Good morning and welcome to BrightView's 2020 First Fiscal Quarter Earnings Conference Call. As a reminder, this call is being recorded. The earnings press release is available on the company's website, investor.brightview.com. Additionally, the online webcast includes the presentation slides that will be referenced as part of today's discussion. Before we begin, the company would like to remind listeners that some of the comments made today, including responses to questions and information reflected in the presentation slides, will be forward-looking and actual results may differ materially from those projected. Please refer to the company's recent 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 the most directly comparable GAAP financial measures and other associated disclosures are contained in the earnings release on the company's website. Disclaimers on forward-looking statements and non-GAAP financial measures apply both to today's prepared remarks as well as the Q&A. This includes references on today's call to organic revenue within the Maintenance Services segment, which consists of underlying Commercial Landscaping revenue including snow removal services net of Managed Exits. The company believes that this measure provides a more complete understanding of the factors and trends affecting the business. Finally, unless otherwise stated, all references to quarterly, year-to-date or annual results or periods refer to our fiscal years ending September 30 in each respective year. Today, the company is presenting the unaudited results for the 3-month period ending December 31, 2019. I will now turn the call over to BrightView's CEO, Andrew Masterman. Please go ahead, sir.

Thank you, Jacob. Good morning, everyone, and thank you for joining us today. This morning, we are going to take you through our results for the first quarter of fiscal 2020 as well as provide an update on the key strategic initiatives that we remain sharply focused on. Turning to our executive summary on Slide 4. Today, we are reporting results for the first quarter of fiscal 2020. Total revenue grew 8.5% in the quarter versus the prior year period, underpinned by positive organic revenue growth in both of our operating segments. Revenue in our maintenance segment benefited from increased snow contracts and higher overall snowfall volume and our Strong-on-Strong M&A strategy, which continues to be a reliable and sustainable source of revenue growth for our company. These benefits more than offset the negative impact from the final tail of our Managed Exits strategy. Additionally, as expected, the Development Services segment delivered a second straight quarter of double-digit growth, again, demonstrating the robustness of its backlog, which is showing no signs of slowing down as we continue through fiscal 2020. These results represent the highest revenues ever generated in each segment during the fiscal first quarter. Adjusted EBITDA for the quarter showed positive growth and was largely in line with our guidance and expectations. As we exit the first fiscal quarter and look forward, we remain confident in our ability to deliver against the full year 2020 guidance of total revenues between $2.465 billion and $2.525 billion and adjusted EBITDA between $312 million and $320 million. The fundamentals of our business remain strong and our position in the industry continues to offer opportunities for us to capture. Additionally, as we look back on our quarterly adjusted EBITDA results over the last three years, we are encouraged. For the 12-month period ending December 31, 2018, we generated approximately $284 million of adjusted EBITDA. For the comparable 12-month period ending December 31, 2019, we generated approximately $307 million of adjusted EBITDA, up 8.1%. Assuming an average snowfall during the rest of 2020, we believe we can continue on this trajectory, which positions us to meet our guidance and continue driving shareholder value for our investors. Moving now to our 2020 first quarter results on Slide 5. Total revenue grew 8.5% in the quarter with both the maintenance and development segments delivering strong results driven by record revenues for our first fiscal quarter. First quarter revenue in the maintenance segment grew 6.7% versus last year, and this result included a 5.9% or $23.2 million incremental contribution from acquisitions as we benefited from the wraparound of M&A transactions completed in 2019 as well as recent deals completed during the first quarter. Excluding Managed Exits, organic revenues, inclusive of snow removal services, were up 1.2% or $4.9 million versus the prior year quarter. This was driven by expanding snow removal revenues, which were up $6 million, representing a 12.5% increase versus the prior year. Although snow removal services provided an overall favorable revenue tailwind, the cadence and geographies of