Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should be read together with our audited consolidated financial statements and the related notes thereto included elsewhere in this Form 10-K.
This section of this Form 10-K generally discusses the fiscal years ended September 30, 2025 and 2024 and year to year comparisons between the fiscal years ended September 30, 2025 and 2024. The discussion around results of operations for the fiscal year ended September 30, 2023 and a comparison of our results for the fiscal years ended September 30, 2024 and 2023 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for fiscal year ended September 30, 2024, filed with the SEC on November 13, 2024 and is incorporated by reference herein ( Fiscal Year Ended September 30, 2024 10-K ).
Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review “Item 1A. Risk Factors” and the “Special Note Regarding Forward-Looking Statements” sections of this Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
Our Company
We are the largest provider of commercial landscaping services in the United States, with revenues approximately 4 times those of our next largest commercial landscaping competitor. We provide commercial landscaping services ranging from landscape maintenance and enhancements to tree care and landscape development. We operate through a differentiated and integrated national service model which systematically delivers services at the local level by combining our network of over 265 branches with a qualified service partner network. Our branch delivery model underpins our position as a single-source end-to-end landscaping solution provider to our diverse customer base at the national, regional and local levels, which we believe represents a significant competitive advantage. We believe our commercial customer base understands the financial and reputational risk associated with inadequate landscape maintenance and considers our services to be essential and non-discretionary.
Our Segments
We report our results of operations through two reportable segments: Maintenance Services and Development Services. We serve a geographically diverse set of customers through our strategically located network of branches in 36 U.S. states and, through our qualified service partner network, we are able to efficiently provide nationwide coverage across the United States.
Maintenance Services
Our Maintenance Services segment delivers a full suite of recurring commercial landscaping services in both evergreen and seasonal markets, ranging from mowing, gardening, mulching and snow removal, to more horticulturally advanced services, such as water management, irrigation maintenance, tree care and golf course maintenance. In addition to contracted maintenance services, we also have a strong track record of providing value-added landscape enhancements. We primarily self-perform our maintenance services through our national branch network, which are route-based in nature. Our maintenance services customers include Fortune 500 corporate campuses and commercial properties, HOAs, public parks, leading international hotels and resorts, airport authorities, municipalities, hospitals and other healthcare facilities, educational institutions, restaurants and retail, and golf courses, among others.
Development Services
Through our Development Services segment, we provide landscape architecture and development services for new facilities and significant redesign projects. Specific services include project design and management services, landscape architecture, landscape installation, irrigation installation, tree moving and installation, pool and water features, sports field services and specialty turf maintenance, among others. Our development services are comprised of sophisticated design, coordination and installation of landscapes at some of the most recognizable corporate, athletic and university complexes and showcase highly visible work that is paramount to our customers’ perception of our brand as a market leader.
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In our Development Services business, we are typically hired by general contractors with whom we maintain strong relationships as a result of our superior technical and project management capabilities. We believe the quality of our work is also well-regarded by our end-customers, some of whom directly request that their general contractors utilize our services when outsourcing their landscape development projects.
Components of Our Revenues and Expenses
Net Service Revenues
Maintenance Services
Our Maintenance Services revenues are generated primarily through landscape maintenance services and snow removal services. Landscape maintenance services that are primarily viewed as non-discretionary, such as lawn care, mowing, gardening, mulching, leaf removal, irrigation and tree care, are provided under recurring annual contracts, which typically range from one to three years in duration and are generally cancellable by the customer with 30-90 days’ notice. Snow removal services are provided on either fixed fee based contracts or per occurrence contracts. Both landscape maintenance services and snow removal services can also include enhancement services that represent supplemental maintenance or improvement services generally provided under contracts of short duration related to specific services. Revenue for landscape maintenance and snow removal services under fixed fee models is recognized over time using an output based method. Additionally, a portion of our recurring fixed fee landscape maintenance and snow removal services are recorded under the series guidance. The right to invoice practical expedient, defined within Note 2 "Summary of Significant Accounting Policies" to our audited consolidated financial statements, is generally applied to revenue related to landscape maintenance and snow removal services performed in relation to per occurrence contracts as well as enhancement services. When use of the practical expedient is not appropriate for these contracts, revenue is recognized using a cost-to-cost input method. Fees for contracted landscape maintenance services are typically billed on an equal monthly basis. Fees for fixed fee snow removal services are typically billed on an equal monthly basis during snow season, while fees for time and material or other activity-based snow removal services are typically billed as the services are performed. Fees for enhancement services are typically billed as the services are performed.
Development Services
Development Services revenue is primarily recognized over time using the cost-to-cost input method, measured by the percentage of cost incurred to date to the estimated total cost for each contract, which we believe to be the best measure of progress. The full amount of anticipated losses on contracts is recorded as soon as such losses can be estimated. These losses are immaterial to current and historical operations. Changes in job performance, job conditions and estimated profitability, including final contract settlements, may result in revisions to costs and revenue and are recognized in the period in which the revisions are determined.
Expenses
Cost of Services Provided
Cost of services provided is comprised of direct costs we incur associated with our operations during a period and includes employee costs, subcontractor costs, purchased materials, and operating equipment and vehicle costs. Employee costs consist of wages and other labor-related expenses, including benefits, workers compensation and healthcare costs, for those employees involved in delivering our services. Subcontractor costs consist of costs relating to our qualified service partner network in our Maintenance Services segment and subcontractors we engage from time to time in our Development Services segment. When our use of subcontractors increases, we may experience incrementally higher costs of services provided. Operating equipment and vehicle costs primarily consist of depreciation related to branch operating equipment and vehicles and related fuel expenses. A large component of our costs are variable, such as labor, subcontractor expense, fuel and materials.
Selling, General and Administrative Expense
Selling, general and administrative expense consists of costs incurred related to compensation and benefits for management, sales and administrative personnel, equity-based compensation, branch and office rent and facility operating costs, depreciation expense related to branch and office locations, as well as professional fees, software costs, goodwill impairment, and other miscellaneous expenses. Corporate expenses, including corporate executive compensation, finance, legal and information technology, are included in consolidated selling, general and administrative expense.
Gain on divestiture
Gain on divestiture consists of the realized gain on sale and transaction related expenses from the divestiture of U.S. Lawns on January 12, 2024.
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Amortization Expense
Amortization expense consists of the periodic amortization of intangible assets, including customer relationships, non-compete agreements and trademarks. The corresponding intangible assets were originally recognized in connection with the KKR and ValleyCrest Acquisitions, as well as from subsequent acquisitions.
Other (income) expense
Other (income) expense consists primarily of investment gains related to investments held in a Rabbi Trust.
Interest Expense Net
Interest expense, net consists primarily of interest expense related primarily to our long term debt as well as interest income related to our cash and cash equivalents. See Note 9 "Long-term Debt" to our audited consolidated financial statements included in Part II. Item 8 of this Form 10-K.
