BrightView Holdings, Inc. (BV) Q3 2026 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to today's BrightView Earnings call. [Operator Instructions] Please note this call may be recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Mr. Chris Stoczko, Vice President of Finance and Investor Relations. Please go ahead, sir.

Good morning, and thank you for joining BrightView's Third Quarter 2026 Earnings Call. Dale Asplund, BrightView's President and Chief Executive Officer; and Brett Urban, Chief Financial Officer, are on the call. I will now refer you to Slide 2 of our presentation, which contains our safe harbor disclaimer. Our presentation includes forward-looking statements subject to risks and uncertainties. In addition, during today's call, we will refer to certain non-GAAP financial measures. Please see our press release and 8-K issued yesterday for a reconciliation of these measures. With that, I'll now turn the call over to Dale.

Thank you, Chris, and good morning, everyone. Our third quarter results reflect the continued progress of our ongoing transformation. The investments we've made in our employees, customer service and operational excellence are translating into stronger operational performance and positioning BrightView for long-term success. The underlying fundamentals of our business continue to improve, and we are well positioned to deliver sustainable, profitable growth over the long term. Q3 marked our second consecutive quarter of organic Land Maintenance revenue growth, with revenue increasing 2.3% year-over-year. This performance was underpinned by another quarter of growth in our land contract book of business, which has now grown 4% from Q2 2025 and represents a 100 basis point improvement over the prior quarter. Growth in our contract book provides increased visibility into the trajectory of our highly resilient and predictable land maintenance business. During the quarter, we experienced 2 nonroutine expenses related items impacting our profitability. The first, as discussed on our last call, was heightened fuel costs. We are happy that we were able to offset a portion of that through mitigating efforts, which I will discuss in a few minutes. Secondly, as we continue to solidify the foundation of the business and position it for the long term, we have made the prudent decision to take a nonroutine self-insurance adjustment, which Brett will talk about in more detail shortly. The basis of this adjustment is heavily weighted towards the adverse development of claims prior to 2024, and by addressing these issues now, this allows us to close out lingering claims that mask some of the progress we have been making. Encouragingly, if you exclude the impact of the prior year self-insurance adjustment, our business was able to largely offset the noncomparable fuel headwinds while continuing to invest in our sales force. Before moving on, I'd like to take a moment to remind everyone that we continue to focus on managing this business for the long term. We have a resilient business model that is poised for sustained growth. The intense focus our team have on delivering best-in-class service to improve customer retention, coupled with our continued investment into our sales force, will continue to build momentum in our Land Maintenance business, which is why we are reaffirming our previously raised land revenue guidance of 2% to 3%. Our outlook remains strong, and these efforts support sustainable, profitable top line growth in both the near and long term, driving meaningful shareholder value and positioning BrightView as the investment of choice. Turning to Slide 5. We continue to drive year-over-year improvement in both frontline turnover and customer retention in the quarter, with frontline turnover coming down about 7 percentage points and customer retention improving about 250 basis points versus the previous year. Our transformation strategy is underpinned by investing in our employees, by focusing on safety, providing industry-leading benefits and delivering consistent service hours. We've differentiated BrightView as the employer of choice. This has reduced turnover, enabling us to reinvest savings back into the business and continue strengthening our competitive advantage. Lower employee turnover translates into more consistent service, delivering and quality of care for our customers, driving higher retention and supporting sustained growth in our contract book of business. We remain focused on managing this business for the long term. The recent macroeconomic pressures that have driven fuel prices higher does not change that approach. Our commitment to our customers or our view of the long-term outlook of this company. We made the deliberate decision not to implement short-term fuel surcharges on existing contracts, and our priority remains preserving long-term customer partnerships rather than reacting to what we believe are temporary cost headwinds. As you can see on Slide 6, this strategy has delivered meaningful progress across our branch network, though there still is significant room for improvement. We've shown this slide in prior quarters using different retention quartiles with the bottom tier below 70% and the top tier above 90%. As we continue to improve performance across the portfolio, our expectations have positively evolved. Our focus is now on branches below 75% retention while we're increasingly looking to replicate the best practices of branches delivering greater than 95% retention. Typically, our branches grow when they achieve mid-80% plus retention. And in 2024, just 40% of our branches were above this level, while only 5% of our branches were in the top quartile. Now over half of our branches are above 85% retention, and we continue to reduce the number of underperforming branches, shifting a higher number of branches to our top quartile. The momentum we built gives us confidence in our strategy, but we believe there is still significant runway to improve as we continue transforming BrightView. This is why we remain disciplined in our approach, keeping our customer at the center of everything we do rather than reacting to short-term pressures. We believe long-term customer relationships are built through consistency and our customers know why they can count on BrightView to deliver for them in any economic environment. Turning to Slide 7. We continue to emphasize the importance higher customer retention has on the ability to grow our Land business. Looking at the chart on the right-hand side of the slide, you can see that branches with 95% plus retention are growing north of 10% on a trailing 12-month basis and branches with 85% to 95% retention are growing on average 6 percentage. Conversely, branches with less than 75% retention are shrinking 10% on average. We continue to evaluate those branches and have actively made changes over the past several quarters, which is why we believe there is still plenty of runway to drive overall company retention to 90-plus percent. As previously mentioned, our focus remains on continuing to move our underperforming branches into the upper quartiles as retention truly is a key catalyst