reoccurring contract book. And as you know, when customers stay with us longer, they tend to spend more money on ancillary services. creating a flywheel effect that positions us for sustainable growth in our reoccurring land segment. It is clear that our underlying strategy is working. Since the beginning of our journey three years ago, our focus has remained the same. Prioritize our employees who will take better care of our customers and ultimately position us as the service provider of choice. The momentum from our disciplined approach continues to gain steam and is why we are so highly encouraged by the forward trajectory of our reoccurring and resilient business. Turning to slide seven, I want to provide an update on our development business, which saw a sharp decline in the fourth quarter that may continue into 2027 due to the volatile macro environment. As a reminder, this construction-based business is more cyclical in nature and is more susceptible to macroeconomical volatility. Unlike our highly The slowdown in development was driven by three key factors. A sharpening decline in the residential construction and market, delays on several large jobs, and delayed bid awards as customers navigate a volatile macro environment underpinned by higher interest rates and inflation. Since 2024, our development revenue related to residential projects has softened. in line with the broader slowdown in the residential construction aimed at uncertain economic environment. Despite the softness, we experienced positive momentum in overall bookings in 2026. Alongside our continued cold start initiatives, however, continued project delays and a more pronounced slowdown in residential drove a larger than expected shortfall in the fourth quarter. We expect this softness to continue in the near term as we are guiding to a sequential step down in development revenue, which Brett will touch on in a few minutes. While we are not immune to the broader economic environment, we have taken actions to mitigate these headwinds. Our Cold Start initiative, which we launched nearly 15 months ago, continues to gain momentum as we expand into markets where we already have a presence on the maintenance side of the business. Additionally, we will continue to remain disciplined in our cost management efforts to protect margin as we navigate through this volatility. Moving to slide eight, on a forward-looking view into the development business, while we continue to navigate the uncertainty of the macro-related environment within this cyclical business, the underlining indicators remain healthy. Our backlog, a metric we monitor monthly and provide visibility into future revenue, typically converts to roughly 90% of revenue in the year. What can sway this is the volatility I mentioned within residential construction, as well as the current political environment surrounding data center build-ups. Collectively, these two verticals represent roughly 15% of our backlog. On the upside, we remain highly encouraged by the volume of bids, and while we have seen some hesitancy in the pace at which jobs are being awarded, we believe that trend will course correct as the macro backdrop becomes more clear. While this business can be cyclical in nature, we remain steadfast in executing our long-term strategy. Despite the short-term choppiness, we believe this business complements our maintenance business as it provides future opportunities to continue generating compound growth in our resilient and reoccurring land business. Moving to slide nine, I'd like to remind everyone of the progress we've made as a company since the start of our journey three years ago. Our focus has remained unfazed. Prioritize our employees, who will then take better care of our customers and ultimately position us as a service provider of choice. Our strategy is working. And while we are still in the early winnings of our transformation, the underlying indicators and momentum we are seeing in our reoccurring land business gives us the conviction about the opportunities that lie ahead and validates our ability to drive meaningful shareholder value in the long term. Before I turn it over to Brett, I want to thank our more than 17,000 employees for their unwavering commitment to delivering consistent, high-quality service to our customers. They are the driving force behind our transformation, and the progress we are seeing would not be possible without them. With that said, I'll now turn it over to Brett.

