BrightView Holdings, Inc. (BV) Q4 2022 Earnings Report, Transcript and Summary

Hello, and welcome to today's BrightView Holdings, Incorporated Fourth Quarter Fiscal 2022 Results Call. My name is Bailey, and I'll be the moderator for today's call. [Operator Instructions] I would now like to pass the conference over to today's host, Faten Freiha, Vice President of Investor Relations. Please go ahead. Your line is now open.

Thank you, operator, and good morning, everyone. Thank you for joining BrightView's fourth quarter and full year fiscal 2022 earnings conference call. Andrew Masterman, Chief Executive Officer; and Brett Urban, Chief Financial Officer, are on the call. Please remember that some of the comments made today, including responses to questions and information reflected on the presentation slides are forward-looking, and actual results may differ materially from those projected. Please refer to the company's SEC filings for more detail on the risks and uncertainties that could impact the company's future operating results and financial condition. Comments made today will also include a discussion of certain non-GAAP financial measures. Reconciliations to comparable GAAP financial measures are provided in today's press release. Disclaimers on forward-looking statements and non-GAAP financial measures apply both to today's prepared remarks as well as the Q&A. I'll now turn the call over to BrightView's CEO, Andrew Masterman.

Thank you, and good morning, everyone. As I reflect in the last couple of years, I couldn't be prouder of the BrightView team's efforts during this difficult and unique environment. The challenges we overcame and improvements we made showcased the strength of our fundamentals and resiliency of our business, built on an 80-year legacy of providing best-in-class landscape and services. We transformed the company through investments in sales force and technology to drive consistent and sustainable organic growth. We strategically expanded our footprint through accretive acquisitions that further accelerated our top line. In the last two years, we have grown total revenue by more than $425 million, approximately the size of our largest competitor. Let's now turn to Slide 4 and review our performance for fiscal 2022. We ended fiscal year 2022 with a record $2.8 billion in revenue despite historical low snowfall, particularly in the first quarter. We delivered land organic growth of 4.4%, exceeding our long-term plans and significantly outpacing projected industry growth of less than 1%. Development organic growth of 10.2% reflects our robust backlog and clear business momentum. Our Strong-on-Strong M&A execution contributed $140 million to the top line, $75 million in maintenance and $65 million in development. All of this resulted in total revenue growth of 8.7% for the year, supported by total organic growth of 3.2%. Turning now to profitability, our profitability for fiscal 2022 was impacted by various external factors, including the low average snowfall, particularly in the first quarter, a rise in labor and material costs as well as an unexpected spike in fuel costs. We have implemented various mitigating actions, including proactive pricing initiatives, shortened development project pricing commitments and other technology enhancements. These initiatives mainly offset the anticipated rise in labor and material costs. As we look ahead, we are closely monitoring fuel costs and looking at a variety of different options to help lessen their impact on our business. Lastly, we remain disciplined in our overhead spend as evidenced by the improvement in corporate expenses year-over-year. As I reflect on this remarkable year and our excellent execution, I believe it's a testament to the strong business foundation we have built over the last six years. Let me reiterate some key performance highlights. We drove industry-leading organic growth and we significantly beat our long-term organic growth plans. We are incredibly proud of our ability to manage through a unique environment and deliver on the elements within our control, driving new growth mitigating material and wage inflation as well as instilling overall cost discipline. We can't control snowfall and spikes in fuel prices, we have an unwavering focus on driving our business forward through strong organic growth, M&A execution and cost discipline. As we look ahead, our priority is clear. We will continue to execute on our growth plans to deliver another year of solid organic growth in fiscal 2023 while implementing initiatives to mitigate against externally driven headwinds and strengthen our profitability. Let's first review key financial highlights for the fourth quarter outlined on Slide 5. Revenue across maintenance and development was supported by both organic growth and continued benefits from M&A transactions. We delivered land, maintenance organic growth of 2.2% on top of a prior year organic growth rate of 9.2%. Hurricane Ian and significant rainfall across the East Coast during the last week of September impacted our higher-margin ancillary services. Excluding this impact, land maintenance organic growth would have been about 3% and in line with our guidance. Adjusted EBITDA came in line with our expectations. Fuel headwind for the quarter was $5 million, net of a fuel surcharge, a little better than anticipated as fuel prices improved modestly from Q3. However, Hurricane Ian and significant rainfall at the end of the quarter impacted our profitability. In addition to realizing lower than expected ancillary services, we incurred hurricane preparation costs to fortify our branches against the impact of the hurricane. The total impact to adjusted EBITDA was approximately $3 million, and we expect to repair efforts over the next 12 months to offset this headwind. Excluding this weather-related headwind, adjusted EBITDA would have been at the high end of our guidance for the fourth quarter. Lastly, from a capital allocation standpoint, while our leverage ratio remains flat with Q3, we are intently focused on growing our EBITDA to improve our leverage ratio. We are committed to efficient capital deployment remaining disciplined with capital expenditures and continuing to pursue select attractive M&A opportunities to maximize shareholder value. Let's now move to Slide 6 to review our top line growth drivers which remain unchanged. On our last call, I went into details behind each pillar. I won't spend as much time today, but I wanted to give you an update on a few initiatives. First, our sales force continues to grow and is driving strong sales growth across our entire business. We expect robust organic growth in both maintenance and development segments in fiscal year 2023. We continue to see solid customer demand in our contract-based business, ancillary penetration remains high, and our development pipeline is robust. On the technology front, we upgraded our customer portal and launched BrightView Connect 2.0. This enhanced portal is now available to our customers and has the entire relationship online, similar to online banking. This