for driving sustainable profitable growth in the mid- to upper single digits in 2027 and beyond. Moving to Slide 8. We delivered another quarter of positive net new business, our fifth consecutive quarter since accelerating our sales force expansion in the second half of 2025. The equation at the top of the page captures the simple formula behind our growth, higher customer retention, plus a larger and more productive sales force drives growing net new sales, expands our contract book and ultimately fuels revenue growth. As shown in the chart on the left, we're seeing the benefit of the 2 key drivers of our growth strategy coming together. Continued improvements in customer retention, combined with a growing and increasingly productive sales force have driven positive net new sales and 4% growth in our contract book of business since the second half of 2025. The third quarter also represents the highest net new results since the start of my tenure at BrightView. This growing contract book continues to translate into top line results. With approximately 1 point of Land Maintenance revenue growth in the first half of the year and 2.3% growth in the third quarter. Looking at the components of that growth, contract revenue increased 3%, reflecting the growth in our contract book reported in the previous quarter. Ancillary revenue grew about 2% as we look to balance price with customer acceptance. The progress we're making in improving the underlying drivers of our contract book positions us to continue growing Land revenue in both the near and long term. On to Slide 9. We continue to build momentum in our sales organization. As of the end of the third quarter, we have hired an incremental 200 net new sellers versus the end of 2024. As a reminder, this includes a mix of new business sellers responsible for going out and finding new Land Maintenance contracts and customer-facing sellers who focus on selling ancillary work to both existing customers and customers outside our base. Our first cohort of sellers have now reached the 1-year mark, and we are seeing an acceleration in new contract sales, now up approximately 20% year-to-date versus the same time last year. As previously mentioned, this continues to feed the top of the funnel, and our contract book of business has grown for 5 consecutive quarters, translating to top line growth in our Land business. Turning to Slide 10. I'd like to spend a few minutes discussing the impact of elevated fuel prices during the quarter as they had an adverse effect on results. But we partially mitigated by a few proactive measures we took to reduce consumption and drive efficiency in our business. First, let's set the stage on the left. Back at our Q2 call in May, we disclosed that April fuel prices were about $1 higher than they were the previous year. And we said if that trend were to continue the entire quarter, we'd see about a $4.5 million impact on the P&L. During May, we continued to see increasing levels of fuel prices. And during the month of June, they began to come down, all of it still at a higher level than the previous year. All told, our fuel prices averaged about $1 higher than the third quarter of 2025. So as expected, elevated fuel prices created a headwind to our bottom line during the quarter, but our teams took proactive steps to mitigate a portion of the impact. We placed significant focus on reducing fuel consumption by leveraging route-based technology to improve daily scheduling and reduce idle time, while also benefiting from the continued refresh of our fleet with newer, more fuel-efficient vehicles. Together, these initiatives reduced fuel consumption by 10% even as revenue has grown compared to the prior year. We placed significant focus on reducing fuel consumption by leveraging route-based technology to improve daily scheduling and reduced idle time, while also benefiting from the continued refresh of our fleet with newer, more fuel-effective vehicles. Together, these initiatives reduced fuel consumption by 10% even as revenue has grown compared to the prior year. We also continue to utilize our fuel application to direct drivers to the lowest cost fueling location, helping us manage fuel costs across our branch network. In addition, as mentioned on the last call, we proactively hedged a portion of our fuel needs, which provided a benefit as elevated fuel prices persisted throughout the quarter. Collectively, these actions reduced our fuel headwinds by approximately $2 million in the third quarter, and we expect them to remain important tools for managing fuel volatility going forward. As previously noted, we have the ability to price ancillary daily, but continue to make sure we are balancing customer acceptance with market prices. We continue to manage this business for the long term and remain focused on building lasting customer relationships. The actions we've taken and will continue taking to mitigate elevated fuel prices allow us to navigate these transitional headwinds. We believe that a customer-first approach supports stronger retention, continued growth in our contract book and ultimately sustained Land growth over the long term. As I wrap up on Slide 11, I think it's worth taking a step back to recognize how far we've come over the last few years. Our focus in 2024 and 2025 was on solidifying the foundation of our business by prioritizing our frontline employees, delivering best-in-class customer service and unlocking our size and scale as the industry's largest commercial landscaper. This strategy has delivered meaningful improvements in employee turnover, customer retention and margin expansion since the end of fiscal 2023. With that foundation in place, we accelerated investments in our sales force in the second half of 2025 and remain committed to our initial plan of adding an incremental 500 sellers. Along with continued improvements in customer retention, our sales force is the engine that will power top line growth. And we're already beginning to see the returns on those investments with 2 consecutive quarters of organic Land Maintenance revenue growth. By continuing to expand our sales organization, we believe we're well positioned to deliver profitable top line growth in both the near and long term, creating meaningful value for our shareholders. Before I hand the call over to Brett, I'd like to thank our 18,000-plus employees for their continued dedication and hard work. This quarter presented challenges as we asked them to drive operational efficiencies across our business while navigating a more complex macroeconomic environment, and they rose to the occasion. Their unwavering dedication to our customers and consistent service delivery reinforces our position as the provider of choice. I also want to assure you that the self-insurance adjustment we took in the quarter was nonroutine and is not something that should be viewed as reoccurring in nature. We continue building on the foundation we've established. It's this customer-first mindset and commitment to operational excellence that gives us confidence in BrightView's long-term future. With that, I'll now turn the call over to Brett. Brett?

