# BrightView Holdings, Inc.: Form 10-Q for the period ended Jun 30, 2023

- Company: [BrightView Holdings, Inc.](/companies/bv.md) (CIK 1734713)
- Form: 10-Q
- Filed: 2023-08-03
- Accepted by EDGAR: Aug 3, 2023, 10:17 ET
- Period: 2023-06-30
- Accession: 0000950170-23-037535
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1734713/000095017023037535/bv-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1734713/000095017023037535/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $766.0m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2022-10-01 to 2023-06-30 | $2.07bn | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $567.4m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2022-10-01 to 2023-06-30 | $1.58bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-04-01 to 2023-06-30 | $198.6m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-10-01 to 2023-06-30 | $493.3m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-04-01 to 2023-06-30 | $136.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2022-10-01 to 2023-06-30 | $413.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | $51.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-10-01 to 2023-06-30 | $46.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-04-01 to 2023-06-30 | $27.4m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-10-01 to 2023-06-30 | $78.3m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $7.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-10-01 to 2023-06-30 | −$5.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | $16.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-10-01 to 2023-06-30 | −$24.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.18 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-10-01 to 2023-06-30 | −$0.26 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.18 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-10-01 to 2023-06-30 | −$0.26 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 94,001,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-10-01 to 2023-06-30 | 93,409,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-10-01 to 2023-06-30 | $89.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-04-01 to 2023-06-30 | $15.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Capital expenditure | 9 months, 2022-10-01 to 2023-06-30 | $57.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2022-10-01 to 2023-06-30 | $1.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-06-30 | $9.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $686.7m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $3.32bn | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $516.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $2.10bn | us-gaap:Liabilities |
| Long-term debt | at 2023-06-30 | $1.34bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-06-30 | $12.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-06-30 | $1.22bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 56,139 characters.

*The following discussion and analysis supplements our management’s discussion and analysis for the year ended September 30, 2022 as contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 17, 2022, and presumes that readers have read or have access to such discussion and analysis. The following discussion and analysis should also be read together with the unaudited consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that reflect our plans and strategy for our business, and involve risks, uncertainties and other factors outside of the Company's control. You should review the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, as updated by subsequent filings with the Securities and Exchange Commission, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.*

### Overview

### Our Company

We are the largest provider of commercial landscaping services in the United States, with revenues approximately 6 times those of our next largest commercial landscaping competitor. We provide commercial landscaping services ranging from landscape maintenance and enhancements to tree care and landscape development. We operate through a differentiated and integrated national service model which systematically delivers services at the local level by combining our network of over 290 branches with a qualified service partner network. Our branch delivery model underpins our position as a single-source end-to-end landscaping solution provider to our diverse customer base at the national, regional and local levels, which we believe represents a significant competitive advantage. We believe our commercial customer base understands the financial and reputational risk associated with inadequate landscape maintenance and considers our services to be essential and non-discretionary.

### Our Segments

We report our results of operations through two reportable segments: Maintenance Services and Development Services. We serve a geographically diverse set of customers through our strategically located network of branches in 35 U.S. states, and, through our qualified service partner network, we are able to efficiently provide nationwide coverage in all 50 U.S. states.

#### Maintenance Services

Our Maintenance Services segment delivers a full suite of recurring commercial landscaping services in both evergreen and seasonal markets, ranging from mowing, gardening, mulching and snow removal, to more horticulturally advanced services, such as water management, irrigation maintenance, tree care, golf course maintenance and specialty turf maintenance. In addition to contracted maintenance services, we also have a strong track record of providing value-added landscape enhancements. We primarily self-perform our maintenance services through our national branch network, which are route-based in nature. Our maintenance services customers include Fortune 500 corporate campuses and commercial properties, HOAs, public parks, leading international hotels and resorts, airport authorities, municipalities, hospitals and other healthcare facilities, educational institutions, restaurants and retail, and golf courses, among others.