Thank you, Dale, and good morning, everyone. Our fiscal 26 results reflect continued progress in our recurring land business with a third consecutive quarter of land maintenance revenue growth and the fastest growth rate of the year in the fourth quarter. While non-routine items and softness in development wait on our full year results, the underlying fundamentals of our business continue to improve. We are entering fiscal 27 with momentum in land growth and a clear path to renewed margin expansion and free cash flow generation. Let's turn to slide 11 to discuss top line results for the full year. Total revenue was $2.7 billion, a 1.5% increase over the prior year. Land maintenance revenue increased approximately 2%, an increase of roughly $31 million as growth in our contract book translated to revenue and recurring customers took on greater ancillary services. We remain extremely encouraged by the underlying growth metrics in our predictable and recurring land maintenance business. Snow revenue was $293 million for the year, up approximately $82 million, driven by elevated snowfall in the Northeast and Midwest geographies. Together, total maintenance services revenue increased about 6% to $2.0 billion. Development revenue was $715 million, a decrease of $74 million, reflecting a downturn in our more residential-focused vertical, as Dale mentioned earlier, coupled with decreased project volumes and the timing and mix of project awards. Turning to profitability on slide 12. Fiscal 26 adjusted EBITDA was $329 million compared to $352 million in the prior year. This includes better-than-expected flow-through from our land business all set by approximately $16 million in non-routine items, roughly $8 million in fuel headwinds, and our planned reinvestment back into ramping up our sales force. Moving to slide 13, I'd like to touch on the progress we've made in streamlining our operations to reduce SG&A's spend and reinvest these savings back into our sales force. SG&A's percentage of revenue improved to 16.8% in fiscal 26, A 210 basis point improvement since 2023. More importantly, we are shifting the composition of our spend. Selling expenses now represents approximately 30% of SG&A, up from approximately 20% in fiscal 24, as we progress towards our long-term target of roughly 35% of our SG&A being dedicated towards selling expenses. Over the long term, we continue to target SG&A of approximately 16%, to 16.5% of revenue, creating a beneficial cycle to unlock our size and scale and reinvest into revenue-generating assets that will produce sustainable, profitable growth. Turning to slide 14 for an update on fuel. Fuel prices in the fourth quarter were approximately $1 per gallon higher than the prior year. In the second half of fiscal 26, we absorbed a gross fuel headwind of approximately $12 million. Through disciplined execution, we offset approximately $4 million of that impact, resulting in a net headwind of $8 million. Our mitigating factors include fuel hedges to reduce price volatility, our newer fleet and route-based technology that reduce fuel consumption, daily pricing on a portion of our land revenue tied to ancillary work, and smart routing that directs drivers to the lowest cost fuel options. As a reminder, and as Dale mentioned earlier, we did not implement fuel surcharges on existing customers in fiscal 26, a measure which we believe helped preserve our long-term relationships with them. Going forward, we will carefully balance price and contract renewals in an effort to right-size our contract for inflationary costs while maintaining good standings with our customers. While fuel will remain a headwind in the first half of fiscal 27, the thoughtful actions we've taken to reduce consumption and hedge against elevated prices remain crucial. Moving to slide 15, our capital allocation priorities remain disciplined and focused on long-term value creation. First, we continue to refresh our fleet, providing reliable equipment, reducing repair and maintenance expense and improving employee morale. Over the past three years, we have invested roughly $500 million in capital, to refresh our outdated fleet, and we're currently about 85% of the way through our fleet refresh initiative. Second, we continue to invest in our sales force to drive profitable top line growth and are about 40% of the way through our 2030 goal of adding roughly 500 net new sellers. Third, we continue to return capital to shareholders through share repurchases. as we believe our shares are meaningfully undervalued given the resilient and recurring nature of our core land business. We repurchased approximately 1.2 million shares in the fourth quarter and 4.1 million shares in fiscal 26, bringing total repurchases to approximately $67 million under our $150 million share repurchase program. These strategic priorities are made possible by the steps we've taken to reinforce our balance sheet and strengthen our financial flexibility. We have no long-term maturities until 2033, ample liquidity, and primarily fixed interest rates on our debt that protect us against market volatility. Now let's turn to slide 16 to introduce our fiscal 27 guidance, which reflects continued growth in our recurring land segment and a return to adjusted EBITDA and margin expansion as well as free cash flow generation. We expect total revenue in the range of $2.535 billion to $2.720 billion. Land maintenance revenue is expected to grow again at approximately 3% to 4% underpinned by our continued contract book growth, ancillary attachment and pricing power. Development revenue is expected to be down approximately 10% at the midpoint as the macro-related softness we experienced in fiscal 26 is expected to continue into 2027. And snow revenue is guided at our five-year average, which is approximately $210 million to $230 million. We expect adjusted EBITDA in the range of $335 million to $355 million. representing a margin of at least 13% and margin expansion of 110 basis points. Our margin outlook reflects continued investment in sellers, improved productivity, G&A and technology efficiencies, and continued fleet and procurement benefits. It also assumes first half fuel headwinds of approximately $4 to $6 million as we do not expect relief from rising fuel costs in the near term. We expect adjusted free cash flow of $110 million to $130 million, reflecting a conversion of nearly 35% at the midpoint. This assumes net capex of $100 to $120 million, cash interest of $55 to $60 million, cash taxes of approximately $5 to $10 million, and the use of working capital to fund our land growth. Turning to slide 17, for our fiscal 27 adjusted EBITDA guidance implies growth of approximately 14 million or 5% at the midpoint. Walking the bridge from our fiscal 26 adjusted EBITDA of approximately 329 million, positive land flow through will be offset by more normal snow year and development softness. Encouragingly, we see significant opportunity to drive further G&A efficiencies through centralization and streamline processes. In addition, vendor consolidation and lower repair and maintenance expense will generate incremental efficiencies in fleet and procurement. These efficiencies will be used to fund incremental seller investments that will continue driving profitable top-line growth well into the future. Finally, we expect a net benefit of approximately $16 million from stepping over the prior year's self-insurance adjustment, partially offset by a roughly $5 million fuel headwind. Together, this brings us to $345 million of EBITDA at the midpoint. To wrap up, our fiscal 27 outlook is underpinned by momentum in our recurring land business and the efficiency levers we have built over the past three plus years. As land growth accelerates and we continue to unlock our size and scale, we are well positioned to return to margin expansion and deliver sustainable, profitable growth within our highly predictable and recurring land segment. We remain incredibly confident in the long-term trajectory of our business and are focusing on managing it for the long term. With that, I'll turn the call back over to Dale.