Thank you, Dale, and good morning, everyone. Our third quarter results demonstrate the continued momentum we're building across the business with improvement in our contract book driving a second consecutive quarter of Land Maintenance revenue growth. While we experienced headwinds from elevated fuel costs and a nonroutine self-insurance adjustment during the quarter, our underlying results reflect the strength of our business and the progress we're making against our strategic priorities. As Dale mentioned, we are hyper-focused on the long-term success of the business and the actions we're taking today position BrightView to deliver sustainable, profitable top line growth for years to come. With that, let's turn to Slide 13 to discuss top line results in the quarter. Total revenue was $718 million, representing a 1.3% increase driven by Land revenue growth, partially offset by a decline in snow revenue. Land Maintenance continued to be a key driver of our performance during the quarter, increasing 2.3% year-over-year and marking the second consecutive quarter of growth. This was driven by continued expansion of our contract book and growth in our ancillary business. The highly resilient and recurring nature of this segment gives us confidence in its ability to continue delivering profitable growth through the fourth quarter of 2026 and well beyond. Development revenue increased modestly in the quarter, reflecting the return of some previously delayed projects. This rebound signals the long-term stability of this business, even though backlog and timing of projects can be choppy. Moving to Slide 14. We would have achieved another quarter of adjusted EBITDA growth, excluding fuel headwinds and a nonroutine self-insurance adjustment, which I'll touch on in greater detail on the next slide. Excluding these nonroutine costs, EBITDA would have been $116 million at a margin of 16.2%. This would have represented an increase of $3 million and 20 basis points of margin expansion versus the prior period as we drive efficiencies in the business, realize incremental flow-through from growing Land revenue and continue to invest in our sales resources. As Dale touched on earlier, fuel expense was a headwind in the quarter as continued macroeconomic uncertainty drove prices higher than the third quarter of 2025. While we were able to mitigate some of this impact through operational efficiencies and hedges, we experienced a $4 million headwind in the quarter related to elevated fuel costs. We also recorded a $16 million adjustment related to self-insurance expenses in the quarter. After all said and done, our reported adjusted EBITDA was $96 million at a margin of 13.3%. Let's turn to Slide 15 to discuss the self-insurance adjustment recorded in the quarter, why it occurred and what we have done to mitigate potential impacts going forward. For context, the self-insurance we are discussing today represents costs related to general liability, workers' compensation, automobile and health insurance. I would first like to state that this is a nonroutine expense, and we would not expect this to reoccur in future periods. Since Dale started in 2024, we have relentlessly focused on our employee-first culture, including outfitting all employees with quality PPE, including a proper pair of reliable and safe work boots. Additionally, we have offered employee wellness programs and PTO to ensure they have the time and affordability to get to a doctor. Additionally, we have upgraded our fleet of vehicles, which now boast new safety technologies, and we also outfitted our vehicles with two-way cameras to assist with safe driving and insurance claim protections. This safety culture has resulted in 25% less claims since 2023 and has seen sequential improvements in lowering claims from 2024 to 2025 and again from 2025 to 2026. This culture and the subsequent lowering of claims through safer behavior will have a positive impact on our insurance costs over the long term. To specifically address the $16 million adjustment in the quarter, with our new internal insurance leadership and partnering with our new actuary, we are resolving new claims more timely. And more importantly, we are being prudent in closing out the older claims before they can continue to develop. A large portion of the $16 million adjustment was ongoing adverse development from prior period claims, specifically from 2023 and prior years when claims went unresolved and developed adversely over time. This development negatively impacted total cost of these claims by approximately 20%. I'm happy to report at the end of Q3, we have now closed over 85% of these 2023 and prior year claims. A smaller portion of the $16 million adjustment is to ensure we can finalize the closeout of the remaining 2023 and prior year claims. These programs involve numerous claims across many years and the longer these claims remain outstanding, the more difficult it would be to predict adverse development and ultimately the final costs. We have been able to close out 50% more claims year-to-date 2026 versus prior year, and we are aggressively resolving claims specifically from prior years before these become a more significant issue. Let's now turn to Slide 16 for our updated 2026 guidance, where we are reaffirming our Land revenue guidance that we raised in May. Total revenue is now expected to be in the range of $2.75 billion to $2.78 billion, representing a 3.5% increase at the midpoint versus 2025. The land revenue assumption is unchanged at 2% to 3% growth for the year, while the updated development assumption reflects similar levels of growth as in the third quarter. Moving to adjusted EBITDA. We are revising our guidance to reflect the impact of elevated fuel costs in the back half of the year as well as the nonroutine self-insurance adjustment we took during Q3. This guide reflects the assumption that fuel headwinds will persist through the rest of this fiscal year. I'd like to remind everyone that excluding the impacts of higher fuel costs and the self-insurance adjustment, our adjusted EBITDA guidance would be approximately $365 million to $370 million, within the guided range we reaffirmed back in May and would have represented another record year of adjusted EBITDA. We also updated our adjusted free cash flow guidance to $70 million to $80 million to reflect the impact on EBITDA from headwinds in fuel and the nonroutine self-insurance adjustment. Turning to Slide 17. I'd like to cover the steps we've taken to reinforce our balance sheet and further strengthen our financial flexibility. During the quarter, we extended all 3 of our debt tranches. As discussed on our last call, during the month of May, we extended our revolving credit facility. Subsequent to this extension, we extended both our AR facility and our term loan in June. An important item to note and a testament to the strength of our balance sheet and the recent transformational success of the business, while extending the term loan, we received more than 2x the amount of financial commitments towards this extension. These transactions not only extend the maturities of our debt tranches, but they also provide an additional $100 million of capacity to support future liquidity needs. Moving to Slide 18 to wrap up. I'd like to remind everyone of the tremendous progress we've made since the implementation of our One BrightView strategy. After experiencing several years of organic Land revenue declines, EBITDA contraction and margin erosion following our IPO, we refocused the business on breaking down silos, localizing our sales force, leveraging our scale, refreshing our fleet, investing in our employees and delivering a better experience for our customers. This has resulted in a return to Land revenue growth, EBITDA growth and continued margin expansion. After adjusting for the headwinds related to fuel and self-insurance, our guidance implies about $70 million in EBITDA growth and 300 basis points of margin expansion since 2023. This success, combined with the continued strength we're seeing in our underlying operating metrics, reinforces my confidence in the trajectory of our business and our ability to deliver sustainable, profitable top line growth and meaningful long-term value for our shareholders. With that, I'll turn the call back over to Dale.