how and where the snow materialized did not offer the most optimal margins. The markets that experienced the most snow, our Midwest and Rocky Mountain regions, are made up primarily of fixed-fee arrangements, which carry lower margins due to the fixed recurring nature of the business. Conversely, our Mid-Atlantic region, which operates under variable billing arrangements and carries higher margins due to the complexities of managing in a variable environment, experienced very little snowfall at all. Commercial Landscaping revenues in the quarter were down about $1 million; some of this was due to the impact increased snowfall had on our ability to complete ancillary projects in the seasonal markets and the winding down of some green contract work in our seasonal markets that will be offset as we ramp up in the spring. We expect the net impact of contract wins and losses to right-size and become positive when we begin servicing those new contracts later in the year during the green season. Also, we are absorbing the final, albeit small, quarterly impact of our Managed Exits strategy in this quarter. This is the final quarter that we will be reporting on this initiative. Lastly, the development segment maintained its strong momentum into 2020 with its highest first quarter revenue contribution ever. Revenues were up 13.7% versus the prior year quarter. We are pleased with the overall revenue growth profile for the quarter, and we continue to see momentum in both segments, not only in what we recognized in this quarter, but also in positive leading indicators for both businesses. New sales in the maintenance business are ahead of last year's strong pace and the backlog in our development business for the balance of fiscal 2020 remains robust. More on that in a minute. Turning to Slide 6. I want to provide a quick update on the critical investments we are making in technology and our team members. As you know, we have completed the rollout of our Electronic Time Capture in our development segment and are continuing to drive full utilization by our team members across the enterprise. The increased visibility provided by Electronic Time Capture is enabling our operational leadership to more effectively and efficiently manage our workforce. We have shifted into the next phase of further integrating the Salesforce CRM software into our business, and our account managers and other customer-facing team members are benefiting from the enhanced visibility into our current and prospective client base. Both the HOA Connect and BV Connect portals continue to receive favorable reviews from our customers as they experience the ease with which they can seamlessly communicate with BrightView on how to manage their properties and meet their needs using these proprietary digital channels. And finally, we have continued to invest in our decentralized sales team, which has grown from 180 at fiscal year-end to over 200 at this point in time. All of them are working directly with our branch-level leaders to locally source and validate new business opportunities in our high-touch industry. We are already seeing positive signs from this investment. As I mentioned earlier, maintenance new sales are ahead of last year's pace and in fact are the strongest results we've experienced over the last four years. This is evidence that the continued investment and redesign of our sales team is working. The team is producing more stable customer portfolios and stronger new business pipelines to support future growth in our underlying maintenance business. And as I mentioned in the past, new sales wins during the first half of the year are a strong indicator of how revenue will trend in the coming quarters, particularly during the green third and fourth fiscal quarters. Our ability to continue to invest in our people and industry-leading technology is a key differentiator and a benefit of the scale of BrightView. While we maintain a thoughtful and disciplined approach to how we utilize our capital, we are uniquely positioned in our industry to pursue multiple value-added investment opportunities that we believe will further enable our organic growth capabilities while continuing to drive long-term shareholder value. On Slide 7, we provide a similar recap as we have in the past of the companies that have joined BrightView through our Strong-on-Strong M&A strategy over the last three years. We reported last month the addition of two more talented teams along with their attractive customer portfolios. Summit Landscape Group, serving customers across the Carolinas and Nashville, Tennessee; and Signature Coast, serving customers in Northern California and Nevada. These transactions strengthen our presence in several attractive evergreen and seasonal markets. We are excited to welcome Mike, Steve and the entire Summit team consisting of 180 skilled landscapers to the