service is aligned with our customers' demand and enables them to engage with us in an efficient manner. Customer feedback so far has been very encouraging. Our digital innovation has helped drive net new growth, and it is one of the reasons we continue to enjoy organic growth that exceeds industry growth rates. Lastly, our integrated suite of applications enables efficiency, seamless acquisition integration and robust data analytics, supporting operational efficiencies with better service quality and safety. From an M&A standpoint and moving to Slide 7, we continue to execute on our Strong-on-Strong M&A strategy. We closed on more than 15 accretive transactions in the last two fiscal years. And in September, we completed the acquisition of Syringa in Boise, Idaho, which complements our recent Intermountain Plantings or IP acquisitions and increases our presence in one of the fastest-growing markets in the country. Syringa is a leading service provider of landscape maintenance and irrigation services and has secured strong customer relationships within the Boise MSA. We announced this past Tuesday that we added Apex Land Group to the BrightView family. Apex is a leading landscape services provider in the Greater Myrtle Beach, South Carolina market with a strong record of client satisfaction and retention. This acquisition enables us to further build upon our presence in the high growth Myrtle Beach market. Our M&A execution this past year will benefit our top line in fiscal 2023. We expect to generate approximately $35 million in revenue in fiscal 2023 as a result of transactions completed in fiscal 2022. Our pipeline remains robust with attractive valuations and more than $700 million of opportunity. In fiscal 2023, we will continue to execute on our M&A strategy in line with long-term plans to drive at least 2% growth, which would imply $20 million of incremental M&A driven revenue as a result of in-year transactions. Let's move now to Slide 8 to review our cost structure. We continue to take a disciplined and strategic approach to managing our costs amid a challenging macroeconomic backdrop. The macroeconomic headwinds remain the same, inflation of labor and material costs, fuel price uncertainty and a potential recessionary environment. To be clear, we are not currently seeing any indicators of a recession in our business. Ancillary services remain strong, and our development pipeline is very encouraging. And our net new growth remains robust. That said, we have taken measures in each of our business segments to enhance and improve our profitability. In our land maintenance business, our strategic pricing efforts will continue to offset wage and material inflation. This year, we established a centralized pricing office to support our branches across the country, partnering with them to further drive and enable pricing negotiations. The pricing benefits we realized were masked by the unexpected spike in fuel costs this year. We continue to take a balanced approach with our customers, absorb some of the incremental fuel costs in the near term and focus on strategic pricing initiatives, improving ancillary penetration and attracting larger, more profitable clients. As a result, with prices continuing at current levels, we expect fuel to remain a headwind for the first half of fiscal 2023. Turning now to our snow business, while this business is highly reliant on amount and geography of snowfall, our goal is to stabilize the margin profile over time. And that is why this past year, we began expanding our self-performance snow businesses. Self-performing snow management where services are performed through direct labor without subcontractors secures higher margins eliminating the middleman. While the benefit from this expansion will be modest for fiscal year 2023, these efforts, combined with normalized snow, we believe, will benefit total company margins over the next few years. Let's move to our development business, which has been primarily impacted by the increase in material costs. As you know, we shifted contract lead times to allow 10 to 15 days of pricing commitments compared to three to six months historically, and this has resulted in significant improvement in our development margins. This quarter, we began to realize the benefits of our efforts, development margins improved by 200 basis points in the fourth quarter. Looking ahead, we expect development margins to improve by approximately 40 to 60 basis points in total for fiscal 2023. Lastly, it's essential to understand our support team structure. Our decentralized operational business model provides ample flexibility in managing support and overhead expenses on a regional basis. And importantly, we efficiently scaled our overhead costs relative to our business growth. In fiscal 2023, despite the inflationary pressures, we expect corporate overhead costs to represent approximately 2.5% of revenue, in line with historical averages. Our disciplined expense management enables our continued investment in business growth to further drive top line momentum. Let's turn to Slide 9. While external headwinds have impacted our business, our strong business fundamentals and strategic plans give us confidence that we continue to be poised for long-term profitable growth. This slide outlines clearly the fundamentals that drive our confidence for the long-term, which I will speak about in a few minutes. Looking to fiscal 2023, we expect robust top line growth, combined with slight improvement in adjusted EBITDA margins, if snow normalizes. We are focused on managing the headwinds we can control while also investing to drive long-term growth. Before turning the call over to Brett, I'd like to speak to our environmental sustainability efforts briefly on Slide 10. We remain focused and dedicated to our strategic long-term sustainability goals, and we'll continue to invest behind sustainable solutions that minimize our impact on the environment, improve profitability and create shareholder value. Our ESG efforts will enable us to better serve our customers and stay ahead of upcoming regulation, particularly in California, where gas-powered equipment will no longer be sold by 2024. Furthermore, we expect to generate cost savings as we lessen our reliance on fuel over the long-term. I am pleased to report that we are committed to converting approximately one-quarter of our entire management fleet to electric or hybrid by the end of fiscal 2023. As we have said in the past, ESG is embedded in the fabric of what we do every single day and has been an integral component of our business strategy for many years. Our diverse workforce, leading industry position and dedication to creating the best landscapes on earth drives us to continue to invest behind sustainable solutions. Early in calendar 2023, we plan to issue our second sustainability report, where we will continue to expand and refine our reporting on environmental and social performance as well as our progress against our ESG goals. I'll now turn it over to Brett, who will - discuss our financial performance in greater detail.