#### Development Services

Through our Development Services segment, we provide landscape architecture and development services for new facilities and significant redesign projects. Specific services include project design and management services, landscape architecture, landscape installation, irrigation installation, tree moving and installation, pool and water features and sports field services, among others. Our development services are comprised of sophisticated design, coordination and installation of landscapes at some of the most recognizable corporate, athletic and university complexes and showcase highly visible work that is paramount to our customers’ perception of our brand as a market leader.

In our Development Services business, we are typically hired by general contractors, with whom we maintain strong relationships as a result of our superior technical and project management capabilities. We believe the quality of our work is also well-regarded by our end-customers, some of whom directly request that their general contractors utilize our services when outsourcing their landscape development projects.

### Components of Our Revenues and Expenses

### Net Service Revenues

#### Maintenance Services

Our Maintenance Services revenues are generated primarily through landscape maintenance services and snow removal services. Landscape maintenance services that are primarily viewed as non-discretionary, such as lawn care, mowing, gardening, mulching, leaf removal, irrigation and tree care, are provided under recurring annual contracts, which typically range from one to three years in duration and are generally cancellable by the customer with 30-90 days’ notice. Snow removal services are provided on either fixed fee based contracts or per occurrence contracts. Both landscape maintenance services and snow removal services can also include enhancement services that represent supplemental maintenance or improvement services generally provided under contracts of short duration related to specific services. Revenue for landscape maintenance and snow removal services under fixed fee models is recognized over time using an output based method. Additionally, a portion of our recurring fixed fee landscape maintenance and snow removal services are recorded under the series guidance. The right to invoice practical expedient, defined within Note 3 “Revenue” to our unaudited consolidated financial statements, is generally applied to revenue related to landscape maintenance and snow removal services performed in relation to per occurrence contracts as well as enhancement services. When use of the practical expedient is not appropriate for these contracts, revenue is recognized using a cost-to-cost input method. Fees for contracted landscape maintenance services are typically billed on an equal monthly basis. Fees for fixed fee snow removal services are typically billed on an equal monthly basis during snow season, while fees for time and material or other activity-based snow removal services are typically billed as the services are performed. Fees for enhancement services are typically billed as the services are performed.

#### Development Services

For Development Services, revenue is primarily recognized over time using the cost-to-cost input method, measured by the percentage of cost incurred to date to the estimated total cost for each contract, which we believe to be the best measure of progress. The full amount of anticipated losses on contracts is recorded as soon as such losses can be estimated. These losses are immaterial to current and historical operations. Changes in job performance, job conditions and estimated profitability, including final contract settlements, may result in revisions to costs and revenue and are recognized in the period in which the revisions are determined.

### Expenses

#### Cost of Services Provided

Cost of services provided is comprised of direct costs we incur associated with our operations during a period and includes employee costs, subcontractor costs, purchased materials, and operating equipment and vehicle costs. Employee costs consist of wages and other labor-related expenses, including benefits, workers compensation and healthcare costs, for those employees involved in delivering our services. Subcontractor costs consist of costs relating to our qualified service partner network in our Maintenance Services segment and subcontractors we engage from time to time in our Development Services segment. When our use of subcontractors increases, we may experience incrementally higher costs of services provided. Operating equipment and vehicle costs primarily consist of depreciation related to branch operating equipment and vehicles and related fuel expenses. A large component of our costs are variable, such as labor, subcontractor expense and materials.

#### Selling, General and Administrative Expense

Selling, general and administrative expense consists of costs incurred related to compensation and benefits for management, sales and administrative personnel, equity-based compensation, branch and office rent and facility operating costs, depreciation expense related to branch and office locations, as well as professional fees, software costs and other miscellaneous expenses. Corporate expenses, including corporate executive compensation, finance, legal and information technology, are included in consolidated selling, general and administrative expense and not allocated to the business segments.

#### Amortization Expense

Amortization expense consists of the periodic amortization of intangible assets, including customer relationships, non-compete agreements and trademarks, recognized when KKR acquired the Company on December 18, 2013 and in connection with businesses we have acquired since December 18, 2013.