BrightView family. Mike and Steve, along with their senior leaders, will remain with the business. We are also proud to welcome the 600 members of the Signature Coast team to BrightView. Signature Coast is a top 50 landscape services provider and the second largest acquisition we've made since the 2017 inception of our Strong-on-Strong acquisition strategy. Over the coming months and years, we will work with Kelly Solomon, along with other senior leaders from the organization, leveraging their talents to consolidate our strong position in these incredibly important evergreen markets. As the acquirer of choice in our industry, these acquisitions mark our 17th and 18th acquisitions since 2017, and we have learned a tremendous amount from every one of them. We have continued to evolve and enhance our integration approach with every acquisition based on what we've learned from the past. More specifically, we have started engaging with branch-level leadership earlier in the process to identify ways to accelerate growth, especially in attractive markets like Reno, Napa and Charleston, South Carolina. We've also started to accelerate our pace of integrating acquisitions into existing branches when we have an established presence in that geography. We are excited about our progress and plan to continue taking advantage of attractive opportunities such as the ones I just described to consolidate our fragmented industry, driving profitable long-term revenue growth for BrightView. Finally, before I turn the call over to John, I wanted to discuss another focus area of BrightView on Slide 8, which is our commitment to environmental sustainability, social responsibility and corporate governance, or ESG. Over the last few years, we have made significant strides in each of these areas to ensure that as the leader in the landscape industry, we are also on the forefront of commitment to ESG. These concepts are important to all stakeholders: the communities where we operate, our employees, our customers and our stockholders. As it relates to environmental sustainability, BrightView is a leader in the use of environmentally-responsible equipment and techniques, including zero-emission commercial lawnmowers, state-of-the-art water conservation technology and innovative landscape practices, such as green roof installations, LEED-certified landscape consulting, waste reduction programs and xeriscaping. BrightView is currently the nation's largest purchaser of zero-emission commercial landscaping equipment, and we've also been honored for helping clients conserve hundreds of millions of gallons of freshwater each year through innovative irrigation technology and design strategies. On the topic of social responsibility, we have been laser-focused in many areas, including diversity and inclusion in the workplace. This past quarter, we celebrated the second anniversary of an employee advocacy group for women at BrightView. The name of the group is GROW, which stands for Growth in Relationships and Opportunities for Women. Being an industry that is made up predominantly of males, I thought it was critical that we take the lead in changing this dynamic. GROW's mission is to advocate for the recruitment, retention and promotion of women at BrightView. GROW has grown from an idea to a group of hundreds of women across the enterprise actively participating to advance the mission. I'm personally involved in GROW and serve as the executive sponsor, along with Amanda Orders, BrightView's recently promoted Chief Human Resources Officer and Co-Founder of GROW. I congratulate the members of GROW on their second anniversary and look forward to continued progress in year three. On the heels of the success of GROW, we have just rolled out another internal employee support group that is focused on advocating for former members of our armed forces. BRAVO, which stands for BrightView Recognizing and Acknowledging Veteran Opportunities, will support the current and future members of the BrightView family that have bravely served and protected their country. The new group is in the early stages of assembly, but I look forward to continued progress and engagement with these team members. And finally, we at BrightView and our Board of Directors remain committed to driving a best-in-class corporate governance structure. This was evidenced by the appointment of two new independent directors during fiscal 2019. Half of our board now consists of independent directors, half of whom are women, and all of whom bring a wealth of executive-level leadership, experience and expertise from across a broad spectrum of industries. As we move forward, we will continue to work on identifying and pursuing areas of opportunity to lead the charge in all facets of the landscaping industry, especially ESG. I'll now turn it over to John, who will discuss our financial performance in greater detail.

