Good morning, and welcome to BrightView's 2020 Second Fiscal Quarter Earnings Conference Call. As a reminder, this call is being recorded. Operator provided instructions on how to ask questions. The earnings press release is available on the company's website, investor.brightview.com. Additionally, the online website includes the presentation slides that will be referenced as part of today's discussion and a downloadable copy is also available online. I will now turn the call over to BrightView's Vice President of Investor Relations, John Shave. Please go ahead.

Thank you, operator, and good morning. Before we begin, I 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 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. Reconciliation 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. Finally, unless otherwise stated, all references to quarterly, year-to-date or annual results or periods refer to our fiscal years ending September 30th in each respective year. Today, the company is presenting the unaudited results for the three-month and six-month period ended March 31, 2020. Now, I will turn the call over to BrightView's CEO, Andrew Masterman.

Thank you, John, and welcome to the BrightView team. Good morning, everyone, and thank you for joining us today. This morning, we look forward to providing you with an update on our response to COVID-19 and initial Q3 observations, all building off of our pre-release from April 23rd, 2020. We will also review our current financial results and progress regarding our Strong-on-Strong M&A strategy. Turning to Slide 4. Before we discuss our results, we first wanted to express our thoughts to those impacted by the COVID-19 outbreak. We are extremely grateful for first responders and healthcare professionals, each of whom bear the greatest burden. We are thankful for all essential workers. And throughout virtually the entire country, landscape maintenance is recognized as an essential service as defined by the Department of Homeland Security. We continue to work with all jurisdictions to ensure our dedicated workers can provide these essential services to our customers. And at this time, all branches are operational. However, in Boston, New York City and San Francisco, there are certain limitations as to the scope of services we can provide. That said, I must acknowledge that keeping our employees, their families and our customers safe is our number one priority. I truly believe our differentiated focus on safety and consistent excellence in service delivery is shining through at this difficult time. In response to COVID-19, we have been quick to act from both a health and safety and business continuity perspective. In early March, we began proactively communicating critical information from the CDC to all employees while implementing branch-based hygiene and sanitization operating procedures and social distancing protocols. In our development business, team members continue to report directly to the job site. In the maintenance business, many of our team members now also report directly to the job site. And for those reporting to the branch, we have reduced the number of workers at dispatch per truck from five to two. We have reduced our crew size to no more than five, and those five members remain as a team to ensure we don't mix crews. We're also further utilizing technology to maintain our customer touch points, prohibiting non-essential travel and supporting a work-from-home policy as applicable. As a testament to the safety protocols established and employed by our team, as of today, we have 67 positive infections against an employee population of more than 21,000. For those affected, we have done our best to be supportive by assigning internal caseworkers with daily check-ins and launching paid sick leaves. Furthermore, we voluntarily quarantined over 1,000 team members that have been potentially exposed, and to-date approximately 850 of those team members have tested negative and have returned to work, and their cases have been closed. One infection is one too many, and we continue to diligently track potential cases and exposure and as we deliver consistent excellence in service to our customers, keeping our employees and their families safe continues to be our number one priority. Moving now to Slide 5. In addition to health and safety, we have been laser-focused on business continuity for the benefit of all stakeholders. Companywide, we are undertaking prudent actions to navigate through the uncertain times ahead, while moving quickly on opportunities to protect revenue and margins to preserve cash. And as a precautionary measure, we tapped a portion of our bank lines and have also frozen salaries, deferred discretionary merit increases and have suspended 401(k) matching contributions for all employees. In addition, our independent Board members have elected to be paid exclusively in stock. Other discretionary spending such as travel and entertainment and capital expenditures have been limited. We have a healthy and diverse mix of customers and projects, and we continue to aggressively pursue public works projects and accelerate our bid output across all segments. And depending on the severity and duration of the pandemic, we are preparing additional mitigation and cost strategies if needed. At the branch level, we are developing plans focused on people, equipment and other spending measures that can be rapidly implemented. Most importantly, our senior leadership team has an average of 17 years experience in the industry, and have the benefit of having navigated difficult cycles in the past. We will meet this challenge head up. To that point and for historical reference, during the financial crisis in the late 2000s, our maintenance revenue experienced modest declines driven primarily by a reduction in ancillary revenue. Going forward, we anticipate ancillary softness in most markets, and this impact will be higher among hospitality and retail customers. Fortunately, across all regions of the country, our largest vertical, homeowners associations has shown to be a stabilizing factor in the business. The stay-at-home orders have highlighted the importance of our services to the millions of residents who live in communities maintained by BrightView. So much though that we have received many thank you notes and appreciation posters from people of all ages across the United States. We are proud to be this calming force. Our development segment saw a greater impact during the 2000's financial crisis. And since then, we have successfully taken proactive measures to ensure our project mix would be more