Thanks, Brett. I want to remind everyone of the size of the opportunity in front of us. The U.S. landscaping market is approximately $102 billion in 2026, and is expected to grow at approximately a 2% CAGR. It's also highly fragmented with roughly 600,000 landscaping businesses in the U.S. As the clear scale leader, Brightview holds only approximately 1.5% market share, which leaves significant room to capture share. Our 2027 land growth guidance of approximately 3.5% at the midpoint outpaces the broader industry's growth. and we believe we are positioned to outpace the market by two to three times over the long term. Our confidence in this long term outlook stems from the unwavering focus we've taken to stabilize our existing Boca business, layering in new sellers and enabling them with the proper tools to acquire customers along existing routes. Our results over the past three quarters exemplify that our strategy is working. Reoccurring land revenue, which just grew 3.3%, along with an implied step-up in our 2027 guide, reaffirms this. Our commitment to driving reoccurring, sustainable land maintenance revenue will be the engine that drives shareholder value and enables us to outpace the industry and truly become the service provider of choice. Before turning to your questions, I'd like to reiterate that our One Bright View strategy remains the foundation of our long-term profitable growth. Becoming the employer of choice, maintaining a customer-centric focus, unlocking our size and scale, and strategically allocating capital are the pillars under which we have worked to transform this business. In 2026, we made progress across each of these pillars, delivering lower turnover, higher retention, a growing contract book, and three consecutive quarters of land revenue growth. Despite the choppiness in our cyclical development business, the progress we made gives us confidence in our trajectory as we enter fiscal 2027. But it's just a stop on the journey. We remain focused on delivering sustainable, profitable long-term growth and margin expansion for our shareholders and making Brightview the investment of choice. With that operator, You can now open the call for questions.

Certainly. Thank you, Mr. Asplund. Ladies and gentlemen, at this time, if you do have any questions, please press star 1. If you would like to remove yourself from the queue, you can press star 2. Additionally, to get to as many questions as time permits, we do ask that you please limit yourself to one question and one follow-up. We'll go first this morning to Bob Labic of CJS Securities.

Good morning, and thank you for taking our questions. Hey, Bob. Morning. Morning. So, yeah, first, obviously, you know, really nice job on maintenance and land services. It was a strong quarter and strong outlook. I don't want to forget that, but really all anyone really wants to kind of focus on and talk about right now certainly is development services. So I wanted to kind of go there with my question. First, thank you for all the new details, you know, regarding kind of the composition of backlog and the work. I think a lot of people really thought of development services as Work done at the end of a major commercial construction project like JFK Airport or Obama Library, etc., which can't really be shut down. It delays a little bit, which you've had, but nothing major or as volatile as we saw this quarter. The new information you shared is regarding residential and HOA, and it's different. Help us understand when HOAs do development work and how they do it and how that's different than the typical commercial work. and obviously how it therefore caused the volatility in the quarter and the outlook.

Yeah, great question, Bob. First of all, I want to start off by we got an early morning here. We're in our LA branch with our team here, so we're excited to be on the West Coast to join everybody. And more importantly, we want to start off by thanking all of our veterans and wishing them a happy Veterans Day as we start off our call today. So I think on the development front, Bob, let me hit your question and I think it's a great question. We did try to share a lot more information because our goal is to be as transparent as we can be. And obviously, our original guide in the fourth quarter had development down, let's call it at the low end of our range, three percent or, you know, six to seven million dollars in revenue. And we showed up with a much drastic change to that. And there was three factors, as you heard me say in my script. You are right. Our large commercial jobs, biggest jobs we have, We traditionally get that work on a schedule based on other subs ahead of us that complete their work. And what we saw in the fourth quarter was some of that work got pushed, specifically three jobs, primarily on the West Coast, that we had anticipated were going to produce roughly $10 to $12 million of revenue that all got pushed basically into future periods. So that created part of the headwind in the quarter. and then the bigger area that you asked about is the residential slowdown. And I want to be very transparent on that. Residential, primarily with home builders in HOAs as they expand, is a portion of our team's work. And what they do in that area is twofold. First, as you expand an HOA and you're putting in new roads, new common areas, anything that might be required to expand and add more homes, We typically will get that work with the builders. And then as they continue to add homes along those HOAs, we usually have packages with the builders that we're doing the install on that type of home builder type work that we're installing the work. So it is twofold. And what we saw, if you go through the full year and the data we shared, we saw a decline of $30 million in that more resi HOA, as we call it, builder focused work. and we saw of that 30 million throughout the year, 15 million of that slowdown came in the fourth quarter and probably even more, you know, give you even more visibility. We actually saw that accelerate as we went through the quarter. So July, we saw a little bit of headwind, similar to what we saw through the first three quarters. August, we saw a step up and then in September, we really saw a slowdown in that business as interest rates had risen and what we saw, and what you hear from some of the home builders, was a drastic slowdown in demand. That business is much more volatile than what that commercial business is. The commercial business is always going to have dependencies on other people to get the work done, but the homeowner business is just going to be based on the demand that we see, and in many years we see that as a little bit of a book and burn work. and we tried to show the transparency what we've done over the last several years and then more importantly as we issue our guide with our backlog that we added on slide eight we tried to be very transparent in what this could mean. We believe typically our backlog in our development business as we look at this monthly in the preceding 12 months we typically see a 90% conversion into actual revenue. Right now that backlog is very healthy at about $800 million as we go into 2027. That would suggest that we could be relatively flat to where we ended the year in 2026. Although, to be completely transparent, obviously the political environment and some of the noise we heard last week as the midterms went through with data centers, we believe the $40 million plus that we have today in data center backlog will continue but more importantly on the data center side a lot of the pending bids that we've worked on over the last several months are either directly data center or data center support such as temporary housing. So we still have a half billion dollars of bids that are sitting out there that could even add to that backlog. So all moving pieces but the one area that probably gives us the most hesitation especially what we saw as we worked through our fourth quarter is the 80 million dollars of residential backlog we have. Much more volatile. Do we believe if interest rates pull back, if the housing market sees a little rebound, that will start up just as fast as we saw it stop in September? Absolutely. But we're trying to be 100% transparent. We'll do so as we work through the whole year. Because our goal is to make sure you guys understand the core business that we have in development, our development teams, are working on all the right things and we're managing the business. We delivered in development a 14.5% margin as we went through the quarter. So the business is still fundamentally strong, yet we did see a very volatile revenue side in that business in the quarter. Brett, do you want to add anything? No, Bob, I just had two things.