Income Tax Expense
Income tax expense includes U.S. federal, state and local income taxes. Our effective tax rate differs from the statutory U.S. income tax rate due to the effect of state and local income taxes, tax credits and certain nondeductible expenses. Our effective tax rate may vary from period to period based on recurring and nonrecurring factors including, but not limited to the geographical distribution of our pre-tax earnings, changes in the tax rates of different jurisdictions, the availability of tax credits and nondeductible items. Changes in judgment due to the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the period of the change.
Dividends on Series A Convertible Preferred Shares
The Series A Convertible Preferred Stock is entitled to dividends at a rate of 7.0% per annum, compounding quarterly. These dividends can be paid in kind or paid in cash, at the Company’s election.
How We Assess the Performance of our Business
We manage operations through the two operating segments described above. In addition to our GAAP financial measures, we review various non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings per Share (“Adjusted EPS”), and Adjusted Free Cash Flow.
We believe Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted EPS are helpful supplemental measures to assist us and investors in evaluating our operating results as they exclude certain items whose fluctuations from period to period do not necessarily correspond to changes in the operations of our business. Adjusted EBITDA represents net (loss) income before interest, taxes, depreciation, amortization and certain non-cash, non-recurring and other adjustment items. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net service revenues. Adjusted Net Income is defined as net (loss) income including interest and depreciation, and excluding other items used to calculate Adjusted EBITDA and further adjusted for the tax effect of these exclusions and the removal of the discrete tax items. We define Adjusted Earnings per Share as Adjusted Net Income divided by the (i) weighted average number of common shares outstanding used in the calculation of basic earnings per share plus (ii) shares of common stock related to the Series A Preferred Stock on an as-converted basis, assumed to be converted for the entire period. We believe that the adjustments applied in presenting Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS are appropriate to provide additional information to investors about certain material non-cash or non-recurring items that we do not expect to continue at the same level in the future.
We believe Adjusted Free Cash Flow is a helpful supplemental measure to assist us and investors in evaluating our liquidity. Adjusted Free Cash Flow represents cash flows from operating activities less capital expenditures, net of proceeds from sales of property and equipment. We believe Adjusted Free Cash Flow is useful to provide additional information to assess our ability to pursue business opportunities and investments and to service our debt. Adjusted Free Cash Flow has limitations as an analytical tool, including that it does not account for our future contractual commitments and excludes investments made to acquire assets under finance leases and required debt service payments.
Management regularly uses these measures as tools in evaluating our operating performance, financial performance and liquidity, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and capital investments. Management uses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted EPS and Adjusted Free Cash Flow to supplement comparable GAAP measures in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. In addition, we believe that Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted EPS and Adjusted Free Cash Flow are frequently used by investors and other interested parties in the evaluation of issuers,
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many of which also present Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted EPS and Adjusted Free Cash Flow when reporting their results in an effort to facilitate an understanding of their operating and financial results and liquidity. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted EPS are provided in addition to, and should not be considered as alternatives to, net (loss) income or any other performance measure derived in accordance with GAAP. Adjusted Free Cash Flow is provided in addition to, and should not be considered as an alternative to, cash flow from operating activities or any other measure derived in accordance with GAAP as a measure of our liquidity. Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted EPS and Adjusted Free Cash Flow have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under GAAP. In addition, because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company. Additionally, these measures are not intended to be a measure of free cash flow available for management’s discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements.
For a reconciliation of the most directly comparable GAAP measures, see “Non-GAAP Financial Measures” below.
Trends and Other Factors Affecting Our Business
Various trends and other factors affect or have affected our operating results, including:
Seasonality
Our services, particularly in our Maintenance Services segment, have seasonal variability such as increased mulching, flower planting and intensive mowing in the spring, leaf removal and cleanup work in the fall, snow removal services in the winter and potentially minimal mowing during drier summer months. This can drive fluctuations in revenue, costs and cash flows for interim periods.
We have a significant presence in geographies that have a year-round growing season, which we refer to as our evergreen markets. Such markets require landscape maintenance services twelve months per year. In markets that do not have a year-round growing season, which we refer to as our seasonal markets, the demand for our landscape maintenance services decreases during the winter months. Typically, our revenues and net income have been higher in the spring and summer seasons, which correspond with the third and fourth quarters of our fiscal year ended September 30. The lower level of activity in seasonal markets during our first and second fiscal quarters is partially offset by revenue from our snow removal services. Such seasonality causes our results of operations to vary from quarter to quarter.
One BrightView Initiative
In fiscal year 2024, the Company launched its One BrightView initiative. The One BrightView initiative represents a cultural change and encapsulates the Company’s effort to refocus our core service lines and position ourselves for long-term profitable growth by streamlining our operating structure, leveraging our size and scale, and becoming the employer of choice. As part of the initiative, the Company has introduced transformational changes designed to unite the organization as one comprehensive team, and drive a renewed focus on the Company’s profitable core businesses. The actions taken under the One BrightView initiative have resulted in improved customer and employee retention and contributed to sustainable improved profitability.
Weather Conditions
Weather may impact the timing of performance of landscape maintenance and enhancement services and progress on development projects from quarter to quarter. For example, snow events in the winter, hurricane-related cleanup in the summer and fall, and the effects of abnormally high rainfall or drought in a given market may impact our services. These less predictable weather patterns can impact both our revenues and our costs, especially from quarter to quarter, but also from year to year in some cases. Extreme weather events such as hurricanes and tropical storms can result in a positive impact to our business in the form of increased enhancement services revenues related to cleanup and other services. However, such weather events may also negatively impact our ability to deliver our contracted services or impact the timing of performance.
In our seasonal markets, the performance of our snow removal services is correlated with the amount of snowfall and number of snowfall events in a given season. We benchmark our performance against ten- and thirty-year cumulative annual snowfall averages.
Acquisitions
In addition to our organic growth, we have grown, and expect to continue to grow, our business through acquisitions in an effort to better service our existing customers and attract new customers. These acquisitions focused on increasing our density and leadership positions in existing local markets, entering into attractive new geographic markets and expanding our portfolio of landscape enhancement services and improving technical capabilities in specialized services.
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As we move forward, we will selectively pursue accretive acquisitions that will focus on increasing market density to build upon our existing footprint in strategic markets, entering new attractive geographies (i.e. ‘greenfield’), and increasing service line density and entering adjacent service lines to provide a robust and consistent suite of services to our customers. Under this renewed strategy, we believe we are the acquirer of choice in the highly fragmented commercial landscaping industry because we offer the ability to leverage our significant size and scale to drive accretive acquisitions, quickly and seamlessly integrate new businesses into ours and provide stable and potentially expanding career opportunities for employees of acquired businesses.
In accordance with GAAP, the results of the acquisitions we have completed are reflected in our consolidated financial statements from the date of acquisition. We incur transaction costs in connection with identifying and completing acquisitions and ongoing integration costs as we integrate acquired companies and seek to achieve synergies. While integration costs vary based on factors specific to each acquisition, such costs are primarily comprised of one-time employee retention costs, employee onboarding and training costs, and fleet and uniform rebranding costs. We typically anticipate integration costs to represent approximately 7%-9% of the acquisition price, and to be incurred within 12 months of acquisition completion.