Thank you, Andrew, and good morning to everyone. I'm thrilled to be here this morning and excited to report on a strong quarter. Our solid financial performance and growth momentum are powered by the dedication of our team members who are executing at the highest levels. I'm thankful and proud of their efforts. Our priorities remain the same, consistently growing our business, improving our profitability, enhancing our balance sheet and executing on capital allocation plans that create long-term shareholder value. With that, let me now provide more details on Q4 results and our outlook for fiscal '23. Moving to Slide 12 total revenue for the fourth quarter increased by 7.4%, reflecting a, 3.4% total organic growth, maintenance revenues increased by 4.8%, driven by 2.2% land organic growth and M&A contributions of $14 million. As Andrew noted, Hurricane Ian and significant rainfall at the end of the quarter impacted our land ancillary services. Excluding this impact, land organic growth would have been approximately 3% and in line with our guidance. Lastly, our pricing strategy contributed about 50 basis points to land organic growth, net of scope reductions as expected. Development revenues increased by 16.3% compared to the prior year. The increase was driven by a combination of strong organic growth of 8.5% and M&A contributions of $13 million. We remain optimistic about our development business in the near and long-term. We serve a diverse mix of end markets, and we're seeing growth across these verticals, most notably in private work and commercial construction projects. Turning to the details on Slide 13, total adjusted EBITDA for the fourth quarter was $91 million, up 2% compared to the prior year. Total net fuel headwind for the quarter was $5 million. Hurricane Ian and the significant rainfall at the end of the quarter impacted our ability to install ancillary business, and we incurred preparation costs associated with the hurricane. This resulted in a combined $3 million headwind. Excluding this weather-related impact, adjusted EBITDA would have been at the high end of our guidance range. Looking at our results by segment, maintenance adjusted EBITDA was $81 million or down 6.5% compared to the prior year. Solid contract growth was more than offset by the surge in fuel prices, a $4 million impact for maintenance as well as a $3 million hurricane-related headwind I mentioned earlier. Lastly, maintenance adjusted EBITDA was impacted by the reintroduction of the 401(k) benefit relative to the prior year. Excluding these headwinds, maintenance-adjusted EBITDA margins would have been roughly flat compared to the prior year. In the Development segment, adjusted EBITDA increased by 37.1% for the fourth quarter. This growth was driven by stronger revenues and shifting of our price commitments discussed earlier. Development adjusted EBITDA margin was up 200 basis points year-over-year and exceeded our expectations of approximately 80 basis points as a result of strong cost management. Looking ahead to fiscal '23, we expect development margins to continue to improve by approximately 40 to 60 basis points. Let's move now to our balance sheet and cash flow metrics on Slide 14. Capital expenditures for the year represented 3.6% of revenue, roughly in line with our expectations. Given the current interest rate environment, we will look to be even more disciplined with our capital, and we plan to keep our capital expenditures slightly under 3.5% for fiscal '23. The level of spend will be dependent on growth opportunities that we may need to support. Net debt was flat sequentially and leverage remains at 4.8 times in line with Q3. As we continue to improve our adjusted EBITDA performance, we expect our leverage ratio to improve over time. Lastly, our liquidity remains strong at $350 million for the fourth quarter, relatively flat with the third quarter. Turning now to Slide 15, we are extremely pleased to have refinanced our debt back in April. We secured favorable terms and extended the term loan and revolver maturity to 2029 and 2027, respectively. Given the rising interest rate environment, it would be prudent to discuss current interest expense expectations for fiscal '23. The chart on this slide illustrates the largest two components of our debt. Our term loan based on SOFR plus a spread of 325 basis points and our AR securitization based on SOFR plus a spread of 170 basis points. As we progress through fiscal '23, we expect SOFR to increase based on the rates implied in the forward curve as depicted in the table on the slide. As a result, we anticipate cash interest to be approximately $107 million and P&L interest to be closer to $112 million. Despite the elevated interest rate environment, we intend to continue to selectively reinvest our cash to fund accretive acquisitions. Moving to Slide 16 to review free cash flow, the strength of our business fundamentals gives us the confidence to anticipate free cash flow improvement in fiscal '23 despite a $58 million interest