Thanks, Andrew, and good morning to everyone. Let me start with a snapshot of our first quarter results on Slide 10. As you have already heard, total revenue for the company was up in the quarter on the back of increased snow removal revenues in the maintenance segment, a strong book of business in the development segment and the continued revenue contribution from our M&A activities. Our adjusted EBITDA totaled $51.7 million, up 3.2% versus the prior year. At the consolidated level, our results were right in line with our expectations for the quarter. We were able to deliver overall growth while funding additional investments that we believe will allow us to drive even stronger new sales results, improved client retention and further streamline our service delivery in the maintenance segment. Turning to the details on Slide 11. As I mentioned, total adjusted EBITDA for the first quarter of 2020 was up 3.2% at $51.7 million. This was driven by solid snow results, although muted in one of our historically strongest regions, momentum in our Development Services segment plus excellent management of corporate expenses. The maintenance segment's adjusted EBITDA declined by 2.1%, which led to a 100 basis point margin contraction versus the prior year quarter in this segment. This decline in profitability was primarily driven by higher SG&A spend in this segment related to the timing of certain variable compensation expenses as well as the increased people and technology investments mentioned earlier. These two factors amounted to approximately $3.5 million of headwind in the quarter. Additionally, while overall we experienced higher snow volumes year-over-year, the profitability contribution from snow was not enough to fully offset the cost of this investment. Due to the lower snowfall realized in the Mid-Atlantic region, which is generally a higher margin book of business for BrightView, profitability in the development segment grew roughly in line with revenue with adjusted EBITDA up 12.4% versus the prior year quarter. The segment's margin of 12.5% was down 10 basis points from the prior year due to timing of certain variable compensation expenses in the quarter. To partially offset the increased maintenance SG&A spend, we implemented several initiatives to reduce centralized costs. As a result, corporate expenses were $0.5 million lower versus the prior year quarter and represented 2.6% of revenue, down 40 basis points as a percentage of revenue. Let's take a look at our capital expenditures and capital allocation on Slide 12. Net capital expenditures for the quarter were $13.5 million representing 2.4% of revenue, which is in line with our expectations and our long-term framework. As you may recall, we saw an uptick in capital expenditures in the second half of fiscal 2019 driven by some opportunistic investments as well as some accelerated purchasing to prepare for the snow season. We are now seeing those spend levels come back in line with our longer-term targets. Net debt decreased $6.3 million compared to the prior year quarter. Our leverage ratio for the quarter was 3.8x compared with our prior year Q1 leverage ratio of 4.1x. We are pleased with this result. And as stated previously, with our adjusted EBITDA guidance range and improved cash generation, we expect our leverage ratio to be at or below 3.5x by the end of fiscal 2020. Before I turn the call back over to Andrew, let me reiterate a message he conveyed earlier in the call. With first quarter results in line with our expectations and the continued marketplace opportunity ahead of us, we remain confident in our ability to deliver against the full year 2020 guidance we shared on our last call. On Slide 13, you'll see a recap of what we shared on that call. We believe we are on track to deliver total revenue between $2.465 billion and $2.525 billion, adjusted EBITDA between $312 million and $320 million and net capital expenditures between 2.5% and 3% of revenues. Our assumptions are for the maintenance segment to grow organically between 1% and 3%, the development segment to grow between 1% and 2% and acquisitions to deliver at least $60 million in realized revenue, including about $30 million of wraparound from 2019. Our guidance range for total revenue and adjusted EBITDA contemplates average snow removal revenue for the rest of 2020. Finally, our improved cash generation should continue to support our M&A strategy while also allowing us to reduce our leverage to 3.5x or lower by the end of fiscal 2020. With that, I'll turn the call back over to Andrew.