One, again, we were trying to share and be as transparent as we always are with more data in our development business, even at the bottom of slide eight, noting that in the month of October, we booked nearly $80 million of new work. So work is starting to maybe get awarded here in the first quarter. Doesn't mean it's all going to happen in 2027. And then I would just mention the guide. Look, that's why we left the guide range so wide. And as Dale and I get through the first quarter and second quarter and more visibility happens in residential and data centers and some of our commercial books, we'll be able to tighten up that guide. But I think they all said it well. There's a path given the backlog that we have and given the historical realization for this business to potentially be flat. And there's also a path where the business could be 10% to 20% down given residential delays, data center potential delays, and some shifts of timing in our commercial business. So we've tried to give a wide range. We're going to tighten up that range as we go throughout the year once we get more visibility. I would tell you what we saw in Q4, as Dale said. You know, we haven't really seen much of a change yet here in Q1, but it doesn't mean, you know, as you get to the back half of the year that some of these areas like residential and timing on these big projects couldn't rebound.

Okay, great. Thank you for all that detail. It's really helpful. And kind of, you know, sticking on this and just so we understand the nature of the construction, construction nature of the business. What about non-backlog work? Because we kind of just talked about you have 800 million, 90%, 720, flat, etc. But that doesn't count any kind of book and burn or whatever the terms you guys use for that. Is there typically any non-backlog or quick-turn work in development services or is that not as applicable to your business?

Yeah, no, that is, it's typically part of our business. What I can tell you, Bob, is we give out the statistic on remaining performance obligation of what work in that backlog is still going to be over the next 12 months. And what we offset that with by how we get to that 90% kind of annual conversion is we get book and burn work that comes in to offset some of those longer jobs. And then you always get movement. So We're signing work every day. I was out in the branch last night, and my team were sharing some of the victories that they've had just as recently as yesterday. We look at what we win, what change orders come in on a daily basis. So that's always our job is to get new work and make sure that we get the work in the ground. Part of the challenge when you have massive jobs, like the three jobs that really hit us in the quarter, is when you have so much work at a dedicated branch that's predicated on one specific job. I'll jump back in queue. Thanks very much. Thanks, Bob.

We'll go next now to Tim Mulroney with William Blair.

Yeah, thanks. Good morning, Dale and Brett. Thanks for taking my question. I just have one. You know, I know the development business is disappointing, but, you know, the land maintenance business organic growth of like 3.3%. That was a solid result. I saw it, encouraging to see. Can you talk about the growth that you're seeing in the contract book of business? I think last quarter you said it was up 4% sequentially. I just want to get more confidence around the sustainability in that 3% to 4% organic growth range as we head into next year.

Yeah, great question, Tim, and thanks for bringing that up, obviously. The opposite of development is the progress we've seen and we've worked so hard to gain over the last three years on the land side. And 3.3% growth in the quarter, finishing the year just under 2% at 1.9 for land is a huge change from where this business historically has been. And that wasn't fueled by anything besides organic growth. And our formula has been the same on that for several quarters now. We've got to make sure we keep our existing customers with retention by taking care of our employees, and then book more work. And what we did share in this quarter, and we knew this was going to be heavily focused on development based on the press release, what we did share is if you look at slide 15, we actually not only shared the progress we've seen, we shared with you that in the month of October, we actually set a record over the last five years for net new in a single month. We did 11.6 million positive in one month. That's after six consecutive quarters. So every investment we've made in adding sellers, everything we've done to take care of our customers to drive retention to 84 and a half has given us a foundation that allows us to grow that business. So I would tell you this, Tim, our three to four, I feel is somewhat conservative. We are in a position that we are going to grow this business. I look at it every quarter. and we're going to continue to drive net new positive knowing that we're going to have that variability on the ancillary if there are macro concerns with people and inflation. And then this year as we go through to drive land, the balance is going to be how do we balance the price that we need to get to offset inflation with the retention needs that we have. So we've seen retention go up 550 basis points over the last three years. Is this another year of 100 to 150 basis point improvement? Maybe, but we're not going to sacrifice price. We did a lot of good work over the last three years to get where we're at. And inflation, as you saw, created some headwinds. And now's the time as we go through our annual contract renewals, we've got to expect our customers to understand that we need to be compensated for the work we've done. So, look, I think the metric we shared was even more valuable. We told you as we went through our first month of the year that we grew our book 1% basically in one month. So that doesn't mean we're going to do that for all 12 months, but I wanted to be even more positive, Tim, to show you why we feel that that 3.3 we just reported and the 3.5 we're guiding to, forget about the noise. You're going to have similar noise on the ancillary side that some of that residential could have with inflation. But we feel the book of business growth is just as powerful to give us that foundation. and as we see ancillary tick along during the year we'll give you guys updates but I feel very confident that the work we've done to get to that and like I said long term Tim we should be outpacing them overall market by you know two to three times and if it's going to grow at one to two percent we should be growing at three to six percent so we feel great. Brett do you want to add anything?