headwind. We expect an improvement in free cash flow to be driven by the following: first, enhanced operating performance, anchored by strong top line growth and improvements in our margin profile, which will drive improvement in cash from operations. Second, we saw accelerated growth in our development business, particularly towards the end of fiscal '22, requiring more working capital than previously anticipated. We expect this working capital to unwind in the first half of fiscal '23 and our reduced working capital usage to provide a $10 million to $20 million benefit versus fiscal '22. Third, we expect to realize tax benefits related to the CARES Act, which will result in $20 million in year benefit. The timing of the CARES Act benefit is uncertain, but we expect this in the first half of fiscal '23. Lastly, our heightened focus on managing capital expenditures will also modestly benefit free cash flow relative to fiscal '22. Although these tailwinds will be partially offset by the interest expense headwind I mentioned earlier, we remain confident that fiscal '23 free cash flow will improve relative to fiscal '22. Please note that free cash flow will fluctuate on a quarterly basis as it is impacted by timing of tax repayments, level of growth in the snow business and trajectory of development projects. Let's turn now to Slide 17 to review our outlook for the first quarter of fiscal '23. As you can see on this slide, we expect total revenues of $610 million to $640 million, and total adjusted EBITDA of $38 million to $44 million. Our guidance assumes 2% to 3% organic growth in both land and development, in line with long-term plans. The low end of our guidance assumes little-to-no snow events, while the high end assumes snowfall slightly below historical averages. In both segments, our pricing initiatives will help to offset material and labor inflation. Fuel will continue to be a $5 million headwind for the first quarter, assuming fuel prices remain consistent with the fourth quarter and October averages. Before turning to our fiscal '23 outlook, I'd like to turn to Slide 18 to speak to our snow business in more detail. This slide shows historical snow performance by quarter for the last three years. We added lines to show expected average snow revenue based on historical snowfall and modest organic growth. As you can see, in fiscal '22, revenue in the first quarter was significantly below historical averages. In the second quarter, snow revenue was lower than average and also included approximately $12 million in M&A contributions. In the third quarter, we had a late winter generating more snow revenue than typical. It's important to consider these trends as you think about fiscal '23 and normalize snow revenue performance by quarter. Let's now turn to our preliminary view of fiscal '23 on Slide 19. In response to investor and analyst feedback and to effectively showcase the strength of our fundamentals, we have decided to provide more details on our growth drivers for fiscal year '23. Please note that we will provide our detailed fiscal year '23 guidance on our Q2 call after the majority of the snow season is behind us. Let's start with revenue. As you can see, we expect continued organic growth of 2% to 3% for both land and development, in line with our long-term plans. In addition, M&A will continue to enhance the top line. We expect acquisitions to contribute at least 2% growth. As snow revenue normalizes to historical averages, we would expect total revenue to approach $3 billion this year. Moving to adjusted EBITDA drivers, in the maintenance business, we would expect labor and material costs to be offset by pricing initiatives. Fuel will continue to impact the business in the first half of the year, assuming current fuel prices remain consistent. The headwind is expected to be about $7 million to $9 million. In our development business, we expect margins to improve by 40 to 60 basis points as we continue to see strong top line growth and efficient cost management. Ultimately, despite all the external headwinds our business is facing, if snow normalizes, we expect fiscal '23 adjusted EBITDA margin to improve by approximately 10 to 20 basis points compared to the prior year. Lastly, I'd like to note that we are not assuming any change to the current economic conditions in our outlook for the first quarter or fiscal '23. Let's move to Slide 20 to discuss our capital allocation priorities. Our robust cash flow generative business model affords us the flexibility to execute our M&A playbook and continue to drive robust, long-term profitable growth. In fiscal year '23 and despite the rising interest rate environment, we will remain optimistic and strategic in allocating capital effectively to fund accretive acquisitions. Additionally, we will be focused on improving our leverage ratio over time, primarily by growing adjusted EBITDA. Ultimately, our goal remains to effectively deploy capital and to drive shareholder value. With that, let me turn the call back over to Andrew.