Thanks, Brett. Before we turn to questions, I'd like to reiterate that our trajectory remains strong, and we are on track to deliver upon our long-term targets despite the headwinds we experienced this quarter. These results are underpinned by the continued progress we have made in employee turnover, customer retention, operational excellence and sales force execution. Our path remains undeterred, and this is made possible by our people who are at the center of everything we do and the driving force behind our transformation. And I am increasingly encouraged by our underlying results and our ability to deliver in the long term. With that, operator, you can open the call up for questions.

[Operator Instructions] We'll go first this morning to Scott Schneeberger of Oppenheimer.

A lot to discuss, I'd like to hone in on Land Maintenance. Fifth consecutive quarter of contract book growth, second consecutive quarter revenue growth. A lot of momentum here into the end of the year. Anything we should be thinking about specifically in the fourth quarter, good or bad as maintained guidance, it looks like you're probably trending pretty well against that. And how should we think, I guess, Dale, about how it may flow into next year given ancillary is growing, you're building the sales force and you have a lot of momentum. Just curious the trickle over looking into the out quarters.

Yes. Thanks, Scott. Great question. I think it's something we've been pushing towards for the last several years, getting that momentum, which I think is the word that best describes what you're asking, the momentum of continuing to build our book of business so we can drive land maintenance, not just in the current quarter, but for many quarters to come. You heard me say in my script that the Land book of business that we continue to show growth in, which is now up 4% over the last 4 -- 5 quarters, is the key lever to making that predictable land revenue as we go. In Q4, as we note in the investor deck on Slide 23, we see somewhere between 3% and 6% land growth in Q4 as we see the momentum continue to flow through with that book of business that we've grown entering the quarter. And Scott, I would say barring anything crazy, we continue to see that momentum into 2027 and beyond. That business, as I said, is very predictable as we manage that book of business. So I think what we're seeing in Q4 in the updated guidance that we're giving is going to probably repeat itself as we go into 2027. But Brett, do you want to add to that?