No just let us add Tim we're steadfast in our strategy to focus on the long term we've We've said that from day one when we launched One Bright View three years ago. We're continuing to say it today, and it's working. Our recurring revenue annuity value creation business is now grown three quarters in a row. Dale mentioned six quarters of net new positivity. We just shared October as a leading indicator for what Q1 could bring from a net new, another quarter there of positivity. We couldn't be more excited about the work we've done to fix the foundation of the land business, and we're excited to see what growth looks like here in 2027. Okay.

Thanks, guys.

Thanks, Dan. We'll go next now to Andy Whitman with Baird.

Great. Good morning, Andy. Hey, guys. I guess I wanted to first ask and build on that last question about your sales investments. You've got the pie chart here about kind of what you've done and what you want to do. In 26, you kind of match funded, I'd say, the benefits from your great snow season. You'll be able to hire a little earlier. Is that still a variable as you look at 27? If it snows a lot, do you go faster here, Dale? and just can you give us, you commented and maybe I just missed the note, but if you're able to and willing to, where's the sales head stand here kind of year end and what's the net hiring you expect on average for 27?

Yeah, great question, Andy, I think. So what's implied in our current guide is similar to last year, we think we're going to add roughly 100 heads throughout the year Call it $9 million to $11 million, depending on timing. So take the midpoint at $10 million is what we think that we're going to spend on incremental sales resources this year. Where we're at in our goal, if you recall, we had said we were about 1,000 go-to-market sellers as we exited 2024 at our investor day, and our goal was to get to roughly 1,500 sellers. and we believe where we're at today, being 40% complete on that, we're up 200 sellers. So we're at roughly 1,200, Andy, with the goal of adding 100 more. You're right. What drove us to add faster last year was the outsized snow that we had. You saw in our guide, we predicted snow. Like I've commented, our goal is to only give good news on snow. We took snow revenue expectations from $293 million last year. to $220 million at the midpoint. If that, with El Nino coming on the West Coast, we see snow rebound back to anywhere near last year's levels, we are going to take that money and invest in sellers. What we saw in October with our net new growth, it is working. More feet on the street, more people out talking to customers, more people talking about ancillary is producing more of that reoccurring land revenue. So yes, right now we're assuming we're going to grow 100% more, so If everything goes as normal, we'd exit the year probably closer to 300 net people up or 60% done towards our 2030 goal. And if we get some snow revenue that helps us pay for more, we're going to go faster because what that'll do is it'll fund us to grow land faster. So great question, Brett.

Yeah, great question again, Andy. And I'll just double down on what Dale said. We know it takes six to 12 months for a seller to start to be productive, 12 to 18 months to really be productive. So- We use Snow as our advantage here in 2026 to add and accelerate those sales investments. And that's partly why we shared October's net new number on the flex. It's working. That 11 million plus number in October from a net new perspective was driven a lot by new sales coming in. So the investments we've made, the strategy that we're looking forward to the long term is working. It's paying dividends and Dale said it previously, you know, the market's going to grow something like one to two percent a year. We think we can be 3x that and, you know, take some time to get these sellers ramped up. So we'll be advantageous here in 2027 if we can. And we have about nine to 11 million, as Dale said, built into the guide for sales investments. If we have a chance to go quicker, we will.

Great. For my follow up, I wanted to ask about, I guess, fuel and pricing and that whole topic. And so it sounds like in the near term, as you're now putting on fuel surcharges, it sounds like, I don't know if this is new, you've been trying to attach a little bit more price on the ancillary to kind of make it up there since that's more of an episodic thing. Just wanted to confirm that I understood that correctly. But also here, like you mentioned that part of your mitigating factors is fuel hedges. Fuel hedges are typically not years in length. They're usually months in length. I'm just wondering, I think your fuel hedges go into spring. I was just wondering how much of the $4 million was from the fuel hedges as opposed to these other mitigating factors. I see your first quarter guidance. I'm just trying to understand some of the moving pieces underneath that and how fuel hedges specifically played a role. Thank you.