resilient in recessionary environments. In 2008, our private-public mix of work was 80% private and 20% public, and we had higher exposure to new home builders. Fast forward to 2020, we've almost doubled our public work mix, which tends to be more resilient, and our exposure to new homebuilders has significantly reduced. As a result, we are much better diversified, and our development backlog remains strong. We could be hampered by delays from subcontractors ahead of us being slowed down. But ultimately, as jurisdictions continue to reopen their economies and projects are brought back to speed, we anticipate delivering on a more normalized work cycle. In April, we continue to operate as an essential business with our branches open and servicing customers. We are trending to an overall revenue decline of mid-single digits for the quarter and continue to operate under the premise that similar trends will continue in the near-term. As mentioned earlier, we have taken multiple spending reduction actions, which should significantly realign our cost structure to revenue softness. We also anticipate continued improvement as overall economic activity accelerates, and we remain focused on maintaining business continuity while protecting our financial strength, liquidity and flexibility. In addition, revenue from acquisitions will help to offset any organic weakness. Turning to Slide 6. Today, we are reporting results for the second quarter of fiscal 2020. Total revenue of $559.1 million was a decline of 6.3%, exclusively driven by historically low snowfall. In terms of profitability, we generated adjusted EBITDA in the second quarter of $38.9 million versus $61.1 million in the prior year. Assuming an average snowfall during the second quarter, we would have continued on a positive trajectory from an adjusted EBITDA perspective. While we saw solid growth in our snow contracts during the quarter, snow revenues declined $89 million or 46.5% versus the prior year due to the historically low snowfall in the East Coast. For the three months ended March 31st, 2020, snowfall across our branch network was approximately 43% of the historical 10-year average versus approximately 86% of the historical 10-year average for the prior year period. Given that we are largely able to provide snow services with our existing fixed cost structure, the variable decremental impact of the lost snow revenue, particularly given the geographies impacted, was about 30% or roughly a $27 million headwind to the adjusted EBITDA in the quarter. Without this headwind, we believe fiscal Q2 adjusted EBITDA would have been approximately $65.9 million versus the $61.1 million of adjusted EBITDA in prior year quarter. Keep in mind, snow margin is driven by many factors, including when, where, how much and how often it snows and will change every year. Organic land growth in the quarter was 1.9%, and development services growth was 15.8%, both of which are the strongest since our IPO. We posted over $29 million in M&A revenue. Unfortunately, the significant lack of snowfall in many of our key regions had a measurable impact on our revenue and earnings. Given the averages, we expect next year to show significant revenue and earnings growth and return to the total growth trajectory we have posted over the past several years. Turning to Slide 7. We completed three strategic acquisitions during the quarter, Summit Landscape Group, Signature Coast and 4 Seasons Landscape. These transactions strengthen our presence in several strategic markets where our Strong-on-Strong M&A strategy continues to be a reliable and sustainable source of growth. We are excited to welcome the entire Summit team, consisting of 180 skilled landscapers. Summit has set itself apart across the Carolinas and has built a strong reputation among its clients for providing each of them with a comprehensive suite of landscaping services. The acquisition is strategic to BrightView as it provides an opportunity to expand our footprint in the growing Charlotte market. Summit is also complementary to our existing footprints in Hilton Head, Charleston and Nashville, and has an attractive client mix of both homeowners associations and commercial accounts. We are also proud to welcome the 600 members of the Signature Coast team. Signature Coast is a top 50 landscape services provider with a diverse client portfolio. The acquisition is the second largest we've made since the 2017 inception of our Strong-on-Strong acquisition strategy. With the addition of Signature Coast, we have increased our density in the strategically critical Northern California region, and it solidifies our position in Reno, Nevada, another regional growth market in the West. Lastly, we're delighted to welcome 4 Seasons and more than 150 new skilled team members into the BrightView family. BrightView and 4 Seasons have shared values toward our customers and employees, and this acquisition further strengthens our position in the attractive Atlanta market. Over the coming months and years, we look forward to working with these organizations to leverage their talents to consolidate our position in these important evergreen markets. As the acquirer of choice in our industry, these acquisitions mark our 17th, 18th and 19th since January 2017, and we learned a tremendous amount from every one of them. We have continued to evolve and enhance our integration approach with each acquisition based on what we've learned from the past. More specifically, we engaged with branch level leadership early in the process to identify ways to accelerate growth, especially in attractive markets like Reno, Napa and Charleston. We've also started to accelerate our pace of integrating acquisitions with existing branches when we have an established presence in that geography. Additionally, our acquisition pipeline remains robust with many near-term opportunities representing over $300 million. That being said, we do not expect to close any deals during fiscal Q3. Over the previous few years, we've witnessed valuation creep, and the current environment could create opportunities in more favorable terms and conditions for us during the second half of calendar 2020. We will continue our aggressive but disciplined approach against our attractive pipeline as we seek market expansion and new market entry. We are excited about our progress and plan to continue taking advantage of these opportunities, such as the ones I just described, to consolidate our fragmented industry, driving profitable long-term revenue growth. Now, I'll turn it over to John, who will discuss our financial performance in greater detail.

