Greg Herring analyzes BrightView’s latest financial update

December 4, 2018 -  By
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Greg Herring

Managed exits, centers of excellence, wallet share, working capital management.

What do those phrases mean? They mean that BrightView Holdings has a strategic plan and is executing that plan. The proof is in the company’s financial results for the year ended Sept. 30, 2018. Before we get to the numbers, let’s review BrightView’s strategic plan because it has great value to landscape business owners.

The BrightView strategic plan has multiple elements:

  • Identifying customer relationships that are not profitable and managing the exit from those relationships.
  • Growing the wallet share with existing customers. BrightView is training its account managers to sell additional services to existing customers. No doubt the company has monthly metrics to measure the progress of this initiative.
  • Training branch managers and account managers and measuring their performance. What gets measured gets done. This training is part of BrightView’s Center of Excellence initiative.
  • Leveraging technology for information and efficiency. As an example, Andrew Masterman, BrightView CEO, said that the company’s account managers get daily feedback on how many hours the crews are working.
  • Acquiring superior landscape businesses in markets where BrightView already operates. The companies in the acquisition pipeline have aggregate revenue of $300 million.
  • Managing accounts receivable, inventory and accounts payable for maximum cash flow. BrightView’s goal for net working capital (accounts receivable plus inventory minus accounts payable) is 10 percent and 12 percent of annual revenue.

Through this plan, BrightView intends to improve its adjusted operating profit margin by 10 to 30 basis points per year. (A basis point is 1/100th of a percent.) For example, BrightView’s adjusted operating profit margin for the 12 months ended Sept. 30, 2018 was 9.49 percent; the company expects the adjusted operating profit margin to be 9.59 percent to 9.79 percent for the 12 months ended Sept. 30, 2019.

In the table below, you will see this type of improvement occurring consistently over the last few years.

As a CFO, I assemble and review rolling 12-month income statements in highly seasonal industries like the landscape industry. I have simplified BrightView’s income statement and provided some important observations below.

The table below contains the trailing 12-month income statements for the last seven quarters. In other words, each column represents 12 months or four quarters.

Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
Net service revenues $2,160 $2,204 $2,226 $2,265 $2,336 $2,339 $2,354
Year-over-year growth rate 8.1% 6.1% 5.7%
Cost of services 1,569.9 1,610.8 1,629.8 1,668.4 1,716.5 1,720.1 1,727.4
Gross profit 590.3 593.0 596.1 596.3 619.5 618.7 626.2
Gross profit margin 27.3% 26.9% 26.8% 26.3% 26.5% 26.5% 26.6%
Selling, general and administrative expenses 455.2 447.3 435.5 431.6 446.2 461.3 481.1
Adjustments (29.0) (28.4) (26.5) (38.8) (45.6) (63.2) (78.2)
Ongoing selling, general and administrative expenses 426.2 418.9 409.0 392.8 400.6 398.1 402.9
Adjusted operating income $164.1 $174.1 $187.1 $203.5 $218.9 $220.6 $223.3
 Operating profit margin 7.6% 7.9% 8.4% 9.0% 9.4% 9.4% 9.5%

Revenue continued to grow at a modest pace. Revenue for the year ended Sept. 30, 2018 was 5.7 percent greater than revenue in the previous year.

The remarkable thing about BrightView’s results in the table above is the consistent growth in the adjusted operating profit margin from 7.60 percent to 9.49 percent in the years ended March 31, 2017 and Sept. 30, 2018, respectively. That growth came despite a slight decrease in the gross profit margin from 27.3 percent to 26.6 percent for the same periods. In summary, the consistency of both the gross profit margin and the operating profit margin is a sign of a great strategic plan and great execution.

BrightView incurred expenses associated with acquiring and integrating businesses, becoming a public company and paying some employees partially through equity-based compensation. Because most landscape businesses do not incur these expenses, I have reduced selling, general and administrative expenses by these amounts in the table above.

Now, why does BrightView’s strategic plan have great value to landscape business owners?

First, without a strategic plan, BrightView’s operating profit margin would not be consistent in its improvement. If you want consistent improvement in your company’s profitability, you need a plan.

Second, BrightView is modeling the way. Business owners can implement most elements of BrightView’s strategic plan regardless of market or size of business. The technology, training and expertise used by BrightView is readily available to all landscape businesses.

Here’s to consistently improving profitability.

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Greg Herring has served as a CFO of both public and private companies. Herring is the CEO of The Herring Group, an operational and strategic finance consultancy. He has significant experience in the landscape industry, where he serves business owners challenged by growth by installing financial dashboards and systems that provide more margin for their businesses and their lives. Reach him at

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