Thank you, John. Turning now to Slide 15. Overall, we are pleased with our first quarter results. We were able to continue delivering top and bottom line growth and remain encouraged by many of the underlying positive trends that we are seeing in both of our segments. Our new sales in the maintenance segment are the highest they've ever been and as I mentioned in the past, represent a strong indicator of how revenue will trend in the upcoming quarters. Development Services delivered a second straight quarter of double-digit growth with a backlog that shows no signs of slowing down through fiscal 2020. And we were able to deliver overall adjusted EBITDA growth while increasing our investments in field-based sales and operations leadership to drive even stronger new sales results, improved client retention and further streamline our service delivery in the maintenance segment. Additionally, our M&A pipeline shows no signs of slowing down and has delivered a reliable source of growth for three years running. We are excited about our progress and plan to continue taking advantage of attractive opportunities to consolidate our fragmented industry and drive profitable long-term growth for BrightView. Thank you for your interest in BrightView and for your attention this morning. We will now open the call for your questions.

We will now open the call for questions. We have a question from Judah Sokel.

Just wanted to ask a question about M&A. I know the guidance is still for the same $60 million in fiscal 2020 despite making these two skilled acquisitions. I assume that's because you were already incorporating these two deals in the previous guidance, knowing that they were in the pipeline. But maybe just help us think through the math. You mentioned $30 million of wraparound and now it looks like you made a couple of deals. I would have thought that that would have brought us above an incremental $30 million to really bring us above that $60 million, well above $60 million. So maybe help us think through the math of the contribution you had from previous deals as well as these new deals, please?

Sure, Judah. When we look at what we've been able to accomplish with the four deals that we've been able to do since the beginning of the quarter, yes, you're right. During the earnings call last time, we had already known about two of those four deals. But that being said, we do believe there is some upside in the overall revenue from M&A with these deals we've already completed. It's just as we look at the entire picture, and we still have the uncertainties around the ancillary flow-through as we get into the second quarter, we'll be able to give an update on that on the next call. In addition, when it comes to the full year outlook for the company, the reality there still is the remaining second quarter and the snow removal services, which we have to understand what those are through the second quarter before we can give an overall update to the impact holistically.

Understood. Just one other quick question as far as development organic revenue growth is concerned. You've now had two straight quarters of double-digit organic revenues in development, yet the guidance is still for 1% to 2% for the full year. So maybe help us understand why that is going to slow down so materially. It sounds like the pipeline is fairly strong. So just trying to understand the cadence of organic revenue growth in development.

Sure. The organic revenue growth continues and the pipeline remains strong for development. We're not fully booked for the entire year yet, although there are very strong indications about bookings pace. That being said, the first quarter, we expect this quarter to be the highest revenue growth quarter for the development segment throughout the whole year given what we see going forward. As we continue to layer in and book for development over the next several months, as we get into May, we'll be able to give you a better feeling. As you know, development is a project-based business. Overall, given the breadth and the size we are, it does provide a fairly stable level of revenue growth, and we'll be able to give better visibility as we complete bookings. We should be more or less complete with our bookings profile into 2020 within the next several months.

We have a question from Hamzah Mazari.

This is Mario Cortellacci filling in for Hamzah. I'm just curious about the investment in sales and operational leadership. I didn't know if that was to retain some talent. We know there's some tightness in the labor market on the field side; I just don't know if you're also seeing it on the management side. And lastly, could you give us an idea of what you're thinking about or what you're looking at for wage inflation in 2020?

Yes, Mario. I'll talk about the degradation in the quarter on the maintenance margins first and then answer your other questions. We reported 100 basis points of degradation in margin. I want to be very clear that those were deliberate decisions focused on the SG&A side. We added the additional field headcount and operational resources in addition to technology to support that sales force through CRM. That was the main driver of that 100 basis point degradation. The other piece was timing and better snow performance on our incentive compensation. And then as we talked about M&A, when they first come in, they're lower from a margin standpoint versus our process of 12 to 24 months to getting them up to our level. So that was a smaller piece of that walk. As far as the labor side, we really haven't seen anything different as far as wage inflation. We factored in our modeling 4% to 5%. That's what we've consistently seen. We've been able to manage that, I think, quite well. And I think the other telling thing in the quarter that's not as evident is if you look at our gross profit in the quarter, which we disclosed, we're essentially flat year-to-year. And I think that's a testament to our ability to continue to focus on pricing and other efficiencies and productivities to offset any labor inflation.

Great. And just one more, and I'll turn it over. What we're seeing in other sectors and other roll-up stories is that there's some urgency from sellers, specifically private or smaller businesses, to get deals done before the election due to unknown tax consequences. I just didn't know if you're seeing the same thing in the landscaping industry.