Thank you, Andrew, and good morning to everyone. First, our heart goes out to the communities and individuals, including healthcare workers and first responders, most deeply hit by the pandemic. Much has changed over the past few months as our country continues to respond to the COVID-19 outbreak. As a result of the current economic uncertainty, including the unknowable severity and duration of the pandemic, we issued a pre-release and withdrew our full year 2020 guidance on April 23rd. Our focus remains on serving our customers and caring for our teams as we navigate this current environment. Now let me provide you with a snapshot of our second quarter results on Slide 9. Total revenue for the company declined 6.3% to $559.1 million, driven by a significant decrease in snow removal services. Maintenance Segment revenue of $416.2 million for the three months ended March 31st, 2020, decreased by $57.1 million, while revenues from snow removal services were $102.5 million, a decrease of $89 million over the 2019 period. Maintenance land revenue of $313.7 million represented an increase of 11.3% compared to the prior year of $281.8 million. The increase in maintenance land was driven by solid revenue contribution of $26.6 million from acquired businesses as well as $5.3 million or 1.9% of maintenance land organic growth, which was the strongest since our IPO. Investments in people and technology to support our sales and account manager teams are enhancing customer relationships and driving both organic growth and strong cash generation. For the three months ended March 31st, 2020, we realized continued robust growth and margin accretion in the Development Segment. Revenues were $143.6 million, an increase of $19.6 million or 15.8% compared to the 2019 period. The continued strong booking pipeline drove growth in this segment. Turning to the details on Slide 10. Total adjusted EBITDA for the second quarter of 2020 was $38.9 million. The negative variance was largely driven by the decremental margins due to the lower snow revenue, which would normally better leverage our fixed cost base during the snow season and a modest increase in SG&A cost to drive new business and increase customer retention. Helping to offset the decrease was continued solid growth in the Development Segment combined with improved efficiencies and cost containment. The Maintenance Segment's adjusted EBITDA declined by 36.6% to $41.2 million, which led to a 380 basis point margin contraction versus the prior year quarter in the segment. This decline in profitability was primarily driven by significantly lower snow removal revenues, especially due to the historically lower snowfall in the Mid-Atlantic and Northeast regions, which are both typically higher margin geographies for BrightView. In the Development Segment, as a result of higher project volumes and productivity improvements, adjusted EBITDA increased 24.5% to $13.7 million for the quarter. The segment's margin increased 60 basis points to 9.5%, driven by increased productivities and efficiencies. Corporate expenses for the fiscal second quarter were up $1.1 million, representing 2.9% of revenue. This was principally due to the timing of certain expenses, which we expect will normalize over the fiscal year. Now let me provide you with a snapshot of our first half fiscal year 2020 results on Slide 11. Total revenue for the company increased 0.6% to $1.13 billion. In the Maintenance Segment, first half revenues were $835.1 million, a $30.7 million decline or 3.5% versus 2019. Key drivers were an $85.6 million decline in first half snow revenue, offset by positive underlying land organic growth of 0.7% and solid revenue contribution of $52.2 million from acquired businesses. In the Development Segment, a strong project pipeline drove robust growth as revenues increased 14.7% to $296.4 million compared to $258.4 million in the prior period. Total adjusted EBITDA for the first half of the fiscal year was $90.5 million compared to $111.2 million in the prior year. The Maintenance Segment's adjusted EBITDA declined by 21.8% to $88.9 million compared to $113.7 million in the prior year due principally to the significant decline in snow removal services mentioned earlier. As a result of higher project volumes and productivity improvements, adjusted EBITDA for the Development Segment increased 16.7% to $32.8 million for the first half of fiscal 2020. Corporate expenses were up slightly for the six months, essentially in line with our expectations and reflective of the timing of certain expenses. Let's move now to our balance sheet and capital allocation on Slide 12. Capital expenditures totaled $35.1 million in the first half of fiscal 2020, down from $42.6 million in the first half of fiscal 2019. Net capital expenditures as a percentage of revenue was 2.9% in the first half of fiscal 2020, down from 3.5% in the prior year. We remain diligently focused on capital expenditures as we continue implementing prudent actions to preserve cash and increase our productivity. Our leverage ratio was 4.1 times at the end of the second quarter of fiscal 2020 versus 4 times at the end of the second quarter and the prior year. In the first half of fiscal year 2020, we generated $53.3 million of free cash flow. That compared favorably to $25.1 million in the prior year and was principally due to the lower capital expenditures and our continued focus on net working capital, specifically accounts receivable and inventory. We also operate a self-insurance program for workers' compensation, general liability, auto liability and our employee healthcare programs. As we navigate the uncertainty of this current environment, we will continue to assess the efficacy of these programs to ensure our reserves remain adequate and our balance sheet remains strong. As we look to the future, let me review our liquidity profile on Slide 13. At the end of fiscal Q2, we had $124 million of availability under our revolver, $23.5 million of availability under our receivables financing agreement and $88 million of cash on hand on the balance sheet. Total liquidity as of March 31, 2020, was $235.5 million. As of May 6, 2020, our total liquidity was $230.9 million. This decline is driven by a reduction of $13.5 million in our receivables financing agreement, driven by aggressive AR collections, offset by an increase of $8.9 million in our cash balance to $96.9 million. We also have flexible and covenant like credit facilities with the following maturities: our receivables financing agreement matures in February of 2022; our revolver matures in August of 2023; and our term loan matures in August of 2025. Additionally, we have completed downside analyses and are confident that we have ample liquidity and cash on hand to not only run BrightView effectively, but to also maintain our focus on paying down debt and continuing our accretive M&A strategy. With that, I'll turn the call back over to Andrew.