#### Other (Income) Expense

Other (income) expense consists primarily of investment gains and losses related to investments held in Rabbi Trust as well as losses on debt extinguishment.

#### Interest Expense

Interest expense relates primarily to our long-term debt. See Note 7 “Long-term Debt” in the unaudited consolidated financial statements included under Part I, Item 1, “Financial Statements”.

#### Income Tax Expense (Benefit)

Income tax expense (benefit) includes U.S. federal, state and local income taxes. Our effective tax rate differs from the statutory U.S. income tax rate due to the effect of state and local income taxes, tax credits and certain nondeductible expenses. Our effective tax rate may vary from quarter to quarter based on recurring and nonrecurring factors including, but not limited to, the geographical distribution of our pre-tax earnings, changes in the tax rates of different jurisdictions, the availability of tax credits and nondeductible items. Changes in judgment due to the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the period of the change.

### Trends and Other Factors Affecting Our Business

Various trends and other factors affect or have affected our operating results, including:

### Seasonality

Our services, particularly in our Maintenance Services segment, have seasonal variability such as increased mulching, flower planting and intensive mowing in the spring, leaf removal and cleanup work in the fall, snow removal services in the winter and potentially minimal mowing during drier summer months. This can drive fluctuations in revenue, costs and cash flows for interim periods.

We have a significant presence in geographies that have a year-round growing season, which we refer to as our evergreen markets. Such markets require landscape maintenance services twelve months per year. In markets that do not have a year-round growing season, which we refer to as our seasonal markets, the demand for our landscape maintenance services decreases during the winter months. Typically, our revenues and net income have been higher in the spring and summer seasons, which correspond with our third and fourth fiscal quarters of our fiscal year ending September 30. The lower level of activity in seasonal markets during our first and second fiscal quarters is partially offset by revenue from our snow removal services. Such seasonality causes our results of operations to vary from quarter to quarter.

### Weather Conditions

Weather may impact the timing of performance of landscape maintenance and enhancement services and progress on development projects from quarter to quarter. For example, snow events in the winter, hurricane-related cleanup in the summer and fall, and the effects of abnormally high rainfall or drought in a given market may impact our services. These less predictable weather patterns can impact both our revenues and our costs, especially from quarter to quarter, but also from year to year in some cases. Extreme weather events such as hurricanes and tropical storms can result in a positive impact to our business in the form of increased enhancement services revenues related to cleanup and other services. However, such weather events may also negatively impact our ability to deliver our contracted services or impact the timing of performance.

In our seasonal markets, the performance of our snow removal services is correlated with the amount of snowfall and number of snowfall events in a given season. We benchmark our performance against ten- and thirty-year cumulative annual snowfall averages.

### Acquisitions

In addition to our organic growth, we have grown, and expect to continue to grow, our business through acquisitions in an effort to better service our existing customers and to attract new customers. These acquisitions have allowed us to execute our “strong-on-strong” acquisition strategy in which we focus on increasing our density and leadership positions in existing local markets, entering into attractive new geographic markets and expanding our portfolio of landscape enhancement services and improving technical capabilities in specialized services. As we continue to selectively pursue acquisitions that complement our “strong-on-strong” acquisition strategy, we believe we are the acquirer of choice in the highly fragmented commercial landscaping industry because we offer the ability to leverage our significant size and scale, as well as provide stable and potentially expanding career opportunities for employees of acquired businesses. In accordance with GAAP, the results of the acquisitions we have completed are reflected in our consolidated financial statements from the date of acquisition. We incur transaction costs in connection with identifying and completing acquisitions and ongoing integration costs as we integrate acquired companies and seek to achieve synergies. During the nine months ended June 30, 2023, the Company acquired three businesses and paid approximately $13.8 million in aggregate consideration, net of cash acquired. We incurred $5.3 million of integration costs during the first nine months of fiscal 2023, of which $4.6 million related to acquisitions completed prior to fiscal 2023 and $0.7 million related to acquisitions completed during fiscal 2023. While integration costs vary based on factors specific to each acquisition, such costs are primarily comprised of one-time employee retention costs, employee onboarding and training costs, and fleet and uniform rebranding costs. We typically anticipate integration costs to represent approximately 7%-9% of the acquisition price, and to be incurred within 12 months of acquisition completion.