Yes, Scott, great question. I think momentum is the key word there. As Dale said several times, the momentum is building. It's what we've been working on since One BrightView launched at the beginning of 2024 and taking care of our employees to take care of our customers and driving the customer retention rate to where it is now. And what we did last year was adding our first cohort of sellers in Q3 of 2025 is now starting to pay dividends in that contract book in 2026. And I'll just add some context to the sequential momentum we're seeing in the Land business. As you think about Q1 and Q2, we said on last call, just to remind everybody, we had about a $6 million shift of Land revenue out of Q1 into Q2, just given timing of snowfall. But if you normalize for that and you kind of think about the sequential quarters of growth, Q1 '26 Land business shrunk about 1%. But then in Q2, when you normalize for that $6 million, it grew 2%. And now in Q3, the Land business is growing 2.5%, and we're guiding in Q4 somewhere between 3% and 6%. So that sequential momentum is building as you think about not only in Q4, but what's ahead of us in 2027 and beyond.

We go next now to Bob Labick with CJS Securities.

I want to start with kind of just to dig a little deeper on the fuel and pricing. And on the May call, you said you discussed you didn't want to kind of instantly jack up fuel surcharges. And today, you reiterated the reasoning because long-term customer relationships are far more important than short-term transient costs. And all of that makes sense. So I kind of want to look forward. And could you talk about contract pricing? What happens on annual renewals as it relates to fuel and other expenses? And when are annual renewals typically in your book of business?

Yes. Great topic, Bob. Thanks for the question. So yes, we still believe, as I said in my script many times, we're managing this business for the long term. And we've seen that develop with our continued progress with our growth in retention now at 84.6% as reported in the quarter. And with that amount of retention, we will see annual renewals come into play in 2 different time periods, mainly. Number one is in our southern markets that have more annual landscape needs. We see those contracts come up for renewal towards the end of the calendar year, call it, in Q4 of the calendar year, October through December, where people go more on a renewal cycle. In the northern markets, that we see more of the weather-related business, the seasonal markets, we typically will see those contracts come in for renewal March and April time frame. We do sell work all year long. So we are out there constantly looking at renewals throughout the year, but the primary 2 periods that we're going to see the opportunity to renew contracts are going to be Q4 calendar year and then once again as we get to the spring. So that -- it's a great topic because I think all that we've done to service our customers better, everything we've heard from our customers, the work we've done to not implement a short-term fuel surcharge, we'll communicate with them as we go through 2027 to make sure they understand some of these headwinds. And we are still optimistic as many people are, as we all see in the news every day, that fuel could back off at any time. And we did see a little bit of that in early July, and then we've seen it bounce up a little more. But it's going to continue to bounce around. And we just want to make sure everything we're doing for our customers is about putting them at the center of what we're doing. But Brett, what do you want to add?

No, I would agree, Bob. Big opportunity next year in pricing, as Dale mentioned, those 2 time periods. But Dale and I have the pleasure today to take this call from our Salt Lake City branch. And we're sitting here in Utah and we get to see several stretch and flexes in the morning in our teams dispatch. And as you think about taking care of our employees and taking care of our customers, just seeing the efficiency we're getting from our new fleet as they roll out of our yards and seeing the teams operate with new route-based technology, trying to get them the most efficient route to their jobs and using fuel applications, for example, on this topic to get to the most efficient gas stations. So as we talk about it, we see it in the results, and we're able to mitigate things we can control, about 30% of the fuel impact in the quarter. It is great to see it firsthand as we sit here today in Salt Lake and really see the crews rolled out using all this new technology and becoming more efficient as we speak.

We'll go next now to Andy Wittmann with Baird.

Great. I guess I wanted to build a little bit more on the first question that was asked. And I understand here that you've got your -- I guess, on Slide 23 here, you've got your outlook for the fourth quarter. You talked about the momentum. The 3% low end of Land growth seems realistic given the organic growth rate that you put up this quarter and you've got the benefit of the sellers maturing and all of that. But the 6% seems like a pretty big number, but you kept it in the range, Dale. So I'm trying to understand like what needs to happen for that to be in play? Is that just like the difference in ancillary and you need a big ancillary year to pick up? It's just trying to understand why that number is still in play for you guys.

Yes. Look, I think it's a great question, Andy. I think, yes, it's going to come down to the ancillary levels that we can get here in Q4. Obviously, our Q4 is our second largest land quarter that we're going to see Q3 being our largest. And ancillary is a big part of that. We showed that ancillary trailed a little bit behind the contract book growth being up 2% versus the 3%. But what I will say and not trying to give any inter-quarter guidance, but I would say, as we saw fuel prices come down, we did see an uptick in our customers' acceptance early in July. So I think it's all going to come down to how hard we're willing to pull the lever, Andy, on the price we get as we build in the fuel costs and how willing we are to take more volume. We want to partner with our customers and drive ancillary. And depending on where ancillary finishes, that could easily get us up to 6% or it could keep us at the low end of 3%. So you are absolutely right. Our contract book, very predictable, and we've seen that. We updated you that we've now grown that 4% over the last 5 quarters and our ancillary is the part, the customers are going to make that decision as our account managers are out talking to them every day. So that is exactly right, and that could easily swing and the difference between getting in the quarter, call it, 3% to 6%, whether we grow ancillary again 2% or whether we grow at 5% in the quarter.