Divestitures
As we continue to focus on profitable growth, part of our strategic initiatives include strengthening our core business. To strengthen our core business, we are implementing cost efficiency plans designed to lead to EBITDA margin expansions. As part of implementing these initiatives, we entered into a strategic sale of our non-core U.S. Lawns franchise business during the year ended September 30, 2024. On January 12, 2024, we completed the sale of our wholly owned subsidiary, U.S. Lawns, for total cash consideration of $51.0 million. The transaction resulted in a gain of $43.6 million for the year ended September 30, 2024, which we reinvested back into the Company.
Industry and Economic Conditions
We believe the non-discretionary nature of our landscape maintenance services provides us with a fairly predictable recurring revenue model. The perennial nature of the landscape maintenance service sector, as well as its wide range of end users, minimizes the impact of a broad or sector-specific downturn. However, in connection with our enhancement services and development services, when demand for commercial construction declines, demand for landscape enhancement services and development projects may decline. When commercial construction activity rises, demand for landscape enhancement services to maintain green space may also increase. This is especially true for new developments in which green space tends to play an increasingly important role. Economic conditions, including rising inflation and fuel prices, as well as rising interest rates, have impacted and may further impact our costs and expenses, and fluctuations in labor markets, may impact our ability to identify, hire and retain employees. Increased labor costs, including recruiting, retention, and overtime expenditures, have and could further adversely affect our profitability.
Results of Operations
The following tables summarize key components of our results of operations for the periods indicated.
Year Ended
September 30,
(in millions)
Net service revenues
Cost of services provided
Gross profit
Selling, general and administrative expense
Gain on divestiture
Amortization expense
Income from operations
Other (income) expense
Interest expense, net
Income before income taxes
Income tax expense
Net income
Basic earnings per share
Adjusted EBITDA (1)
Adjusted Net Income (1)
Cash flows from operating activities
Adjusted Free Cash Flow (1)
(1) See “Non-GAAP Financial Measures” below for a reconciliation to the most directly comparable GAAP measure.
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Fiscal Year Ended September 30, 2025 compared to Fiscal Year Ended September 30, 2024
Net Service Revenues
Net service revenues for the fiscal year ended September 30, 2025 decreased $94.3 million, or 3.4%, to $2,672.8 million, from $2,767.1 million in the 2024 period. The decrease was driven by a decrease in Maintenance Services revenues of $72.7 million, combined with a decrease in Development Services revenues of $19.7 million as discussed further below in Segment Results.
Gross Profit
Gross profit for the fiscal year ended September 30, 2025 decreased $23.9 million, or 3.7%, to $621.7 million, from $645.6 million in the 2024 period. Gross margin remained flat at 23.3% for the fiscal year ended September 30, 2025. The decreases in gross profit was primarily driven by the decrease net service revenues, described above combined with increased depreciation.
Selling, General and Administrative Expense
Selling, general and administrative expense for the fiscal year ended September 30, 2025 decreased $38.7 million, or 7.8%, to $457.8 million, from $496.5 million in the 2024 period. As a percentage of revenue, selling, general and administrative expense decreased 80 basis points for the fiscal year ended September 30, 2025 to 17.1%, from 17.9% in the 2024 period. The decrease was driven primarily by decreases in compensation-related costs as a result of the Company's cost management initiatives combined with a decrease in business transformation and integration costs.
Gain on divestiture
There was no gain on divestiture for the fiscal year ended September 30, 2025. Gain on divestiture for the fiscal year ended September 30, 2024 was $43.6 million which consisted of the realized gain on sale and transaction related expenses from the divestiture of U.S. Lawns on January 12, 2024.
Amortization Expense
Amortization expense for the fiscal year ended September 30, 2025 decreased $6.5 million, or 18.2%, to $29.3 million, from $35.8 million in the 2024 period. The decrease was principally due the decrease in the amortization of intangible assets, based on the pattern consistent with expected future cash flows calculated at the time the assets were acquired.
Other (Income) Expense
Other income was $0.4 million for the fiscal year ended September 30, 2025 compared to other income of $2.0 million in the 2024 period. The $1.6 million decrease in other income was driven principally by changes in the value of investments held in the Rabbi Trust and costs associated with the repricing of the Company's term loan.
Interest Expense
Interest expense for the fiscal year ended September 30, 2025 decreased $8.7 million, or 13.9%, to $53.7 million, from $62.4 million in the 2024 period. The decrease was driven principally by the decrease in interest rates as a result of the repricing of our Series B Term Loans in fiscal 2024 and the decrease in the Company's long term debt balance partially offset by an increase in finance lease interest expense and a decrease in interest income.
Income Tax Expense
For the fiscal year ended September 30, 2025, income tax expense decreased $4.8 million, or 15.9%, to $25.3 million, compared to $30.1 million in the 2024 period. The change in income tax expense is primarily attributable to the change in the Company’s pretax income of $81.3 million in the current period compared to pretax income of $96.5 million in the 2024 period.
Net Income
For the fiscal year ended September 30, 2025, net income decreased by $10.4 million, to a net income of $56.0 million, from $66.4 million in the 2024 period. The decrease in net income was primarily due to the changes noted above.
Dividends on Series A Convertible Preferred Shares
For the fiscal year ended September 30, 2025, Dividends on Series A Convertible Preferred Shares were $35.8 million compared to $35.7 million in the 2024 period.
Adjusted EBITDA
Adjusted EBITDA increased $27.6 million for the fiscal year ended September 30, 2025, to $352.3 million, from $324.7 million in the 2024 period. Adjusted EBITDA margin was 13.2% and 11.7% for the fiscal years ended 2025 and 2024, respectively. The increase
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in Adjusted EBITDA was principally driven by an increase of $18.3 million, or 20.6% in Development Services Segment Adjusted EBITDA, and an increase of $9.3 million, or 3.9% in Maintenance Services Segment Adjusted EBITDA, as discussed further below in Segment Results.
Adjusted Net Income
Adjusted Net Income for the fiscal year ended September 30, 2025 increased $0.1 million to $113.2 million, from $113.1 million in the 2024 period due to the changes noted above.
Segment Results
We classify our business into two segments: Maintenance Services and Development Services. Our corporate operations are allocated to the segments on a pro rata basis, based on segment revenue.
We evaluate the performance of our segments on Net Service Revenues, Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin (Segment Adjusted EBITDA as a percentage of Net Service Revenues). Segment Adjusted EBITDA is indicative of operational performance and ongoing profitability. Our management closely monitors Segment Adjusted EBITDA to evaluate past performance and identify actions required to improve profitability.
Segment Results for the Fiscal Years Ended September 30, 2025 and September 30, 2024
The following tables present Net Service Revenues, Segment Adjusted EBITDA, and Segment Adjusted EBITDA Margin for each of our segments. Changes in Segment Adjusted EBITDA Margin are shown in basis points, or bps.