Over the last several years, we've seen a fairly robust M&A pipeline. I can't say that it has dramatically changed one way or another. I can say that we continue to see a very strong pipeline, and we are engaged at any given time with a dozen companies across the country that are potentially looking at joining BrightView. Our discipline is that we are looking at strong companies with our Strong-on-Strong strategy, and we'll continue to be disciplined. But I would say there's really no dramatic change in the quality or size of the pipeline that we see.

We have a question from Kevin McVeigh.

Given the strength on the development side, I wonder if you can revisit for us the sensitivity on development and how that ultimately translates into maintenance in terms of the sensitivity from a revenue perspective? And then from a margin perspective, do you think we'll continue to see the same historical deltas? Or do you see any narrowing of those margin trends within maintenance as opposed to development?

On development, we see continued strength across the business. We actually see projects in most major metropolitan areas since we have 25 branches across the country. We expect the revenue side for development to be fairly steady and not coming down; we are looking at projects that extend into 2021 and 2022. Conversion from development into maintenance historically happens roughly 20% to 25% of the time. The customers are often different—development customers are generally contractors and maintenance customers tend to be property managers or owners—so the nature of the transaction is different. That being said, the handoff provides a good pipeline of opportunity for our maintenance group.

And the margins—do you expect the historical spread between maintenance and development margins to continue or to narrow over time?

Kevin, we still expect to see differentiation in those margins. They are different types of businesses with different cost structures and gross margin profiles. Historically we've seen segmentation in the EBITDA margins of maintenance versus development, and we don't expect that to change in the near term or materially in the foreseeable future.

Super. And then just real quick on the snowfall. Can you remind us what the difference is in terms of margin on fixed contracts versus variable, and what the mix is overall?

We don't break out snow margins specifically. Generally, in high-snow areas—Boston, Detroit, Chicago, Denver—those tend to have fixed-fee arrangements which carry lower margins because they're predictable and recurring. In less predictable areas like Washington, D.C., Baltimore, the Mid-Atlantic and some southern regions, pricing is more variable and can carry higher margins when snow occurs because of the variable billing model. In periods where it doesn't snow much, you carry extra fixed costs; when it does snow, those variable markets can be advantageous because of how we deploy labor.

Got it. And did that factor into the decision earlier in the year to increase in-sourcing?

In some ways, yes. In our fixed-fee markets we have a predictable revenue stream, which allows us to build a team that provides more stability for the labor force and enables us to deploy those employees into both predictable fixed-fee arrangements and into the main season.

We have a question from Andrew Wittmann.

I'm going to go back to the revenue guidance question. You said at least on the revenue side there could be some upside. Previously you talked about $30 million of wrap from last year, and at the last conference call you also said there's $20 million already factored in that you'd closed for this year, so you only had a $10 million hole to fill. Since then you've had two acquisitions, one of which looks pretty big. Based on headcount alone these two could deliver somewhere around $50 million of annual revenue which implies about $40 million this year—more than the $10 million gap. So why isn't revenue substantially higher or coming in above plan?

Andrew, you're right in your analysis regarding the acquisitions and their expected revenue contribution; we would expect the deals to contribute $20 million plus relative to where we're sitting. However, when it comes to the overall company outlook we still need to see how snow revenues materialize in the second quarter. If snow revenues come in at our average forecast for 2020, as we move into May we would expect to look at positive movement on overall revenue. We will provide more clarity as we enter the May period.

Okay, that's helpful. And then regarding margins—John, the $3.5 million you called out for investments, does that fully explain the maintenance segment's margin? On a go-forward basis, will these investments remain in the base and therefore keep margins pressured, or when will we start seeing margin lift as the investments are absorbed?