### Goodwill

Goodwill represents the excess of the purchase price over the fair values of the underlying net assets acquired in an acquisition. Goodwill is not amortized, but rather is tested annually for impairment in the fourth quarter of each year, or more frequently if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

Goodwill is allocated to, and evaluated for impairment at our three identified reporting units. Goodwill is tested for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. We may elect not to perform the qualitative assessment for some or all reporting units and perform the quantitative impairment test. The quantitative goodwill impairment test requires us to compare the carrying value of the reporting unit’s net assets to the fair value of the reporting unit. The Company determined fair values of each of the reporting units using a combination of the income and market multiple approaches. The estimates used in each approach include significant management assumptions, including long-term future growth rates, operating margins, discount rates and future economic and market conditions.

If the fair value exceeds the carrying value, no further evaluation is required, and no impairment loss is recognized. If the carrying amount of a reporting unit, including goodwill, exceeds the estimated fair value, the excess of the carrying value over the fair value is recorded as an impairment loss, the amount of which would not exceed the total amount of goodwill allocated to the reporting unit.

Our methodology for estimating the fair value of our reporting units utilizes a combination of the market and income approaches. The market approach is based on the guideline public company method, which measures the value of the reporting unit through applying valuation multiples of selected guideline public companies to the reporting unit’s key operating metrics. The income approach is based on the Discounted Cash Flow (“DCF”) method, which is based on the present value of future cash flows. The principal assumptions utilized in the DCF methodology include long-term future growth rates, operating margins, and discount rates. There can be no assurance that our estimates and assumptions regarding forecasted cash flow, long-term future growth rates and operating margins made for purposes of the annual goodwill impairment test will prove to be accurate predictions of the future. We believe the current assumptions and estimates utilized under each approach are both reasonable and appropriate.

During the second quarter of fiscal 2023, the Company identified a triggering event from increases in interest rates and the recent decline in the market price of its common stock. As a result, the Company performed an interim quantitative impairment test for the Maintenance reporting unit as of March 31, 2023. Based on the analysis, the fair value of the reporting unit exceeded the carrying value; however, the fair value of the Maintenance reporting unit exceeded the carrying value by 1.8%. Since the Maintenance reporting unit fair value did not substantially exceed the carrying value, we may be at risk for an impairment loss in the future if interest rates and market conditions continue to trend unfavorably or if our forecasts assumed in the fair value calculation are not realized. As of June 30, 2023, there was $1,797.7 million of goodwill recorded related to the Maintenance reporting unit.

### Industry and Economic Conditions

We believe the non-discretionary nature of our landscape maintenance services provides us with a fairly predictable recurring revenue model. The perennial nature of the landscape maintenance service sector, as well as its wide range of end users, minimizes the impact of a broad or sector-specific downturn. However, in connection with our enhancement services and development services, when demand for commercial construction declines, demand for landscape enhancement services and development projects may decline. When commercial construction activity rises, demand for landscape enhancement services to maintain green space may also increase. This is especially true for new developments in which green space tends to play an increasingly important role. Economic conditions, including rising inflation and fuel prices, as well as rising interest rates, have impacted and may further impact our costs and expenses, and fluctuations in labor markets, may impact our ability to identify, hire and retain employees. Increased labor costs, including recruiting, retention, and overtime expenditures, have and could adversely affect our profitability.

### COVID-19 Update

While most of the impact of the COVID-19 pandemic has largely subsided, the effects of any resurgence of the virus or lingering macroeconomic effects such as labor and supply constraints and inflation continue to be highly uncertain and outside the Company’s control. Although our Maintenance and Development operations are considered essential services, future governmental orders or other restrictions may limit, restrict or prohibit operations in the future. Further limitations could have a material adverse impact on our business, financial condition and results of operations.