Maintenance Services Segment Results
Year Ended
September 30,
Percent Change
(in millions)
Net Service Revenues
Segment Adjusted EBITDA
Segment Adjusted EBITDA Margin
100 bps
Maintenance Services Net Service Revenues
Maintenance Services net service revenues for the fiscal year ended September 30, 2025 decreased by $72.7 million, or 3.7%, compared to the 2024 period. The decrease was primarily driven by strategic reductions of non-core businesses and to a lesser extent a decline in commercial landscaping in our core business.
Maintenance Services Segment Adjusted EBITDA
Segment Adjusted EBITDA for the fiscal year ended September 30, 2025 increased $9.3 million, to $245.5 million, compared to $236.2 million in the 2024 period. Segment Adjusted EBITDA Margin increased 100 basis points to 13.0% in the year ended September 30, 2025, from 12.0% in the 2024 period. The increase in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were principally driven by lower personnel, vehicle, and equipment related costs as a result of the Company's cost management initiatives. These savings were partially offset by the decrease in revenues described above.
Development Services Segment Results
Year Ended
September 30,
Percent Change
(in millions)
Net Service Revenues
Segment Adjusted EBITDA
Segment Adjusted EBITDA Margin
260 bps
Development Services Net Service Revenues
Development Services net service revenues for the fiscal year ended September 30, 2025 decreased $19.7 million, or 2.4%, compared to the 2024 period. The decrease was primarily driven by the timing of projects during the second half of fiscal 2025, which were partially offset by increased Development Services project volumes in the first half of fiscal 2025.
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Development Services Segment Adjusted EBITDA
Segment Adjusted EBITDA for the fiscal year ended September 30, 2025 increased $18.3 million, to $106.8 million, compared to $88.5 million in the 2024 period. Segment Adjusted EBITDA Margin increased 260 basis points, to 13.5% for the period from 10.9% in the prior year. The increases in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were primarily driven by reductions in overhead costs due to the Company's cost management initiatives, combined with the timing and mix of projects in the period.
Non-GAAP Financial Measures
Set forth below are the reconciliations of net income to Adjusted EBITDA and Adjusted Net Income and cash flows from operating activities to Adjusted Free Cash Flow.
Year Ended
September 30,
(in millions)
Adjusted EBITDA
Net income
Plus:
Interest expense, net
Income tax expense
Depreciation expense
Amortization expense
Business transformation and integration costs (a)
Gain on divestiture (b)
Equity-based compensation (c)
Debt extinguishment (d)
Adjusted EBITDA
Adjusted Net Income
Net income
Plus:
Amortization expense
Business transformation and integration costs (a)
Gain on divestiture (b)
Equity-based compensation (c)
Debt extinguishment (d)
Income tax adjustment (e)
Adjusted Net Income
Adjusted Free Cash Flow
Cash flows provided by operating activities
Minus:
Capital expenditures
Plus:
Proceeds from sale of property and equipment
Adjusted Free Cash Flow
Business transformation and integration costs consist of (i) severance and related costs; (ii) business integration costs and (iii) information technology infrastructure, transformation and other costs.
Year Ended
September 30,
(in millions)
Severance and related costs
Business integration (f)
IT infrastructure, transformation, and other (g)
Business transformation and integration costs
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Represents the realized gain on sale and transaction related expenses from the divestiture of U.S. Lawns on January 12, 2024.
Represents equity-based compensation expense and related taxes recognized for equity incentive plans outstanding.
Represents losses on the extinguishment of debt related to Amendments No. 9 and No. 8 to the Credit Agreement, in the fiscal years ended September 30, 2025 and 2024 respectively, and includes accelerated amortization of deferred financing fees and original issue discount as well as fees paid to lenders and third parties.
Represents the tax effect of pre-tax items excluded from Adjusted Net Income and the removal of the applicable discrete tax items, which collectively result in an increase or decrease in income tax. The tax effect of pre-tax items excluded from Adjusted Net Income is computed using the statutory rate related to the jurisdiction that was impacted by the adjustment after taking into account the impact of permanent differences and valuation allowances. Discrete tax items include changes in laws or rates, changes in uncertain tax positions relating to prior years and changes in valuation allowances.
Year Ended
September 30,
(in millions)
Tax impact of pre-tax income adjustments
Discrete tax items
Income tax adjustment
Represents isolated expenses specifically related to the integration of acquired companies such as one-time employee retention costs, employee onboarding and training costs, fleet and uniform rebranding costs, and adjustments to performance based contingent consideration. The Company excludes Business integration costs from the non-GAAP measures disclosed above since such expenses vary in amount due to the number of acquisitions and size of acquired companies as well as factors specific to each acquisition, and as a result lack predictability as to occurrence and/or timing, and create a lack of comparability between periods.
Represents expenses related to distinct initiatives, typically significant enterprise-wide changes, including actions taken as part of the Company's One BrightView initiative. Such expenses are excluded from the measures disclosed above since such expenses vary in amount based on occurrence as well as factors specific to each of the activities, are outside of the normal operations of the business, and create a lack of comparability between periods.
Liquidity and Capital Resources
Liquidity
Our principal sources of liquidity are existing cash and cash equivalents, cash generated from operations and borrowings under the Credit Agreement and the Receivables Financing Agreement (as defined below). Our principal uses of cash are to provide working capital, meet debt service requirements, fund capital expenditures and finance strategic plans, including acquisitions. We may also seek to finance capital expenditures under finance leases or other debt arrangements that provide liquidity or favorable borrowing terms. We continue to consider acquisition opportunities, but the size and timing of any future acquisitions and the related potential capital requirements cannot be predicted. While we have in the past financed certain acquisitions with internally generated cash, in the event that suitable businesses are available for acquisition upon acceptable terms, we may obtain all or a portion of the necessary financing through the incurrence of additional long-term borrowings.
Based on our current level of operations and available cash, we believe our cash flow from operations, together with availability under the Revolving Credit Facility under the Credit Agreement and the Receivables Financing Agreement (each as defined below), will provide sufficient liquidity to fund our current obligations, projected working capital requirements, debt service requirements and capital spending requirements for the next twelve months.
A substantial portion of our liquidity needs arise from debt service requirements, and from the ongoing cost of operations, working capital and capital expenditures.
(in millions)
September 30,
September 30,
Cash and cash equivalents
Long-term debt
Total debt
The Company is party to the Credit Agreement, a five-year revolving credit facility that, pursuant to Amendment No. 6 to the Credit Agreement, dated April 22, 2022 (the "Amendment Agreement"), matures on April 22, 2027 (the “Revolving Credit Facility”)
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and, through a wholly-owned subsidiary, a receivables financing agreement dated April 28, 2017 (as amended, the “Receivables Financing Agreement”). Each of the Company's credit facilities bear interest based in-part on a secured overnight financing rate. See “Description of Indebtedness”.