Thanks, John. Now turning to Slide 15. I want to emphasize what we believe are six key market dynamics. First, we are pleased with our second quarter results and the organic growth trajectory. Second, looking forward, fiscal Q3 total revenue is trending down in the mid-single digits due to COVID-related impacts. Third, across the enterprise, including hospitality and retail, base contract maintenance services remained steady at about 97% of pre-COVID levels. Fourth, we are experiencing softness in ancillary services within maintenance and project delays in development. We are uncertain as to the overall impact in Q3 and the total fiscal year. Fifth, we continue to provide basic, although reduced, maintenance services to hospitality and retail customers, which represent approximately 10% of our contract base. These are the highest COVID-impacted verticals. Finally, we are seeing resiliency in our two largest verticals, homeowners associations and commercial, which are experiencing considerable stability. The fundamentals of our business and our industry remains strong. Our sales and marketing strategies and structure are our formula for long-term success, and our continued investments in field-based sales and operations leadership will drive stronger new sales and result in improved client retention, while further streamlining our service delivery. The investment and expansion of our sales team, combined with targeted regional efforts in digital marketing, have grown our sales opportunity pipeline to its highest level in the company's history. Over time, this enhanced and robust pipeline should support organic growth well ahead of industry avenues. The investments we have made in technology to support our operations, our customers and our leaders have provided us with the tools to further differentiate ourselves, leading to improved customer satisfaction and stronger financial results. As a result, the strategic initiatives we have been implementing will help us navigate this unprecedented environment. Additionally, our M&A pipeline shows no sign of slowing down and has delivered a reliable source of growth for three years running. We plan on taking advantage of our attractive pipeline of opportunities, utilizing our strong cash position and liquidity to continue to consolidate our fragmented industry. I would also like to personally thank all of our dedicated employees, families and partners for their resiliency and dedication during these challenging times. Over 21,000 people in BrightView come to work every day to make sure the living assets in which we live, work and play are safe and beautiful. We entered this crisis in a position of strength and expect to exit it even stronger. Although we are mindful of the challenging macro trends and forecasts, we are optimistic about our prospects to drive profitable growth for the long-term. Thank you for your interest in BrightView and for your attention this morning. We will now open the call for your questions.

Operator provided instructions on how to ask questions. Your first question comes from Judah Sokel from JPMorgan. Your line is open.

Hi. Good morning. Thank you for taking my questions. My first question was about the roughly 5% decline, or more precisely the mid-single-digit decline you said you were trending toward for the next quarter. I appreciate the visibility; could you help unpack that mid-single-digit figure? How much of it is due to COVID and how much would you have been trending toward without COVID's impact? And could you help us think through the specific impact on ancillary work versus ongoing regular contractual green work?