Thank you, Brett. We are very pleased with our results for the fourth quarter, which marks our sixth consecutive quarter of land organic growth. For full year fiscal 2022, we delivered solid organic growth in every single quarter showcasing our unwavering focus on driving organic growth. In addition, we executed on our M&A strategy which was a solid contributor to our top line for the year. Our development business began to recover in the fourth quarter, and we expect margins to improve in fiscal 2023. Despite the inflationary environment, we are able to offset labor and material inflation costs with our pricing efforts across our business. These results showcase the resiliency of our model and our ability to execute at the highest level in a very challenging and dynamic environment. It is clear that we have a strong, resilient and agile business. We are leaders in our industry with an unparalleled customer value proposition, supported by investments behind digital services and sustainability. We are executing against our growth initiatives and driving strong momentum in our business. Our future is bright, and we are confident that we have the right strategy and the right culture within our business to further accelerate our performance. Importantly, our business remains poised for long-term growth, and let me outline the main reasons. First, commercial landscaping is a strong business that has withstood various economic cycles and environments. Second, we serve marquee customers across various end markets. Our business and customer mix give us the, agility to continue to thrive in a rapidly changing environment. Third, we have a differentiated customer value proposition, powered by technology, sustainability and an unparalleled network of expertise. Fourth, secular trends, including moving towards electrical equipment and limiting water usage are in our favor and position us very well competitively. We have invested heavily in our capabilities in these areas to be able to address our customer needs. Lastly, we have multiple opportunities, organic and M&A that will power our growth and drive long-term profitability. In closing, I'd like to thank our customers for their support and partnership in working with us on managing the current inflationary environment. Also, I'm thankful for our teams for their continued attention to designing, creating, maintaining and enhancing the best landscapes on earth. Thank you for your interest and for your attention this morning. We'll now open the call for your questions.