We can increase the borrowing availability under the Credit Agreement or increase the term loans outstanding under the Credit Agreement by up to the greater of (1) $303.0 million and (2) 100% of Consolidated EBITDA (as defined in the Credit Agreement) for the most recently ended four consecutive fiscal quarters, in the aggregate, in the form of additional commitments under the Revolving Credit Facility and/or incremental term loans under the Credit Agreement, or in the form of other indebtedness in lieu thereof, plus an additional amount so long as we do not exceed a specified first lien secured leverage ratio. We can incur such additional secured or other unsecured indebtedness under the Credit Agreement if certain specified conditions are met. Our liquidity requirements are significant primarily due to debt service requirements. See Note 9 "Long-term Debt" to our audited consolidated financial statements included elsewhere in Part II. Item 8 of this Form 10-K.
The Company is party to the Investment Agreement dated August 28, 2023, pursuant to which the Company issued and sold, in a private placement, an aggregate of 500,000 shares of the Company’s Series A Convertible Preferred Stock, for an aggregate purchase price of $500.0 million. The Series A Convertible Preferred Stock is entitled to dividends at a rate of 7.0% per annum, compounding quarterly, paid in kind or paid in cash, at the Company’s election.
Our business may not generate sufficient cash flows from operations or future borrowings may not be available to us under our Revolving Credit Facility or the Receivables Financing Agreement in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. Our ability to do so depends on, among other factors, prevailing economic conditions, many of which are beyond our control. In addition, upon the occurrence of certain events, such as a change in control, we could be required to repay or refinance our indebtedness. We may not be able to refinance any of our indebtedness, including the Series B Term Loan under the Credit Agreement, on commercially reasonable terms or at all. Any future acquisitions, joint ventures, or other similar transactions may require additional capital and there can be no assurance that any such capital will be available to us on acceptable terms or at all.
Cash Flows
Information about our cash flows, by category, is presented in our Consolidated Statements of Cash Flows and is summarized below:
Year Ended
September 30,
(in millions)
Operating activities
Investing activities
Financing activities
Adjusted Free Cash Flow (1)
(1) See “Non-GAAP Financial Measures” above for a reconciliation to the most directly comparable GAAP measure.
Cash Flows provided by Operating Activities
Net cash provided by operating activities for the fiscal year ended September 30, 2025 increased $86.2 million, to $291.8 million, from $205.6 million in the 2024 period. This increase was due to an increase in net income adjusted for non-cash activities, combined with increases in cash provided by accounts payable and other operating liabilities. This was partially offset by an increase in cash used for other operating assets.
Cash Flows used in Investing Activities
Net cash used in investing activities was $223.9 million in the fiscal year ended September 30, 2025, an increase of $218.3 million compared to $5.6 million for the 2024 period. The increase in cash used in investing activities was driven by a $175.8 million increase in cash used for the purchase of property and equipment, and a $51.0 million decrease in proceeds from divestiture in comparison to the prior year. This was partially offset by $9.5 million increase in proceeds from the sale of property and equipment.
Cash Flows used in Financing Activities
Net cash used in financing activities of $133.8 million for the fiscal year ended September 30, 2025 included repayments of finance lease obligations of $48.4 million, Series A preferred stock dividends of $35.8 million, repayments of our Receivable Financing
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Agreement of $29.1 million, repurchase of common stock and distributions of $24.2 million, and a decrease in book overdrafts of $12.1 million. This was partially offset by proceeds from our Receivable Financing Agreement of $14.5 million.
Adjusted Free Cash Flow
Adjusted Free Cash Flow decreased $80.1 million to $65.2 million for the fiscal year ended September 30, 2025 from $145.3 million in the 2024 period. The decrease in Adjusted Free Cash Flow was due to an increase in net cash provided by operating activities offset by an increase in cash used for capital expenditures, each as described above.
Working Capital
(in millions)
September 30,
September 30,
Net Working Capital:
Current assets
Less: Current liabilities
Net working capital
Net working capital is defined as current assets less current liabilities. Net working capital decreased $85.0 million, to $151.8 million, at September 30, 2025, from $236.8 million at September 30, 2024, primarily driven by decreases in cash and cash equivalents of $65.9 million, unbilled revenue of $24.7 million, accounts receivable of $22.1 million, other current assets of $1.1 million, and an increase in deferred revenue of $3.8 million. These were partially offset by a decrease in accrued expenses and other current liabilities of $25.5 million and accounts payable of $6.4 million.
Description of Indebtedness
Series B Term Loan due 2029
On April 22, 2022, the Company entered into the Amendment Agreement, which amended the existing Credit Agreement to provide for: (i) a $1,200.0 million seven-year term loan (the “Series B Term Loan”) and (ii) a $300.0 million five-year revolving credit facility (the “Revolving Credit Facility”). The Series B Term Loan matures on April 22, 2029 and bears interest at a rate per annum of a secured overnight financing rate (“Term SOFR”), plus a margin of 3.25% or a base rate (“ABR”) plus a margin of 2.25%, subject to SOFR and ABR floors of 0.50% and 1.50%, respectively. The Company used the net proceeds from the Series B Term Loan to repay all amounts then outstanding under the Company’s Credit Agreement. As a result of the repayment of the amounts outstanding under the Company's Credit Agreement, the Company recorded a loss on debt extinguishment of $12.6 million due to accelerated amortization of deferred financing fees and original issue discount included in the Other expense (income) line of the Consolidated Statements of Operations for the year ended September 30, 2022. An original issue discount of $12.0 was incurred when the Series B Term Loan was issued and is being amortized using the effective interest method over the life of the debt, resulting in an effective yield of 3.42%.
On August 28, 2023, the Company voluntarily repaid $450.0 million of the amount outstanding under the Company’s Amendment Agreement. As a result of this voluntary repayment, the Company recorded a loss on debt extinguishment of $8.3 million due to accelerated amortization of deferred financing fees and original issue discount as well as fees paid to lenders and third parties. The loss on debt extinguishment is included in the Other (income) expense line of the Consolidated Statements of Operations for the year ended September 30, 2023.
On August 31, 2023, the Company entered into Amendment No. 7 to the Credit Agreement (the “Seventh Credit Agreement Amendment”). The Seventh Credit Agreement Amendment (i) amends the definition of “Permitted Holders” to include Birch Equity Holdings, LP, a Delaware limited partnership, Birch-OR Equity Holdings, LLC, a Delaware limited liability company and One Rock Capital Partners, LLC and (ii) provides for a 1.00% prepayment premium for voluntary prepayments made in connection with repricing transactions or amendments made where the primary purpose of which is to decrease the effective yield.
On May 28, 2024, the Company entered into Amendment No. 8 to the Credit Agreement (the "Eighth Credit Agreement Amendment"). Under the Eighth Credit Agreement Amendment, the existing Series B Term Loans were amended to bear interest at a rate per annum based on Term SOFR, plus a margin of 2.50% or ABR plus a margin of 1.50%, subject to SOFR and ABR floors of 0.50% and 1.50%, respectively.
On January 29, 2025, the Company entered into Amendment No. 9 to the Credit Agreement (the "Ninth Credit Agreement Amendment"). Under the Ninth Credit Agreement Amendment, the existing Series B Term Loans were amended to bear interest at a rate per annum based on Term SOFR, plus a margin of 2.00% or ABR plus a margin of 1.00%, subject to SOFR and ABR floors of 0.50% and 1.50%, respectively.