Yes. Good morning, Judah. If you look at overall, the trajectory we posted at 1.9% organic growth in the second quarter, we feel that that was kind of the momentum we were building in the overall organization. And so we don't see any reason why that wouldn't have continued as we go forward. So, between that kind of momentum and then COVID-related impacts, obviously starting in early March, that started affecting us from being able to actually close on new sales opportunities as we were looking forward and thus slowed us down, combined with some of the service adjustments that were out there. Although those service adjustments, as we said, we have about 97% of our base contract level continues at levels that we expected before. So it really isn't in that base contract maintenance. It really comes down to what level of ancillary pull-through we get, combined with the speed at which our subcontractors before us on development projects get done with their work, so we can get in and complete our work. Those are the things we don't know. We don't have complete visibility out there. That range of somewhere in the mid-single digits on revenue, and that can be in the range of anything in the midranges is why as we stand here today. We can't definitively say where that's going to be and why we've removed our guidance for the year. We do feel though comfortably saying that because of the stability we see in our overall contract revenue, combined with the strong backlog in general we have in development going forward, that we have confidence we'll kind of land in that range.

Okay, that was really helpful. Maybe a follow-up, and I apologize if this is obvious, but how does it work exactly when a customer such as a university or a hotel is closed down? Do you still have the ability to come in and do certain levels of basic maintenance work so that when they reopen, the effort required is not too large?

That's exactly right. And what we've done is we work proactively with those customers to be able to make sure that the living asset they have has a basic level of maintenance. So there isn't some massive cost influx for our customers as they come back to work — as they come back to normality. So, it's the basic level of service we go out, maintain it, in most cases that have more significant impacts. And then when we come back, we get back to the normal level when people are coming back to those properties every single day.

Perfect. Thank you, guys.

Your next question comes from George Tong from Goldman Sachs. Your line is open.

Hi. Thanks. Good morning. You mentioned that 97% of your base contracts are continuing at pre-COVID levels. Can you talk about what proportion of your land maintenance business consists of ancillary work, which is seeing most of the sensitivity to the coronavirus and what proportion is the stable part? And then how that sort of fits into your mid-single-digit growth outlook for the next quarter?

Yes, it's not mid-single-digit growth, we're seeing a mid-single-digit decline. But yes, George, we think we've talked about it in the past, when you look at the maintenance business, and we don't specifically break out contract versus ancillary. But in general, when you take the entire maintenance business, meaning the golf business, our outsourced business and BrightView enterprise systems, the whole business is roughly a three quarter, one quarter split between ancillary and contract services. So that's rough. But again, that ancillary can vary quite a bit.

Got it. That's helpful. And then, on the cost side, you talked about spending reductions to align your overall cost structure to preserve margins. How much of the cost reductions would you say are temporary versus permanent in nature? And what do you think the timing of the savings will look like over the course of the year?

George, good morning. This is John. Look, those initiatives are immediate. I would say, some of them, like Andrew mentioned on his prepared comments around 401(k) match, those would be temporary. But we're looking at across the entire business, the maintenance, development, the corporate structure. We have a deep dive on all the cost initiatives, managing fuel, managing labor, managing overtime, managing discretionary items, disposable items like tools and gloves and things of that nature. I would say the temporary items would be things like merit, T&E, any open positions that we put on hold. But we will continue — as we see more through the quarter, we will continue to be very aggressive in our costs so that we're managing according to the revenue that we see.

Got it. Thank you.

Your next question comes from Andrew Wittmann from Baird. Your line is open.

I guess, maybe asking a similar question a different way, John, is when you think about a mid-single-digit decline, what's the right way to think about the drop-through effect to EBITDA, the decremental margins? Can you help us with that?

Well, yes, I think, look, when you look at the business and you think about where we are and you think about the maintenance business and the development piece, we think we could see a little bit more of an impact in the development side from a margin standpoint, just because of the project nature of that and the fact that we tend to be at the end of those projects, but that's more deferral as opposed to cancellations. And I think that's an extremely important point. On the maintenance side, we think, as Andrew said, we think — we feel really good about where the contract work is. We've seen that continue into the early part of the third quarter with our revenue on the contract side in April being pretty much exactly where we thought it would be. That obviously is going to be buoyed through the M&A side, where we were ahead of the curve of where we thought we'd be this time of the year. I think the challenge for us and the EBITDA impact will be on the ancillary.