Yeah, great. Another good question, Andy. So fuel, like we said, we had in the back half of the year, we had about $12 million of gross headwinds. and our mitigating factors were offset by $4 million, so creating the $8 million P&L hit. Of that, Andiott split it into two buckets. Our more efficient, less consumption was $2 million, and fuel hedges gave us back a couple million dollars in the back half of the year. And you're right, those fuel hedges go until the spring. So what I would comment on what we're seeing, and we tried to note it again in the deck, is on fuel we said... We felt like October, as we worked through October, and many people saw this as you follow oil, it was actually back to May's annual levels where it was at the high point. Our headwinds in October were the highest point of the year, but similar to what we saw when we came out of May and what's happened over the past couple weeks, we've seen in November the price of oil drop and our average price per gallon come down drastically. It's a very volatile trend. We saw it move up as we went through our Q4, but just as quick as it was at its peak in October, we've seen it come down. So, yeah, we're going to keep monitoring it, and like we said, Andy, the majority of our renewals are going to happen here in November, December, January, and then the ones in more of our seasonal markets will happen in March and April. So, We feel good about where we're at.

Thanks, Andy. We'll go next now to Jeffrey Stevenson with Loop Capital.

Good morning. Thanks for taking my questions today. Hi, good morning. Could you provide any more detail on your 110 basis point margin expansion assumptions and how that breaks out between maintenance and development? and then how should we think about technology related efficiency benefits from your field service management system and your fiscal 27 maintenance margin expectations as well?

Yeah, look, let me I'll pass the margin stuff to Brett. I would just make a comment on the margin expansion. Obviously, depending on how much headwind we get in development, we're going to manage that business and the cost structure to reflect revenue. The majority of that margin expansion is going to show up in maintenance. And Brett will try to give you a little more detail of what makes up that 110 bps. But on the technology side, Jeff, look, we made several strategic investments. We put in an HRIS system that we're using to make sure we're managing our employees and creating more visibility. And a big investment we made is our field service management tool. And you heard me talk about The consumption of our fuel because we're getting more productivity on our routes. The fact that we have a reduced number of employees to produce more revenue as we work through the fourth quarter is an example of creating more visibility with technology to help manage our employees creates the ability to do more with the same resources or less. So we are all over this, Jeff, and I think the progress we make, it's varied. There's branches that are using it on a daily basis and getting drastic investment benefits. And then there's other branches that they're still getting their arms around it. It's all predicated. The tool is built on how detailed the estimates we put in so we can allocate out the labor that's needed. So people are starting to see quality data up front creates better visibility for them to manage their labor. in the back. But it's a key catalyst, Jeff, as we continue to manage this for our long-term margin goals. But, Brett, do you want to talk about that?

Yeah, I'll just give a little more detail on actual margin basis points here, Jeff. Keep in mind two things. One is we took a self-insurance adjustment in Q3. We don't expect that to reoccur here in 2027. We actually saw Q4 fairly flat in that category, so no material impact to the P&L. And we continue to close out those older claims, like we said, in Q3. We were about 85% of the way closed out of those older claims in the end of Q3, and now we're about 90% of the way closed out through those claims here at the end of Q4. And we used the dollars we already had put up on the balance sheet in our reserves to close out those claims. So that's about 60 basis points of margin that impacted us in 26, Jeff. That will be a positive for 27. So that's about half of the margin improvement story is just that one-time non-routine adjustment we had to take in Q3. But the big piece I want to highlight is we are – As we said in Q3, we are pleasantly surprised and happy with our land flow-through. That's coming in at north of 25% on revenue flow-through. So if you think about our guide next year, 3% to 4% growth, we should see those incremental revenue dollars produce something like 25% margin flow-through, where a couple quarters ago we expected that to be around 20%. So that's going to add margin improvement when we get this land business growing, which is really the value creator annuity business growth. that we've been building over the last several years. So you have the insurance piece coming back. You have land coming through a 25% flow through. And then we continue to get benefits as Dale says through tech and systems technology, better routing and more efficient use of our technology. We have G&A savings. We continue to get in the business and reinvest those back in sellers. And then don't forget our fleet procurement strategies. Those Those strategies this year unlock something like 30 to 40 basis points of margin expansion. We expect the same thing to happen next year. So as you put that all together, Jeff, we feel really confident that somewhere north of 100 basis points, 110 basis points of margin expansion is very reasonable in our guide.

No, thanks for all that detail, Brett. That was very helpful. And just a quick follow-up on your snow guidance, which assumes a return to five-year average. So as we move into the winter months, Dale, are you seeing an increase in the percentage of fixed contracts after the elevated snow levels we saw last year?

Yeah, great question, Jeff. I think what we've seen as we work with our customers, I think it's, you take the country and split it in half last year. I think our partners in the East Coast area, specifically Northeast, Mid-Atlantic, even Midwest that saw elevated snow, I think they've been very interested in rethinking about Their contract with us, and yes, we've seen increases. Unfortunately, we saw the exact opposite last year on the West Coast. The levels of snow from Colorado out to the Pacific Northwest were very reduced. So we think that group this year will continue to try to be focused on kind of the variable-type snow model. But we're happy with the key markets where we produce the majority of our snow, and we see those markets seeing more fixed So every year it's going to be a balance. We want to do what's best for our customers, but long term it is a lot easier for us to manage if we know how many people to keep on and we can predict that based on fixed revenue.

Great. Thank you.