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There were no debt repayments on the Series B Term Loan for the fiscal years ended September 30, 2025 and September 30, 2024.
In addition to scheduled payments, the Company is obligated to pay a percentage of excess cash flow, as defined in the Credit Agreement, as payments to principal. The percentage varies with the ratio of the Company’s debt to its cash flow. The excess cash flow calculation did not result in any required payment due for the periods ended September 30, 2025, September 30, 2024, and September 30, 2023.
Revolving credit facility
The Company has a five-year $300 million revolving credit facility that matures on April 22, 2027 and bears interest at a rate per annum of Term SOFR plus a margin ranging from 2.00% to 2.50%, or ABR plus a margin ranging from 1.00 to 1.50%, subject to SOFR and ABR floors of 0.00% and 1.00%, respectively, with the margin on the Revolving Credit Facility determined based on the Company’s first lien net leverage ratio. The Revolving Credit Facility replaced the previous $260.0 million revolving credit facility under the Credit Agreement. The Company had no outstanding balance under the Revolving Credit Facility as of September 30, 2025 and September 30, 2024. There were no borrowings or repayments under the facility during the years ended September 30, 2025 and September 2024. The Company had no letters of credits issued and outstanding as of September 30, 2025 and September 30, 2024.
Receivables financing agreement
On April 28, 2017, the Company, through a wholly-owned subsidiary, entered into a receivables financing agreement. On June 22, 2022, the Company entered into the Third Amendment to the Receivables Financing Agreement (the “Third Amendment”) which extended the term through June 22, 2025 and increased the borrowing capacity to $275.0 million. On August 31, 2023, the Company, entered into the Fourth Amendment to the Receivables Financing Agreement (the “Fourth Amendment”), which amends the definition of “Permitted Holders” to align with the definition of “Permitted Holders” under the Credit Agreement Amendment, as of the date of the closing of the Receivables Financing Amendment described above. On June 27, 2024, the Company, through a wholly-owned subsidiary, entered into the Fifth Amendment to the Receivables Financing Agreement (the "Fifth Amendment"), which increased the borrowing capacity to $325.0 million and extended the term through June 27, 2027. All amounts outstanding under the Receivables Financing Agreement are collateralized by substantially all of the accounts receivable and unbilled revenue of the Company. During the year ended September 30, 2025, the Company borrowed $14.5 million against the capacity and voluntarily repaid $29.1 million. During the year ended September 30, 2024, the Company borrowed $0.5 million against the capacity and voluntarily repaid $87.3 million.
The interest rate on the amounts borrowed under the Receivables Financing Agreement is established for periods of up to six months at 140-170 bps over SOFR depending on the Company’s leverage ratio, and a commitment fee equal to 0.4% of the unused balance of the facility. The weighted average interest rate on the amounts borrowed under the Receivables Financing Agreement was 5.6% and 6.7% for the years ended September 30, 2025 and September 30, 2024, respectively.
For additional information on our material indebtedness, including our First Lien Term Loans, Series B Term Loans and Revolving Credit Facility and our outstanding borrowings under the Receivables Financing Agreement, see Note 9 "Long-term Debt" in our audited consolidated financial statements included elsewhere in this Form 10-K.
As of September 30, 2025 , September 30, 2024, and September 30, 2023, we were in compliance with all of our debt covenants and no event of default had occurred or was ongoing.
Contractual Obligations and Commercial Commitments
The Company’s primary contractual obligations include the payment of interest and principal on our outstanding long term debt, our operating and finance lease portfolios, and other operational purchase obligations.
The Company has outstanding variable-rate debt through its Series B Term Loan, Revolving Credit Facility, Receivables Financing Agreement and other debt instruments, which hold varying maturities. See Note 9 "Long-term Debt" to our audited consolidated financial statements included in Part II. Item 8 of this Form 10-K for further information, including the timing of principal and interest payments associated with the Company’s long term debt.
The Company has operating and finance leases for branch and administrative offices, vehicles, certain machinery and equipment, and furniture. The Company’s leases have remaining lease terms of one month up to 9.4 years. See Note 12 "Leases". to our audited consolidated financial statements included in Part II. Item 8 of this Form 10-K for additional information, including the maturity schedule of future principal and interest payments associated with our finance and operating lease portfolios.
Purchase obligations include commitments for various products and services made in the normal course of business to meet operational requirements, including the procurement of capital assets. As of September 30, 2025 the Company had $45.6 million of operational purchase obligations, with $24.0 million payable within twelve months. These purchase obligation amounts represent only those items for which we are contractually obligated as of September 30, 2025 .
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our consolidated financial statements because they involve significant judgments and uncertainties. Management believes that the application of these policies on a consistent basis enables us to provide the users of the consolidated financial statements with useful and reliable information about our operating results and financial condition. Certain of these estimates include determining fair value. All of these estimates reflect our best judgment about current, and for some estimates, future economic and market conditions and their effect based on information available as of the date of these consolidated financial statements. If these conditions change from those expected, it is reasonably possible that the judgments and estimates described below could change, which may result in future impairments of goodwill, intangibles and long-lived assets, increases in reserves for contingencies, establishment of valuation allowances on deferred tax assets and increase in tax liabilities, among other effects. Also see Note 2 "Summary of Significant Accounting Policies" to our audited consolidated financial statements included elsewhere in this Form 10-K, which discusses the significant accounting policies that we have selected from acceptable alternatives.
Acquisitions
From time to time we enter into strategic acquisitions in an effort to better service existing customers and to attain new customers. When we acquire a controlling financial interest in an entity or group of assets that are determined to meet the definition of a business, we apply the acquisition method described in ASC Topic 805, Business Combinations . In accordance with GAAP, the results of the acquisitions we have completed are reflected in our consolidated financial statements from the date of acquisition forward.
We allocate the purchase consideration paid to acquire the business to the assets and liabilities acquired based on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as goodwill. If during the measurement period (a period not to exceed twelve months from the acquisition date) we receive additional information that existed as of the acquisition date but at the time of the original allocation described above was unknown to us, we make the appropriate adjustments to the purchase price allocation in the reporting period the amounts are determined.
Significant judgment is required to estimate the fair value of intangible assets and in assigning their respective useful lives. Accordingly, we typically engage third-party valuation specialists, who work under the direction of management, to assist in valuing significant tangible and intangible assets acquired.
The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management, but are inherently uncertain.
We typically use an income method to estimate the fair value of intangible assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants, and include the amount and timing of future cash flows (including expected growth rates and profitability), a brand’s relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.
Determining the useful life of an intangible asset also requires judgment. All of our acquired intangible assets (e.g., trademarks, non-compete agreements and customer relationships) are expected to have finite useful lives. Our estimates of the useful lives of finite-lived intangible assets are based on a number of factors including competitive environment, market share, brand history, operating plans and the macroeconomic environment of the regions in which the brands are sold.