I think that's just one more important point to piggyback on that. The development business as we went into Q3 was fully booked for the quarter. And the reality is, any kind of development softness, which we do believe there is some due to project delays and us being able to get into those properties at the speed that we initially anticipated.

Yes. So that makes sense. Anything that was — you have to imagine that anything that was that late in development from the building perspective, like the landscaping needs to come in, you're just waiting. Those guys are down, so you can't get there. And when you can get there, you'll do the job is basically what you're saying, right?

That's correct. Whether it happens in Q3 or Q4, we just don't know at this point in time.

Pipeline is still strong. In a net business, not surprising, Andy. So, we're seeing the biggest impact up in the Northeast in Boston, not surprising with what's going on up there, and in the San Francisco Bay Area. Those are the two that have really — where we've seen an impact on the development. But again, I want to be very clear. It's not cancellation of work. It's when those things start to open back up, the project is continuing and us getting back in there. There's a big difference if they're walking away versus deferral as you know.

Yes. That makes sense. I guess, you've talked a lot — it sounds like a lot of the impact here is on the ancillary, and I guess that makes sense. But I was just curious if you could just talk about if some of these more hard-hit customers of yours are coming to you and looking for price on the base contract as well and how that dynamic is playing out if at all?

Yes. Look, given the diverse level of customers we have, we have a different situation across the board. And mostly, what we find is, again, in those hospitality and retail-based customer verticals is where we see the biggest impact. And what we do is, we absolutely need to continue to work with them in their situations. What we want to do and what we pretty much across the board get is being able to work with them to maintain it at a basic level, to understand how we can minimize costs when hotels get backfilled, they are going to need to have their maintenance looking to the level of standards that they have initially contracted, so we can quickly get back in. All that being said, we continue in our new negotiations, our new sales coming in, maintaining our pricing levels that we have seen historically in the past at about 2% on new deals. So we haven't seen that being impacted. And we are working with current customers, but we do believe that's reflected in the total kind of leaning up to that 97% level across the whole organization.

I have two other questions that I think are important, sorry. We've seen other service providers to businesses kind of delaying or deferring some cash payments for some of those most hard-hit customers as well in an effort to show a partnership with them, keep the business. And I think they've had a long-term relationship. I have to imagine some of those same factors apply to so much of your customer base. John, should we expect any impact on free cash flow as a result of this as well and bad debt as it relates to that, if you could comment, please?

Let me take your bad debt question. Let me take your questions in reverse, Andy. Our track record on bad debt is stellar. I don't expect that to change at all. We got really good relationships with our customers. I mean, are we seeing some delays in working with customers? Absolutely. The key in all of this is communication. Having that communication being forthright with new customers really shines in times like this. If you don't have the relationship in times happening like we're in now, yes, things can get fractured. As far as cash — free cash flow, when I think about it, and obviously we've looked at it very, very hard. We've done pressure testing. And when I look at the main components of how we think about it, right, obviously we withdrew our guidance. So our starting point of EBITDA, that was hard to give you a feel for right now. But I would tell you, on the CapEx, we're certainly not starving the business. But I think if you've seen our performance in the second quarter on our free cash flow, we've improved our controls. Andrew and I are all over it and involved in everything, and that's a testament really to the folks running the business among both development and maintenance. So I don't see any changes on what we said full year on capital. I think we're ahead of the curve of where we thought we'd be on working capital. And that's been our initiative of about being aggressive on AR and collecting our money. I feel very good about where we projected on our interest expense, and I feel very good about cash taxes. And the other interesting thing about our performance this quarter is, we had a refund last year, which we didn't see that repeat this year in our taxes. And then the non-recurring is the hard one to get our arms out. It's a little bit higher than we thought it would be, but that's mainly driven strictly by the M&A. And we will take advantage of things that we can do around things like COVID because we bought a lot of things like hand sanitizer, which are non-operating, which will show up, and that's one of the reasons why the non-recurring is up. But outside of that, we are managing the cash very tightly, and that's why we added the liquidity slide to share that and be very transparent. I feel good about that right now.

The one odd shot, it seems like from this environment for your business, in particular, is the availability of labor. It's always been hard. Even in good hiring environments, it's sometimes hard to hire landscapers, given the nature of the work. I was wondering if you are seeing increased job applications or ability to hire people and fill some of those openings and the turnover that you always experience in this business and if that's affecting the cost of labor in your P&L?