Andy, I would just add, we continue to say we feel very confident in the trajectory of the business and the long-term goals that we set forth in our Investor Day 1.5 years ago in February '25, where we've laid out '27 growth at somewhere between a range of 3% to 6% in Land. And we continue to build the momentum in the book, as Dale mentioned, and obviously, ancillary is an attachment to that book. But we continue to look long term and focus on the long-term trajectory of the business. And we feel great about the goals we laid out in Investor Day, especially when it comes to a Land growth perspective. So that momentum is building as we continue to use that word. And ancillary could be a lever up and down here in Q4, whether it's you get to the 3% to 4% range or you get more ancillary and you get to the 5% to 6% range. But we still feel great about the long-term growth goals we've set for that Land business.

Okay. Just a quick follow-up here, Brett. Just on cash flow here. We heard your explanation for the reduction in fuel prices and cash payments on the insurance settlement. So I understand that's the case for your updated '26 guide. But as we look forward to '27, obviously, fuel is anyone's guess and all of us here on the buy side and the sell side are going to be wrestling with what do we do with your profit margins on the fuel assumption. But like -- I mean, does the '27 free cash flow guidance then kind of look more like the -- I guess, you'd call it the old '26 guidance because you don't have the big impact from the insurance settlements or -- and then hopefully presumably get a little bit of growth. I think if you could just comment a little bit on how 2027 could play out from a cash flow perspective? I think that would be helpful for everyone.

Yes, absolutely. And I'll comment as much as I can here in Q3, we're -- obviously, on our next call in November, we'll give 2027 guidance for both revenue, profitability and cash flow. If you think about cash flow, look, our original guide was $100 million to $115 million, about 30% free cash flow conversion. This business is a highly generative cash business, it can be once we get through the refreshing of the fleet, which we do expect to take another step down in capital next year. So that will add more free cash flow conversion as we think about that CapEx coming back down the end of the bell curve. And as we try to put on Slide 18, the new jump-off point isn't the $340 million to $345 million. It's something like $365 million to $370 million when you normalize for these noncomparable nonroutine items. So -- and we put a '27 bar out there that you can look is higher than that number. So you think about more operating income coming in the business, less CapEx in the business, I think you're going to see BrightView really start to shine when it comes to free cash flow generation starting next year. Still a little bit of fleet refresh to go in '27, but you're really going to start to see that cash flow conversion tick up. And then we're going to get to a much higher pace than that as you think about '28, '29 CapEx returns to normal levels, which is really 3.5%, 4% of revenue, somewhere in that range. The other thing I would just add there because obviously, very proud of this in the quarter. We've also added a significant amount of liquidity to the business. We added $100 million additional liquidity by extending and amending our 3 debt tranches. That's also in the presentation we put forward. And it just gives the business the financial flexibility with no long-term maturities now in your sight to continue to invest in the business, whether it's that final year of fleet refresh in '27 or continue to invest in our sales force, continue to invest in our employees, continue to invest in technology, et cetera. So we feel great where the balance sheet is heading, and we do expect cash flow conversion to be higher next year.

We'll go next now to Greg Palm with Craig-Hallum.

If I'm doing my math right and I add back some of those items that are more, call it, nonrecurring in nature, I think the flow-through on Land Maintenance was actually quite good in the quarter. So I wonder if you can confirm that. And just -- I don't know, as we think about next year, just give us some sense on what that might look like if we assume this sort of mid-single-digit growth rate sort of continues or if that's the right growth rate next year?

Yes. Look, I think we are happy with the flow-through, Greg. There's a lot of moving pieces in the quarter on the revenue bridge that we gave you on Slide 13. And we specifically carved out, as everybody knows, as we went through the first 6 months, snow was a huge benefit to us. So we did see a little bit of noise in the quarter on snow, and we pointed that out with a $3 million headwind from some credits we wrote customers. But when I really look at development, we're at our team in Salt Lake, like Brett said, one of our best development branches. And our development group, despite having $1 million of incremental revenue, had solid flow-through on that with a couple of million dollars of benefit. And on the Land side, this is probably the more optimistic part. We've always said we're targeting somewhere around 20% to 22% flow-through. We saw roughly 25% flow-through in that Land revenue. So the $12 million incremental revenue, Greg, produced roughly $3 million of incremental EBITDA. So look, we had some nonroutine items that hit us in the quarter, and Brett covered those in his script, and we believe they are absolutely not something that we're worried about repeating next year. We had to get all lingering claims behind us, and I think we've taken the prudent actions to get that behind us so we can truly reflect all the progress we're making in the business. We have made our employees safer. We've given them better vehicles. We are doing a much better job with our sales organization to put indemnification language that makes sense in contracts. So we limit our liabilities. So I am fully confident, Greg, that what we get through here in Q3, by the time we come out in November and let everybody know what 2027 looks like, we are once again returning to margin expansion and long-term profitable growth, and we are 100% committed to finding a way to make sure we hit those 2030 goals that we keep reminding everybody out there. And that goes to Andy's last question. That includes getting free cash flow conversion to 40-plus percent over the next 3 to 4 years. So all positive that we're moving on. Brett, do you want to add anything?