The costs of finite-lived intangible assets are amortized to expense over their estimated lives. The value of residual goodwill is not amortized, but is tested at least annually for impairment as described in the following note.
Goodwill
Goodwill represents the excess of the purchase price over the fair values of the underlying net assets acquired in an acquisition. Goodwill is not amortized, but rather is tested annually for impairment, or more frequently if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. We test goodwill for impairment annually in the fourth quarter of each year using data as of July 1 of that year.
Goodwill is allocated to, and evaluated for impairment at our two identified reporting units. Goodwill is tested for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. We may elect not to perform the
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qualitative assessment for some or all reporting units and perform the quantitative impairment test. The quantitative goodwill impairment test requires us to compare the carrying value of the reporting unit’s net assets to the fair value of the reporting unit. The Company determined fair values of each of the reporting units using a combination of the income and market multiple approaches. The estimates used in each approach include significant management assumptions, including valuation multiples of selected guideline public companies, long-term future growth rates, operating margins, and discount rates.
If the fair value exceeds the carrying value, no further evaluation is required, and no impairment loss is recognized. If the carrying amount of a reporting unit, including goodwill, exceeds the estimated fair value, the excess of the carrying value over the fair value is recorded as an impairment loss, the amount of which not to exceed the total amount of goodwill allocated to the reporting unit.
Our methodology for estimating the fair value of our reporting units utilizes a combination of the market and income approaches. The market approach is based on the guideline public company method, which measures the value of the reporting unit through applying valuation multiples of selected guideline public companies to the reporting unit’s key operating metrics. The income approach is based on the Discounted Cash Flow (“DCF”) method, which is based on the present value of future cash flows. The principal assumptions utilized in the DCF methodology include long-term future growth rates, operating margins, and discount rates. There can be no assurance that our estimates and assumptions regarding forecasted cash flow, long-term future growth rates and operating margins made for purposes of the annual goodwill impairment test will prove to be accurate predictions of the future. We believe the current assumptions and estimates utilized under each approach are both reasonable and appropriate.
Based on our most recent annual analysis as of July 1, 2025, the fair values for both of our reporting units exceeded the carrying values, and therefore no indicators of impairment existed for those reporting units; however, the fair value of the Maintenance reporting unit exceeded the carrying value by 15.4%. Since the Maintenance reporting unit fair value did not substantially exceed the carrying value we may be at risk for an impairment loss in the future if forecasted trends assumed in the fair value calculation are not realized. As of September 30, 2025, there was $1,797.7 million of goodwill recorded related to the Maintenance reporting unit. See Note 7 "Intangible Assets, Goodwill, Acquisitions, and Divestitures" to our audited consolidat ed financial statements included in Part II. Item 8 of this Form 10-K for additional information.
Long-lived Assets (Excluding Goodwill)
Long-lived assets with finite lives are depreciated and amortized generally on a straight-line basis over their estimated useful lives. These lives are based on our previous experience for similar assets, potential market obsolescence and other industry and business data. Property and equipment and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value. Changes in estimated useful lives or in the asset values could cause us to adjust our book value or future expense accordingly.
Net Service Revenues
We perform landscape maintenance and enhancement services, development services, other landscape services and snow removal services. Revenue is recognized based upon the service provided and the contract terms and is reported net of discounts and applicable sales taxes.
Maintenance Services
Our Maintenance Services revenues are generated primarily through landscape maintenance services and snow removal services. Landscape maintenance services that are primarily viewed as non-discretionary, such as lawn care, mowing, gardening, mulching, leaf removal, irrigation and tree care, are provided under recurring annual contracts, which typically range from one to three years in duration and are generally cancellable by the customer with 30-90 days’ notice. Snow removal services are provided on either fixed fee based contracts or per occurrence contracts. Both landscape maintenance services and snow removal services can also include enhancement services that represent supplemental maintenance or improvement services generally provided under contracts of short duration related to specific services. Revenue for landscape maintenance and snow removal services under fixed fee models is recognized over time using an output based method. Additionally, a portion of our recurring fixed fee landscape maintenance and snow removal services are recorded under the series guidance. The right to invoice practical expedient, defined within Note 2 "Summary of Significant Accounting Policies" to our audited consolidated financial statements, is generally applied to revenue related to landscape maintenance and snow removal services performed in relation to per occurrence contracts as well as enhancement services. When use of the practical expedient is not appropriate for these contracts, revenue is recognized using a cost-to-cost input method. Fees for contracted landscape maintenance services are typically billed on an equal monthly basis. Fees for fixed fee snow removal services are typically billed on an equal monthly basis during snow season, while fees for time and material or other activity-based snow removal services are typically billed as the services are performed. Fees for enhancement services are typically billed as the services are performed.
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Development Services
Development Services revenue is primarily recognized over time using the cost-to-cost input method, measured by the percentage of cost incurred to date to the estimated total cost for each contract, which we believe to be the best measure of progress. The full amount of anticipated losses on contracts is recorded as soon as such losses can be estimated. These losses have been immaterial in prior periods. Changes in job performance, job conditions, and estimated profitability, including final contract settlements, may result in revisions to costs and revenue and are recognized in the period in which the revisions are determined.
Risk Management and Insurance
We carry general liability, auto liability, workers’ compensation and employee health care insurance policies. In addition, we carry other reasonable and customary insurance policies for a Company of our size and scope, as well as umbrella liability insurance policies to cover claims over the liability limits contained in the primary policies. Our insurance programs for workers’ compensation, general liability, auto liability and employee health care for certain employees contain self-insured retention amounts, deductibles and other coverage limits (“self-insured liability”). Claims that are not self-insured as well as claims in excess of the self-insured liability amounts are insured. We use estimates in the determination of the required accrued self-insured claims. These estimates are based upon calculations performed by third-party actuaries, as well as examination of historical trends, and industry claims experience. We adjust our estimate of accrued self-insured claims when required to reflect changes based on factors such as changes in health care costs, accident frequency and claim severity. We believe the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these highly judgmental accruals. However, the use of any estimation technique in this area is inherently sensitive given the magnitude of claims involved and the length of time until the ultimate cost is known. We believe our recorded obligations for these expenses are consistently measured. Nevertheless, changes in healthcare costs, accident frequency and claim severity can materially affect the estimates for these liabilities.
Equity-based Compensation
We account for equity-based compensation plans under the fair value recognition and measurement provisions in accordance with applicable accounting standards, which require all equity-based payments to employees and non-employees, including grants of stock options, to be measured based on the grant date fair value of the awards. We use the Black-Scholes-Merton valuation model to estimate the fair value of stock options granted to employees and non-employees. This model requires certain assumptions including the estimated expected term of the stock options, the risk-free interest rate and the exercise price, of which certain assumptions are highly complex and subjective. The expected option life represents the period of time that the options granted are expected to be outstanding based on management’s best estimate of the timing of a liquidity event and the contractual term of the stock option. As there is not sufficient trading history of our common stock, we use a group of our competitors which we believe are similar to us, adjusted for our capital structure, in order to estimate volatility. Our exercise price is the stock price on the date in which shares were granted.