Thank you [Operator Instructions] Our first question today comes from the line of George Tong from Goldman Sachs. Please go ahead, your line is now open.

Hi thanks, good morning. Hurricane Ian and heavy rainfall impacted ancillary services demand in the quarter. Do you expect weather to have any lingering impact on fiscal 1Q revenue performance?

Good morning, George. We did - the timing of the hurricane as far as Q4 was perfectly aligned with the end of our quarter. And so that last week, it was really rained up and down the Eastern seaboard from Florida, all the way up to Boston. What we're going to be seeing, as we get into this quarter, is actually a flip side, a positive impact that we expect from hurricanes, which is the cleanup and the repair. We expect that to start in the first quarter. And then cascade it frankly, into the second and third quarters as we continue to rebuild and retain. We believe in Q1, we'll have at least a $5 million positive impact on revenue and could be more as we work our way through the quarter.

That's helpful. And then as you think about snowfall activity for next year, what would normal snowfall mean for snow revenue growth in fiscal 2023?

Yes, and that's where we're sitting today. Still normal snow will clearly be at a higher level. If you looked at the slide that we put there, the historical kind of averages if you look - and snow coming in at around $55 million or little from that on a normal snow quarter. Our guidance right now assumes the low end, no snow. We just need to say that's the reality of what could happen and the high end - is slightly below average. But certainly, if you look at historical trends, it could be significantly higher than our current guide.

Right. I guess just to quickly follow-up on that. As you think about the full year, just at a high level, what percentage would correspond to regular snowfall, what percentage snow revenue growth?

Yes,. I mean if you look at the base that we have, and again, kind of looking at the slides last year, and if you refer back to the snow slide that showed the overall position on an average year, that number would have been closer on an annual basis, right, up in the 260 range or something like that. Again, you look back to fiscal '21 that was a year where - we had above average Q2 - sorry yes, Q2 and average Q1, we posted north of 280 that was above average. So if you look back at 260-ish or so being an average year, we've got some acquisitions since then. And we believe strongly that organic growth will continue in our snow book and should grow somewhere between 2% to 3%. So yes, 256 kind of, if you look on here, 260, 280 towards the high end, growing at mid-single digits is probably where you could expect a normal snow year.

Got it, that's helpful. Thank you.

Thank you. The next question today comes from the line of Tim Mulrooney from William Blair. Please go ahead, your line is now open.

Hi, this is Sam Kusswurm on for Tim. Andrew and Brett, hope you are doing well?

Doing well, thanks Sam.