Nothing to add, Greg, great question. I would just reiterate the fact that what Dale said, we saw some noise in snow that was really offset by some favorable job closeouts and development. But as you think about the long-term health of the business and not only revenue growth but margin expansion, we've always said Land is going to come through at 20% plus margin flow-through. And we saw a number more like 25% in Q3. So that just gives us even more confidence as we look towards our long-term goals that not only is that Land growth going to continue, but that margin and that flow-through is going to come with it.

We'll go next now to Stephanie Moore with Jefferies.

I have -- I guess my first question, I appreciate the commentary that you provided and the momentum you're seeing on the organic growth front in Land and the path from low to mid-single-digit growth. One follow-up, though. Can you talk about the makeup of the new business? Are you seeing growth on the contractual side? Is it more so ancillary side? I'm just trying to get a sense of the overall stickiness of that Land growth and some of the gains you're seeing? And then my second question actually is on the development side. Could you talk a little bit about how that development pipeline has increased and what you think it takes to convert from pipeline to actual go-live on those projects? So 2 there.

Great, Stephanie. Thanks. Yes. Look, I think where we see the most upside right now continues to be in that book of business growth on the contract side. I mentioned and Andy brought up what would need to be true to get to the high end of that Q4 range, which we said is going to be the choppiness on the ancillary side. Ancillary is something that we're pricing every day, and that does have the fluctuation that can occur as we get more aggressive in pricing or we can get less aggressive if we see things like commodities or fuel prices come down. But I would tell you, if you really look at what's building that momentum, it's definitely on the contract side. And when we talked about all the investments we've made and we continue to make in our sales organization, adding 200 sellers like we note on Slide 9. What that's done is driven our new sales contract volume up 20% year-to-date. So you just -- you put more into the top of the funnel with more new sales, and we keep driving retention and lose less out the bottom, it's just going to have a great multiple effect as we continue to build that contract book. And yes, ancillary will be choppy. We'll see the gives and takes of that throughout the year. But the good news is, like I said, early July, we actually saw some benefits as fuel pulled back and our customers were more willing to spend on that discretionary spend. So short term, we continue to push on that contract book. Long term, we believe both levers are going to keep coming. And I remind everybody, the longer we partner with a customer, this is why retention is so critical. The longer we partner with a customer, the more they'll spend with us on ancillary. Typically, in year 1, they spend about 25% of their contract value on ancillary. By year 4 and 5, they're spending 50% to 60%. So we continue to believe partnering for the long term is key. Ancillary will ebb and flow just like development is doing. But at the end of the day, it's going to drive long-term growth. Look, you asked about development. What are we seeing in development? My teams in development, like I said earlier, I'm sitting in Salt Lake City with one of my best teams, and it's been a great conversation this week as I've spent time with them. We have numerous quotes out there right now on the street. Like ancillary, customers might be a little hesitant to sign, but they are very optimistic of what they're going to be booking over the next 4 to 5 months. So I would tell you, we've seen a lot of opportunity on some very big jobs. We have some pretty good paper out there right now, but I think the guys are getting more conversations happening about getting those contracts signed. So I see like we saw in the third quarter, continued momentum in development, just like we've started building in the Land side as we go through Q4 and into 2027 to get that business once again returning to growth. But Brett, do you want to add anything?

Yes. Just to add a couple of math points maybe on this. As you think about the Land business and the contract business on Page 8, and Stephanie, we said this publicly out of the $1.7 billion Land Maintenance business, it's about 2/3 contract, 1/3 ancillary. You kind of do rough math on the contract, leaves with $1.150 billion of contract revenue. And if you look at over the last 5 quarters, the contract book growing 4%, you do some math on that, that's roughly $40 million to $45 million of growth in that contract book. It may be a quarter or so lag as it works its way into the P&L. But that 3% growth we announced last quarter, which is now 4% of the contract book resulted on Page 8 in the bottom right corner of the chart, 3% of contract revenue in the P&L. So we're seeing the math come through the P&L from a growth rate perspective in the Land business, and we expect that to continue, as Dale mentioned. And then on the development side of things, we're controlling the things we can control. It is a little bit of a choppy business. This quarter was -- showed some slight growth. We are implying and guiding next quarter to show some more growth. But as you think about that business, we've mentioned our cold start initiative. Last quarter, we said we had 6 cold starts open and operating, meaning they've sold business. It doesn't necessarily mean they put it in the ground yet and we realize the revenue, but they're building the backlog. We've added 2 more cold starts here in Q3. So now we're up to 8 new branches open in development to have sold and booked revenue and will eventually make its way through the P&L. So we're excited about that initiative as well.