Andy, I can talk to the recruiting side, and then John can jump on the cost. But as far as recruiting, we continue to ramp up in recruiting in this period right now. Just like we do every single year, we hired thousands of people in April and May as we ramped into the season. We have not seen, one way or the other, a significant shift. Although I will say, in the very — I mean, we're talking like in the last several weeks, our ability to get people to come work is kind of at a normal level. I can't say there has been a massive influx of new applicants into their branches. But I think we're at a normal level, and we're finding an ability to bring on people without any problem to support the level of activity that we have similar to last year. Cost side?

Yes. Andy, on the cost side, we've been very clear. Historically, we've seen labor inflation around 4% to 5% and up through, I would say, in the first half of our fiscal 2020, it was still right around 4%. Would that decline in the future in the second half? It might. But right now, we're not factoring that in because we're still seeing that kind of 4%-ish, 4%-ish plus wage inflation. And we've been able to mitigate that for the most part with our rigor and focus on price. So we've been able to get enough price through the first half of the year essentially offset that from a margin standpoint.

Your next question comes from Shlomo Rosenbaum from Stifel. Your line is open.

Hi. Good morning. Thank you for taking my questions. Andrew and John, typically when I've talked to people in the industry about what happens in the downturns, they tell me the development side is more supportive in the maintenance side because of the ancillary business service issue — it falls down a little bit. Are we seeing the opposite right now or just more slowdowns in terms of project work, but for some reason, the maintenance is more stable, how should I think about that?

I think you're seeing the maintenance continuing to be stable. I think the issue you have in development is unique in the circumstance now, because it's really only impacted by the fact that the subcontractors before us aren't getting the work done as quickly as they otherwise would expect. Now that's being relieved now, right, you're seeing it across the country, construction workers going back to work. So we believe this development impact is basically, right now, kind of a Q3, Q4 impact only. Our pipeline is strong. And so, no, it is really a very, very temporary impact to the business on development, and we see that coming back, frankly, to a fairly normalized level of pace as we get into Q4, exactly when in Q4, I can't say. But as we get into Q4, we see it back at the regular pace that we're at. And our pipeline remains robust as we look toward the rest of calendar 2020, and even as we're walking into calendar '21. On the maintenance side, it's the ancillary piece of the business. And again, we really don't have great visibility more than two or three weeks out in ancillary. So I really can't say exactly how that's going to play itself out over the course of the rest of the fiscal year.

Okay. That's helpful. And then, just in stuff opening up, you made an acquisition down there in Atlanta, Georgia is pretty much opening up right now. What are you hearing from 4 Seasons over there in terms of pacing of things or things coming back at a faster clip? Can you just give us some insight what you're hearing from those guys?

Sure. Yes, absolutely. And I would say, in Georgia, specifically with 4 Seasons Group, they are seeing kind of a normal level of operating, shall we say. And we see that pretty much throughout our Southeast area is kind of a normal level of operating. Now also within those markets, that's a heavier weighting on homeowners associations, which tends to be a more stabilizing factor in the overall book of business. So that could have some — that does have some impact on that. But that being said, if you look at relative weightings of impact, Southeast is seeing less of an impact than other parts of the country.

Okay. Great. And you mentioned a little bit about price in some of the acquisitions. Can you just comment a little bit about valuation multiples. I think you guys are typically buying in 5 to 7. I think you said you'd go to 6 to 8. But what has the mismatch been in typically, although you had a pretty healthy cadence of acquisitions and where do you see that kind of coming back down or where do you want to see it go to before you start getting more active again?

Well, I think, where I'd say I wanted to go, but let's get wherever in a realistic way. Look, we do believe that the range that we've purchased acquisitions in will probably come down toward the lower end of the range rather than the higher end of the range. As we look forward, some of it being the fact that as we — when we look at companies to buy, we look at their forecast EBITDA and in really the trailing 12 months and the future 12 months. And the reality is, we have to make adjustments in impacts that this is going to have, and no company is immune to this overall impact. Better companies are going to obviously come through this better, depending on the mix of business they have. But we do believe that the deals we talk with, these are good companies. They have solid books of business, but there's going to be less dollars out there chasing and working on the acquisition deals, so that should provide us some opportunities as we go forward. All that being said, we did the acquisitions early on in the period. We have a really good pipeline ahead of us. But we're really focused on the strong acquisitions that come into our company, the Strong-on-Strong strategy. And we also temper that with our cash strategy. And as we've said, we really — we had planned earlier frankly to take a bit of a pause in the third quarter. We continue to take a pause in the third quarter, but we're still in active negotiations with multiple potentials that could fit well within the company.

Your next question comes from Seth Weber from RBC. Your line is open.