Prior to our IPO, our stock price was calculated based on a combination of the income and market multiple approaches. Under the income approach, specifically the discounted cash flow method, forecasted cash flows are discounted to the present value at a risk-adjusted discount rate. The valuation analyses determine discrete free cash flows over several years based on forecast financial information provided by management and a terminal value for the residual period beyond the discrete forecast, which are discounted at an appropriate rate to estimate our enterprise value. Under the market multiple approach, specifically the guideline public company methods, we selected publicly traded companies with similar financial and operating characteristics as us and calculated valuation multiples based on the guideline public company’s financial information and market data. Subsequent to the IPO, the estimation of our stock price is no longer necessary as we rely on the market price to determine the market value of our common stock.
For additional information related to the assumptions used, see Note 13 "Equity-Based Compensation" to our audited consolidated financial statements included elsewhere in Part II. Item 8 of this Form 10-K.
Income Taxes
The determination of our provision for income taxes requires management’s judgment in the use of estimates and the interpretation and application of complex tax laws. Judgment is also required in assessing the timing and amounts of deductible and taxable items. We may establish contingency reserves for material, known tax exposures relating to deductions, transactions, and other matters involving some uncertainty as to the proper tax treatment of the item. Such reserves reflect our judgment as to the resolution of the issues involved if subject to judicial review. Several years may elapse before a particular matter, for which we have established a reserve, is audited and finally resolved or clarified. While we believe that our reserves are adequate to cover reasonably expected tax risks, issues raised by a tax authority may be finally resolved at an amount different than the related reserve. Such differences could materially increase or decrease our income tax provision in the current and/or future periods. When facts and circumstances change (including a resolution of an issue or statute of limitations expiration), these reserves are adjusted through the provision for income taxes in the period of change.
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Recently Issued Accounting Pronouncements
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which removes specified exceptions and adds requirements to simplify the accounting for income taxes. The Company adopted the guidance in the first quarter of fiscal 2022. The adoption of ASU 2019-12 did not have a material impact on the Company's consolidated financial statements and disclosures.
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting which provides optional expedients and exceptions for the accounting for contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The guidance is effective for the Company upon issuance through December 31, 2022. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the third quarter of fiscal 2020 the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. In January 2021, the FASB issued ASU 2021-01 to clarify the scope of certain optional expedients for derivatives that are affected by the discounting transition. The Company continues to evaluate the impact of the guidance on its consolidated financial statements and may apply other elections as applicable as additional changes in the market occur.
Business Combinations
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 as if it had originated the contracts. The Company adopted the guidance in the first quarter of fiscal 2023. The adoption of ASU No. 2021-08 did not have a material impact on the Company’s consolidated financial statements and disclosures.
Segment Reporting
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The ASU expands public entities' segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment's profit or loss and assets. The purpose of the guidance is to enable investors to better understand an entity's overall performance and assess potential future cash flows. The Company adopted the updated accounting guidance on a retrospective basis for the year ended September 30, 2025. The adoption of ASU No. 2023-07 did not have a material impact on the Company's consolidated financial statements. Refer to Note 15 "Segments" to our consolidated financial statements for related disclosures.
Income Taxes
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The ASU expands public entities tax disclosures including improving disclosures surrounding the company's rate reconciliation, cash taxes paid, and disaggregation of income tax expense (or benefit) from continuing operations. The Company has adopted and implemented the applicable disclosure requirements for the year ended September 30, 2025. The adoption of ASU No. 2023-09 did not have a material impact on the Company's consolidated financial statements. Refer to Note 11 "Income Taxes" to our consolidated financial statements for further details.
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU No. 2024-03, Income Statement (Subtopic 220-40): Expense Disaggregation Disclosures . The ASU enhances disclosure of income statement expense categories to improve transparency and provide financial statement users with more detailed information about the nature, amount, and timing of expenses impacting financial performance. In January 2025, the FASB issued ASU No. 2025-01 to clarify the effective date of the update. The amendment is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. The Company is in the process of evaluating the impact of ASU No. 2024-03 on its consolidated financial statements.
Accounting for Software Costs
In August 2025, the FASB issued ASU No. 2025-06, Intangibles (Subtopic 350-40): Goodwill and Other Internal-Use Software . The ASU removes all reference to prescriptive and sequential software development stages and requires entities to start capitalizing
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software costs when both management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. The amendment is effective for annual periods beginning after December 15, 2027, and interim periods within those annual reporting periods. The Company is in the process of evaluating the impact of ASU No. 2025-06 on its consolidated financial statements.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk
Interest Rate Risk
We are exposed to interest rate risk as a result of our variable rate borrowings. We manage our exposure to interest rate risk by using pay-fixed interest rate swap and collar contracts as cash flow hedges of a portion of our variable rate debt. We have historically targeted hedging between 80% and 90% of the principal amount outstanding under our Series B Term Loan.
As of September 30, 2025, we had variable rate debt outstanding of $799.6 million at a weighted average interest rate of 6.5% for the year ended September 30, 2025, excluding the impact of our outstanding hedge agreements. Substantially all of our outstanding variable rate debt was incurred under the Amended Credit Agreement and the Receivables Financing Agreement. Each of these loans bears interest based on SOFR plus a spread.
We use interest rate swap and collar contracts to offset our exposure to interest rate movements. These outstanding interest rate contracts qualify and are designated as cash flow hedges of forecasted SOFR-based interest payments. At September 30, 2025, we were a fixed rate payer on fixed-floating interest rate swap and collar contracts that effectively fixed (swap) or limited (collar) the SOFR-based index used to determine the interest rates charged on our SOFR-based variable rate borrowings. See Note 10 "Fair Value Measurements and Derivative Instruments" to our audited consolidated financial statements included elsewhere in this Form 10-K.
Based on the debt outstanding and hedge contracts in place for the year ended September 30, 2025, a 100 basis point change in interest rates on our variable rate debt would result in a change to our fiscal 2025 interest expense by approximately $2.7 million inclusive of the impact from the active hedge contracts. Actual interest rates could change significantly more than 100 bps.
Commodity Price Risk
We are exposed to market risk for changes in fuel prices through the consumption of fuel by our vehicle fleet and mowers in the delivery of services to our customers. We purchase our fuel at prevailing market prices. We manage our exposure through the execution of a documented hedging strategy. We have historically entered into fuel swap contracts to mitigate the financial impact of fluctuations in fuel prices when appropriate. We currently have open fuel-based derivative instruments. Based on the hedging contract in place during fiscal 2025, a ten percent change in fuel prices would have resulted in a change of approximately $4.0 million in our annual fuel cost inclusive of the impact from the active hedge contracts.
We continue to monitor our exposure and the current pricing environment and may execute new fuel-based derivative instruments in the future. See Note 10 "Fair Value Measurements and Derivative Instruments" to our audited consolidated financial statements included elsewhere in this Form 10-K.
Item 8. Financial Statement s and Supplementary Data
The consolidated financial statements, supplementary information and financial statement schedules of the Company are set forth beginning on page F-1 of this report.