Great question. As we reiterated our full year guidance, that's the starting point. This quarter's impact will be the highest of the year. There will be impacts in future quarters, but as revenue grows those impacts will be to a lesser degree. This was all contemplated in our full year guidance. Historically, we've said the second half of the year would be stronger than the first half. Snow in the second quarter is harder to predict. Once we get into the green quarters in the back half of the year, we expect to see some improvement. Any headwind we might expect would be related to M&A timing; historically, acquired businesses come in at lower margins and over 12 to 24 months we add 300 to 400 basis points to them. I wouldn't expect a different cadence this year. This quarter was the largest impact and it was a deliberate decision, which we think is the right thing to do.

Our next question comes from George Tong.

Your landscape maintenance revenue this quarter was impacted by lower ancillary sales and the wind down of certain contracts. Can you elaborate on these headwinds and specific initiatives you have to reaccelerate organic growth in landscape maintenance?

When it comes to maintenance organic growth, we had positive snow contract growth that was offset somewhat by timing. The seasonal segment saw some contracts wind down before replacements ramped up, which caused a relatively small gap. Additionally, the early start to the snow season in October and November limited our ability to complete ancillary projects that were on the books. We believe as we enter the busy green season latent demand will resurface, and with the increased salesforce we have hired, we should start seeing incremental growth above last year. The sales investment will have an impact in 2020 and an even bigger impact in 2021.

Got it. That's helpful. And with respect to margins, can you confirm if you're reiterating your guidance of EBITDA margin expansion of 10 to 30 basis points in fiscal 2020 and discuss the puts and takes or where within this range you might land?

We have reconfirmed our guidance on revenue and EBITDA. Our long-term objective remains to deliver incremental margin improvement of 10 to 30 basis points. We believe the second half of the year will be stronger than the first half assuming normal weather. We are investing in things that bode well for the business long term, such as the maturing sales team and retention initiatives. Risks include unfavorable weather and labor. On the plus side, we have a maturing sales team and new CRM investments that are in the early days but promising. Hiving the maintenance business into three discrete leadership functions allows us to hone in on drivers of profitability and growth.

One thing that could put pressure on margins is that the companies we're acquiring, like Signature Coast and Summit, are great businesses but may come in at slightly lower margins than our corporate average. Over time we integrate and improve margins, but these additions might apply a modest near-term margin headwind. We'll have a better view of the overall impact as we get more clarity in our May and August calls.

Our next question comes from Shlomo Rosenbaum.

There's been a decent amount of investment into sales resources and leadership. Where do you see this going in terms of a normalized organic level? We saw 1.2% this quarter. With the investment momentum, what's a realistic expectation for where this business can get to? Given where we are in the economic cycle, where should we think about this business going?

If you look at the industry, it grows roughly 1% to 1.5% per IBIS and other sources. I believe we can grow at double that rate—meaning 2% to 3%—given our scale and investments. Last year we didn't achieve that, but this year I believe the sales team and our retention efforts will get us to the 2% to 3% range. New salespeople take time to ramp—typically nine to twelve months—so the impact increases over time. I'm optimistic we can outperform the industry growth rate and that continued investment will drive that outcome.

Okay. John, how should we think about free cash flow this year? Any changes versus what you talked about last quarter? Can you walk through how to think about EBITDA to free cash flow this year?

I don't see material changes. Assuming normal weather and hitting our guidance of $312 million to $320 million of adjusted EBITDA, we remain on track. Capital expenditures are where we planned; we had a good first quarter and we're scrutinizing spend. We had talked about approximately $70 million of net capital expenditures for the year. Working capital assumed a use of about $20 million in our guidance; that ebbs and flows with the business mix. Interest is being managed well. Cash taxes were discussed at about $35 million for fiscal 2020. Nonrecurring items were a little higher in Q1 due to M&A and some IT infrastructure costs for CRM and an estimating tool. If you do the math with nonrecurring around $15 million, you'd get free cash flow in the $100 million to $110 million range. We are not changing that guidance.