Thank you. Ladies and gentlemen, in the interest of time, we do ask that you please limit yourself to one question moving forward. We'll go next now to Greg Palm with Craig Hallam.

Yeah, good morning. Thanks for taking the questions. Going back to the land business, which is obviously where you're seeing good momentum, can you talk to us a little bit about, you know, price scope, what you've been sort of seeing and realizing in recent quarters, and then as it relates to fiscal 27, what's sort of built in or baked in from an assumption standpoint?

Yeah, great question, Greg. Obviously, every time we talk to our customers, it's about what do they plan to spend on their landscaping and how much do we need to be able to service it. For every one of our accounts, we know how much time it takes and what effort we put in and the distance we drive to get there. So we have a good idea of existing profitability by account. So we're going to work through every customer to make sure that Any price increases based off what their existing level of margin is, and that's going to be fair to them. And we're going to look at customers that might not be able to afford more money, but they understand that we have a cost impact on our business that's driven by inflation. They're probably going to ask us to see a little bit of offset with some type of scope reduction. Hopefully, it's just number of services. So as we keep the price roughly the same, We can see, you know, less work required to produce that job. So that helps us offset that. What's built in, Greg, we usually see roughly about half of what we would see in price increases, we would assume the customers might take back in scope. So right now, we're assuming we could get, let's call it three to 4% in price as we go through the year based on no fuel surcharges, and we might give a percent and a half or two back in scope. that could get us as we work through the year let's call it a one to two point you know tailwind as we go into 2028. Brett anything?

No I just you know as you think about the the guide the three to four percent Greg I would just add you know you think about the momentum we're building in customer retention improvements new sales improvements net new consecutive quarters building on top the number we just posted for October all very positive you can kind of think of two and a half Thank you for joining us.

Thank you. We'll go next now to Scott Schneeberger with Oppenheimer.

Thanks, guys. I have one question that's kind of two-parter, one for each of you in development. So, Dale, first off, just with, you know, it looks like you're really happy with, you know, the sales ads and the production you're getting in land and it's showing in the numbers. Development, I just want your take on It feels like a lot of macro and timing that's impacting you, but is there perhaps a difference in your go-to-market sales approach in land versus development where you view productivity enhancement potential with development sales? And then the follow-up is just, Brett, kind of thoughts on cadence of development over the coming year. It sounds like it's going to be back halfway to the way you're looking at it because you mentioned the lack of momentum in the beginning of the fiscal year. Thanks, guys.

Yeah, great point, Scott. We've added sales resources in our development business and what we look at, we look at that book of bookings, what we have for that bookings to predict our future revenue. But what we also look at on a monthly basis is how much paper we have on the street and what we're out there actually bidding. We have several estimators working through estimates that give it to our go-to-market team that go out and present our proposal to customers. We bid over $2 billion of work in 2026. And more importantly, like we noted, we have over $500 million that we're still pending a decision on. So it's a give and take, and there is timing, Scott. But by all means, we look at every metric to make sure. Our go-to-market team in development, partnering with our branch leaders who are very involved in the sales process, especially on the bigger jobs. And we're working through that and making sure that each one of our BDs have a target group of jobs that they're out there bidding on. Right now, like I said, our visibility and why we tried to provide a lot more data, we feel great about our book of business. It would support somewhere around a flat level of revenue, but it's just the volatility we saw in Q4, so we want to make sure we're letting everybody know on a daily basis what we're seeing. We're going to try to give you guys updates. We share data. in that development business that we've never shared. The last time we shared anything on backlog was when we shared at Investor Day that we exited 2024 with $880 million. We produced $789 million of revenue in the preceding 12 months. So at the end of the day, we believe we have a very fundamentally strong book of bookings out there. The problem is just we know there's going to be volatility. And you said it well, Scott. That volatility will probably be much more first half weighted than it's going to be in the back half of the year. And the comps will be a lot easier in the back half of the year.

Yeah, I'd echo that, Scott. Think about the timing of development and how this could unfold. As we sat here a quarter ago, we had a low end of our range at a shrink of 3%, and the actual result was a shrink of 18%. I think that's what Dale referenced earlier, where as the quarter progressed, we saw things like residential growth. really come to a halt. We saw things on some of these large jobs really, really push out, you know, further than anticipated. And, you know, from a Q1 first half perspective, we'll, you know, we haven't really seen much change in that dynamic at this point being, you know, 40-so days into the new year. I think could things change, you know, in the near future or the next couple quarters? Yeah, for sure. As Dale mentioned, we have the backlog. It's just really timing and whether the timing is, you know, more back half-weighted or some of that project slip into 2028. But the backlog is there. We continue to build the backlog. We're controlling what we can control. And look, that's why we shared some of the, as you mentioned, that's why we even shared October's booking number because we're trying to give as much transparency into that business that the work is in our backlog. It's just a matter of timing of when it's going to get executed.

Look, I know, operator, we're at time, but I do want to go several minutes over because we still have calls in the queue here because I know a lot of people have questions. So move on to our next caller. Thanks, Scott.

Thank you, Mr. Asplund. We'll go next now to Stephanie Moore with Jefferies.