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

This is Zack Pacheco on for Jeff. Last quarter, you guys talked about how the accelerated pace of new hires, new sales hires could potentially weigh on back half margins. Any way to quantify if this margin impact occurred during the quarter and maybe if it's meaningful in future quarters?

Yes. I think -- so I would go to Slide 14 of the investor deck that we have, and you can see the impact right there. We note that we had $4 million of headwind by the adding of sellers Zack. So if you actually look at the deck, this is down a little bit from the $6 million we had last quarter as we start lapping the resources we added last year. But we're trying to be 100% transparent for you to make sure every quarter, you get a lot of visibility into exactly how much we're spending because this is an investment in the future. And when we see the continued sales growth volume we get and the continued retention benefit, it's a double win for us. But Brett, do you want to add?

Yes. I would just add that it's been about 60 bps in the quarter, right, the $4 million and $718 million, so 60 bps of margin impact from making those sales investments, absolutely the right thing to do for the long-term health of the business, as we've been saying for several quarters. And year-to-date, the first 2 quarters were $6 million each, that's $12 million. And you add the $4 million for Q3, that's [ $16 million ] a total. So far that we've invested year-to-date is $16 million on revenue of about $1.97 billion. So it's about an 80 basis point impact, Zack, as you think about the year-to-date impact on margins. Again, absolutely the right thing to do for the long-term health of the business.

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

I had a question on the seller additions to the development business and the sales curve that you gave or the productivity run rate for the Land contract business was really helpful to understanding how revenue could ramp as you add new sellers. So I'm wondering if you could provide something similar on the development side, like what a typical productivity run rate looks like for a new development seller?

Yes. Look, great question, Ryan. What I would say is, I would say they take a little longer to get up to speed is the ability for a development seller, but they usually partner with our experienced branch managers, and that helps them get up to speed. When we bid development work, it's a much longer pipeline. It's relationships usually with general contractors, and we're getting in at the early stages on the project. So lots of times, the jobs they start working on, they might actually not come to contracts for 2 years, but it's about making sure they're building a pipeline. That's why when we talked about opening those 10 cold starts and getting a nice pipeline out there and getting people quoted. The work that you're putting out to the bid for the development team, yes, it takes longer for them, but they're much, much bigger projects. So our development group is out there selling work that's anywhere from, call it, $2 million to $3 million all the way up to $20 million to $30 million. So longer pipeline to get them up to selling and closing deals, but it's usually a much bigger when they hit that hurdle, it has a much bigger impact on the business. But Brett, do you want to add anything?

No, I think that's well said. It is a longer lead time for these projects are bigger in nature. They could be multimillion dollars over a long period of time. We do disclose our remaining performance obligation metric. That's the reason why because some of these are lasting more than a year. Now I would just mention and reiterate and said this before, we believe we have by far the best development group of branch managers out there in the business, a lot of experience and tenure. We've set up a great mentor program for our cold start initiatives. So when we do open up new branches and we add new sellers to the business that they have an experienced and tenured development branch manager to help them hit the ground running. So we've done that as well. And yes, I think as we get into future quarters and we start to see some of these bigger projects land from our investments in development, we'll be transparent like we always are and share those success.

Yes. Real quick, Ryan, let me try to give you some detail. We have added resources on the sales side. In fact, if you look at over the same time period, we've added 10 resources in our development group for new sellers. So that probably gives you a little more specific. So it's up 10 different people that we've got in our branches across the country to help us get new business. And they partner so close with our branch leadership because like we said, with our estimating team, with our selling team and our branch leadership team, it's truly a group effort to get those big projects that, that team focuses on, and they do a great job doing it. So we've added some people to be out in the street. But more importantly, I think we've added resources for estimating and we've added the branches to help us be at more locations to provide more input to some of these GCs. So momentum we're seeing every day.

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

Thank you, operator. Look, I want to close today by reminding everybody that our transformation continues to get momentum. We built a strong foundation at BrightView by bringing the organization together, unlocking our size and scale and making disciplined investment in our people, customer service and the sales organization. The progress we're seeing across key metrics like Land Maintenance growth, contract book and customer retention, employee turnover continue to provide benefits to the company. As we look ahead, we'll remain well positioned to build on these foundations, and we continue to be optimistic about the future. So with that, operator, you can now end the call.

Thank you, Mr. Asplund, and thank you, Mr. Urban. Again, ladies and gentlemen, that will conclude today's BrightView Third Quarter Earnings Conference Call. We'd like to thank you all so much for joining us this morning, and wish you all a great day. Goodbye.