Hey. Good morning, guys. This is Gunnar Hansen on for Seth. I guess, just a clarification on the mid-single-digit decline commentary for the third quarter. Is that an organic or a reported number? And I guess, just to follow up on that, what are the expectations for the M&A rep, given the recent M&A activity?

Yes. That's a total company. So that's all in. As we look at the whole business and many multiple moving pieces that we're not — we don't have a solid — again, we don't have a solid grasp over some of the ancillary and development shifts that we talked about before. So that's why we can't say specifically where that's all going to fall out, and that's why mid-single digits is kind of a — it can be a broad range, obviously. But we want to give at least some color as to what that's going to be. The M&A portion of that, we would expect that to be kind of a similar range as 2000 Q2 was as far as the — it's about similar magnitude.

Okay. Thanks. And I guess, it sounds like some of the development work, given the backlog, should at least return as time progresses and the subcontractors get their work done. But I guess, could you talk a little bit about the ancillary services and if they would benefit? I guess, would you be able to recoup any of those lost ancillary revenues later in the year or are they really more sensitive to this kind of seasonal period? And maybe just give some more background on what exactly the ancillary services are, how you would expect those to progress?

Well, there are some ancillary services that are going to occur regardless of the economy. When a tree limb falls in a parking lot, you need to remove it. And when an irrigation system shrinks or leaks, you need to fix it, because there are certain elements of things like in the fall, leaf removal needs to be taken away. There are elements of some ancillary services which need to occur regardless. So those will continue. Now that being said, we have a fixed group of folks who deal with ancillary services. There isn't a certain staffing level we've put in place and train people. Ancillary services are not things which you just stick someone out in the field to go do. They tend to be more specialized services with trained levels of employees. And so, we step up and focus on being able to bring that in line. So, when we miss out on an ancillary service in a particular quarter, we can see a stronger backlog for the subsequent quarter. But it isn't something which you necessarily can specifically make up in totality. But we would expect after we get through the COVID pandemic that we would see ancillary services returning to more normalized levels, which will allow us as we go forward into future quarters to experience similar levels of total overall growth that we were beginning to experience, and we did experience in the second quarter.

Your next question comes from Hamzah Mazari from Jefferies. Your line is open.

Hey. Good morning. I hope you guys are healthy and safe out there. My first question is just one client retention. Could you maybe talk about what you saw in client retention during the shutdown? And then, the mid-single-digit decline in April, did that change through the month? Did it accelerate at all or it stayed pretty consistent?

Well, let me take both of those. One, we didn't say mid-single digit in April; that's for the whole quarter, we see the whole business kind of trending in that direction. So we're not necessarily reporting on an April result. We're trying to just give you a view for where we believe the whole third quarter is going to land. Secondly, when you talk about retention, we've seen actually a slight improvement in our overall retention environment in this situation, but I can't tell you whether that's COVID related or not. I think what we were seeing and we had planned for is given the different elements of that intense customer focus we put around our client and some of the improvements that we have in our overall field service operations and the focus that our talented account managers put out there that we've been able to really harness some of those relationships. So we've actually seen a little bit of — a slight improvement in client retention. But that's also been offset by also a slowdown in sales, as I mentioned earlier, as new deals aren't closed quite to the level that we anticipated as you could expect, I think, is happening across the board.

Got it. And just my follow-up question. Post-COVID, some people are talking about less need for commercial real estate, working-from-home, etc. Is there a correlation with less commercial real estate need and less landscaping? I guess, 40% of your business is corporate or maybe that's just the general landscaping maintenance end market. But any thoughts long-term structurally, any changes to landscaping coming out of COVID-19? Thank you.

Right now, we don't — number one, we operate in the upper quartile of the landscaping industry. So, where we are positioned is more of those high-intensity places, which really value creating beautiful properties and have an affinity for their operations. We don't see that as being the impacted area. You might have places in other sectors of the economy which might have more sensitivity or more volatility relating to that. But we see where we operate in landscaping, which is still a massive market. We operate in a $17 billion upper quartile market, with the whole market being $70 billion plus or so. That quartile where we operate in, we see good stability going forward.

Great, thank you.

At this time, we have no more questions. So now, I'd like to turn the call back over to Mr. Masterman for closing remarks.

Thank you, Lida. Appreciate it. Once again, I'd like to thank everyone for participating in the call today and for your interest in BrightView. We look forward to speaking with you when we report our third quarter fiscal 2020 results. Please stay safe, be healthy, and we look forward to seeing you out in the field.

This concludes today’s conference call. You may now disconnect.