Hi, good morning. Thank you guys so much. I wanted to ask maybe a bigger picture question. Appreciate all the strong work that has been done on the land side of the business and understand what you've explained in terms of what you're seeing on the development side, but As you think about the business mix of the business maybe over the next three to five years, is there any thought about maybe de-emphasizing some of the development work and focusing more so on the contractual, steadier maintenance work?

Thanks. Great question, Stephanie. I think we are a better partner to our customers in markets where we offer strong development support with our maintenance team. So are we going to continue on that model? Absolutely. You can see what I showed. In 15 months, we've added several cold starts to markets where we have a strong maintenance presence, and it helps us on the maintenance business. Development is a choppy business. It's much more cyclical, and we all know that. But it's still a value for our teams to be able to support our customers. It's just like tree work. It's just like some of the other ancillary works that we do. So do I want to de-emphasize? The way I want to de-emphasize is I'd like to grow my development business. I just want to grow my land business, my reoccurring revenue at a lot faster pace. But I don't think our goal is to say just because it's a different choppy business that's more construction orientated, we want to reduce our revenue long term. We still want to grow the business. But there's no question our number one focus is land growth, reoccurring revenue growth, and everything we need to do to drive that. Brett?

I'd echo the same comments. Our focus in the last three years has been fixing the foundation of our land business, getting back to growth in our land business, investing in sellers, which is mainly in our land business. As Dale mentioned, that's our reoccurring revenue, annuity, value creator business. It doesn't mean we're going to not focus on building out some sales force in development, doing some cold starts in areas where we have maintenance but no development presence. Those are going to help us over the long term, but clearly our path to long-term profitable growth in this business is going to come from that annuity recurring revenue stream in land.

Thank you. We'll go next now to Ryan Gilbert with BTIG.

Hi, thanks. Good morning, guys. Thanks for taking my question and appreciate all the details that you provided on this call and in the presentation as well. I had a question on The residential development business, and I can appreciate that August, September, and likely October as well were pretty rough months for the homebuilders. But it does look like your residential development revenue was down around 30% in both 2025 and 2026, which I think is slower than what we're seeing from the census housing starts data. And we've heard from the builders that they've got pretty limited pricing power in the market. and they're trying to take out costs wherever they can. So I'm just wondering, are you seeing instances or do you feel like the, I guess our builders substituting out your landscaping for a cheaper alternative or just not doing the landscaping altogether? I would just love a little more clarity on the gap between the down 30 that you're seeing versus a shallower decline in the Housing Starts data.

Let me try to comment on what we feel when we see slowdown in the HOA-type housing market. It's twofold, right? It's not just there's less housing starts, so therefore we're going to do less landscape installation. It's the expansion of those HOAs where we get all the common area work as well. So we see it kind of compounded when you're not expanding out with new homes. You don't need to expand out the HOA into new areas with new roads, with new common areas. with all that area. So we feel like our business is going to be choppier, especially in that area. But we're going to continue to partner with those home builders because it's going to start up just as fast as it slowed down. So, you know, I don't know if you can directly say they're not starting as many homes, so they're down on volume. And that relates to our volume, just like they might not be starting homes as fast as we'll see a pickup if they're going to start expanding those HOAs so they can be ready to Put new homes in. So we might see it on the backside even faster, Ryan, than what you see it just on the homeowner side, right? And then just be clear, Ty, back to the guide.

You know, we have 80 million or so in the backlog for residential as we are very transparent on our slides here. And I think as you think about the guide, we've already baked in essentially Some of that, Ryan, not happening at the midpoint of our guide. So just to be clear, I think we still feel very confident in land growth. We still feel very confident in margin expansion, even if that residential $80 million really comes in something much, much less, even if it's 10% or 20% realization and it doesn't pick back up. We still feel very confident in the range we've provided in the guide and getting back to margin expansion in 2027. Okay.

Thanks, guys. Thank you. Thank you, and ladies and gentlemen, that is all the time we have for questions this morning. Mr. Asplund, I'd like to turn things back to you, sir, for any closing comments.

Thank you, operator, and once again, I apologize we didn't get to everybody's questions. Our team, Chris and team, will follow up if we do have questions, but I'll close by reiterating the confidence we have in the trajectory of our business. Over the past several years, we've strengthened the foundation of Brightview by bringing the organization together, including improving employee and customer retention, unlocking the size and scale, and most importantly, investing in our sales organization. In fiscal 2026, we began to see those efforts translate to top line results with a growing contract book driving three consecutive quarters of land maintenance revenue growth. As we enter fiscal 27, we believe we have the right foundation and strategy in place to build on the momentum that we deliver both top and bottom line, while continuing to invest our revenue-generating assets to drive long-term value. We remain focused on accelerating growth in our resilient and reoccurring land business, returning to margin expansion, and delivering sustainable, profitable growth. We're confident in the opportunities ahead and our ability to create meaningful long-term shareholder value. With that, operator, we can close the call.

Thank you very much, Mr. Asplund. Again, ladies and gentlemen, that will conclude today's Brightview Earnings Conference. We'd like to thank you all so much for joining us today and wish you all a great day. Goodbye.