Yes, I'll jump right in here. In your development business, I know you shifted to 10 to 15-day pricing commitments instead of historical three to six months. I guess I'm wondering if you could share how customers have responded to this change and if your competitors have also shifted the strategy or still holding to a longer lead time. And if they are holding to a longer lead time, does this create any sort of disadvantage during the bidding process?

Yes, pretty much the industry itself has shifted. I mean they see - the competitive nature of the market. They have their own - they're not immune to the cost inflation than we are. So I think customers are accepting kind of our shortened lead times. Competition has also adjusted their lead times. So kind of more of a normal industry practice now is going to be a shorter window for quoting until we see some type of long-term shift in stability in material rates.

Great, that's helpful. Maybe switching gears a little bit here then. I think you mentioned last quarter, a majority of your customers have accepted the fuel surcharges, but you remain thoughtful about the rollout and absorbing some costs yourself. Can you update us on this process? Have additional customers come on board to this - to the rollout? And then are the fuel surcharges prefixed or are you able to put some variability into these agreements?

Yes, fuel surcharge negotiations continued throughout the entire year of fiscal '22. As we now go into fiscal '23, what's happening with fuel surcharges, is actually we're shifting a surcharge into our pricing structures, right. And so that will manifest itself as we get into the green season in the May, June timeframe - and we're basing right now our pricing structures based on approximately current levels of roughly $4 gas. So as we forecast out there that kind of $4 level, that's where our pricing will be, and we'll be removing fuel surcharges as we embed that current level of fuel in our contracts.

Appreciate it that's helpful color. I'll leave there, thanks.

Thank you.

Thank you [Operator Instructions] The next question today comes from the line of Bob Labick from CJS Securities. Please go ahead, your line is now open.

Yes, hi good morning, it's Pete Lukas for Bob. Just in terms of the maintenance services revenue growth, how much of that would you say was due to price increases?

Yes, hi Pete, you look at net-net-net, it's about a 50 bps growth on overall maintenance due to price. When I say net-net-net that means we have price increases and we have scope adjustments. So actually price increases were higher. If we have, and I'll say, roughly 5% price increase, it means we have roughly 4.5% of scope adjustments. Both of them positively impacting margin, but ultimately resulting in only about a 50 bps top line benefit.

Great. And then shifting over to ancillary services, I know you mentioned the impact of the hurricane, but maybe if you could talk kind of ex that, would you say it's back to pre-pandemic level on an account basis? And what were the drivers of the ancillary per account be right now and any trends you're seeing there?

Sure, our contract maintenance and the contract part of the maintenance business rebounded very quickly off of pandemic. And so, we feel that, that actually came back to more of a normalized level early in '22 if not the end of '21. The ancillary services we have now are back - very strong at pre-pandemic levels for in a normalized state. And actually, when you see the hurricane coming in, that's going to only benefit that's going to be plus. That's going to be above historical ancillary services. And really, when it comes down to - it come back to a more normalized environment. When you go to hotel [ph] you're expecting to see different levels of ancillary power changes, things like that. When you go into homeowners associations and people are going to be there, you're going to be expecting a relatively tight look. And the reality is more and more people every day are going back to work in offices and the commercial complexes are - we're seeing the same levels of spend in our commercial properties that we saw back in 2019. So again, it's across the board. We only saw a dip of ancillary services of 5% to 10% throughput the pandemic. And so due to the resilient nature of the business, we see that rebound coming back and actually giving us a lot of confidence as we look out to 2023 with these elevated rates or more normalized rates, I should say, of ancillary penetration.

Very helpful thanks. I'll jump back in the queue.

Thank you. There are no additional questions waiting at this time. So I'd like to pass the conference back over to Andrew Masterman for any closing remarks. Please go ahead.

Yes, thank you, thank you Bailey. Once again, I want to thank everyone for participating in the call today and for your interest in BrightView. We look forward to speaking to you at upcoming events and when we report our first quarter results in February. Until then, stay safe, and be well.

This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.