There was a sizable receivable from a project that didn't occur last year. Any update on that flowing through into this year?

A lot of it is timing in the development business. Maintenance working capital is strong—less than 10%—while development is higher due to GC payment terms like 'paid when paid.' The development timing and ramp-up caused the receivable, but we expect it to unwind over the year. We have factored that into our full-year working capital guidance, but we are working aggressively to collect those amounts, which could be upside to our guidance.

Great. And was the incentive compensation in the quarter a factor in development coming in strong? Is that where you're seeing it more?

Exactly. Incentive compensation was more pronounced on the development side given their strength in the first half of the year; it was a smaller factor on maintenance, which was driven by snow.

Our next question comes from Tim Mulrooney.

Regarding contract renewals, I think you're about two months into your renewal season for the seasonal markets. Can you help frame how the renewal process is going this year and what pricing improvements you're targeting?

You're right—renewals typically run from early December through the end of April, with the heavy activity in March and into mid-April for the start-up season. Things are trending a little better than last year in terms of pace; we're confident we will achieve if not beat last year's renewal and retention rates. Pricing-wise, we're targeting similar levels to prior years. We see the same inflationary pressures as the industry and expect to achieve pricing in the 2% range on average—somewhere between 2% to 4% depending on the client—to cover primarily labor inflation.

Okay. Maybe I'll ask you again next quarter how April and May went.

Yes, that's right. By May we should have a clear picture of renewal and retention outcomes from the seasonal markets.

Our next question comes from Seth Weber.

It's Gunnar Hansen on for Seth. A lot of questions have been answered already, but going back to the maintenance segment margins, John, can you clarify—are the incremental costs in the quarter more one-time, or are they recurring investments in technology and people that will stay in the base?

Let me reiterate: the impact in the quarter was driven by investment in additional sales force headcount to get to over 200 people and the technology to support them—mainly CRM. This quarter's impact will be the highest of the year. There will be impacts in future quarters, but they will be smaller as revenue grows. All of this was factored into our full year guidance. The incentive comp timing was more tied to development and increased snow, and M&A timing has an expected impact when deals close. We don't expect these investments to be a showstopper for the full year.

Okay. On the sensitivity around Q2 snow revenue, what is the standard baseline average snowfall that you use for planning? Ten-year, 30-year average? What's the baseline you're using?

We look at 10- and 30-year averages for planning. Over the last two years, second quarter snow revenues were very consistent, but earlier years show variability—e.g., fiscal 2017 was much lower. There's inherent variability and it's too early in the quarter to call. We'll provide more detail on the second quarter call when we have clarity.

Regarding the business development hires, how have more mature personnel performed and how are new hires ramping? What are the expectations for this group of roughly 200 people?

We won't disclose individual salesperson targets. New hires don't sell at the same rate as tenured reps initially; they are supported by regional sales leaders and take about nine to twelve months to fully ramp. So the first-year impact is smaller, with more substantive contribution into the second year. We team new reps with experienced leaders to accelerate ramp and we expect the full benefit to be more visible in 2021.

How much white space is there to add more salespeople? Are you early innings?

The industry is roughly a $70 billion maintenance and snow removal market. Given that opportunity and our strategic focus on top MSAs and sub-tier markets, there is significant white space to continue hiring salespeople. Our current pace—adding about 10% new salespeople in the last quarter and targeting steady growth for the rest of the year—is digestible. We can continue a high single-digit expansion of the salesforce for the foreseeable future.

Thank you, everyone, for dialing in. Are there any other closing comments or remarks from the speakers or presenters?

Yes. Once again, I want to thank everyone for participating in the call and for your interest in BrightView. We look forward to speaking with everybody over the course of the quarter as well as when we report our second quarter of fiscal 2020 results in early May. Have a great day and we look forward to speaking with you soon.

Thank you, everyone, for joining today's conference. You may now disconnect at this time.