The scope, duration and magnitude of the direct and indirect effects of the COVID-19 pandemic are difficult or impossible to anticipate. Due to the uncertainty related to the extent of the ongoing impact of the pandemic, the Company’s results in the third quarter of 2023 and 2022 may not be indicative of the Company’s future results. For additional information on the risks posed by COVID-19, see “Item 1A – Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2022.

### Results of Operations

The following tables summarize key components of our results of operations for the periods indicated.

*(in millions)*

|  | Three Months Ended June 30, 2023 | 2022 | Nine Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net service revenues | $766.0 | $747.4 | $2,072.3 | $2,051.2 |
| Cost of services provided | 567.4 | 558.2 | 1,579.0 | 1,565.0 |
| Gross profit | 198.6 | 189.2 | 493.3 | 486.2 |
| Selling, general and administrative expense | 136.6 | 131.3 | 413.0 | 399.5 |
| Amortization expense | 10.8 | 13.2 | 33.7 | 38.7 |
| Income from operations | 51.2 | 44.7 | 46.6 | 48.0 |
| Other (income) expense | (0.6) | 14.6 | (2.1) | 15.1 |
| Interest expense | 27.4 | 14.8 | 78.3 | 34.5 |
| Income (loss) before income taxes | 24.4 | 15.3 | (29.6) | (1.6) |
| Income tax expense (benefit) | 7.6 | 4.5 | (5.5) | (0.3) |
| Net income (loss) | $16.8 | $10.8 | $(24.1) | $(1.3) |
| Adjusted EBITDA(1) | $101.8 | $94.3 | $197.1 | $196.6 |
| Adjusted Net Income(1) | $41.4 | $39.8 | $33.5 | $66.4 |
| Earnings (Loss) per Share | $0.18 | $0.12 | $(0.26) | $(0.01) |
| Adjusted Earnings per Share(1) | $0.44 | $0.43 | $0.36 | $0.65 |
| Cash flows from operating activities | $34.3 | $23.4 | $89.3 | $65.7 |
| Free Cash Flow(1) | $22.3 | $2.3 | $38.2 | $(17.0) |

(1) See the “Non-GAAP Financial Measures” section included below for a reconciliation to the most directly comparable GAAP measure.

### Three Months Ended June 30, 2023 compared to Three Months Ended June 30, 2022

#### Net Service Revenues

Net service revenues for the three months ended June 30, 2023 increased $18.6 million, or 2.5%, to $766.0 million, from $747.4 million in the 2022 period. The increase was driven by increases in Maintenance Services revenues of $2.8 million and Development Services revenues of $17.0 million as discussed further below in Segment Results.

#### Gross Profit

Gross profit for the three months ended June 30, 2023 increased $9.4 million, or 5.0%, to $198.6 million, from $189.2 million in the 2022 period. Gross margin increased 60 basis points, to 25.9%, in the three months ended June 30, 2023, from 25.3% in the 2022 period. The increase in gross profit was driven by the increases in Development Services and Maintenance Services revenues as well as lower fuel costs, partially offset by an increase in labor costs.

#### Selling, General and Administrative Expense

Selling, general and administrative expense for the three months ended June 30, 2023 increased $5.3 million, or 4.0%, to $136.6 million, from $131.3 million in the 2022 period. As a percentage of revenue, Selling, general and administrative expense increased 20 basis points for the three months ended June 30, 2023 to 17.8%, from 17.6% in the 2022 period. The increase was driven principally by increases in compensation-related costs, partially offset by decreases in COVID-19 related expenses during the period.

#### Amortization Expense

Amortization expense for the three months ended June 30, 2023 decreased $2.4 million, or 18.2%, to $10.8 million, from $13.2 million in the 2022 period. The decrease was principally due to a $1.2 million decrease in amortization expense for intangible assets recognized in connection with our acquired businesses subsequent to the ValleyCrest Acquisition and a $1.2 million decrease in the amortization of historical intangible assets recognized in connection with the KKR Acquisition and the ValleyCrest Acquisition, based on the pattern consistent with expected future cash flows calculated at the time of acquisition.

#### Other (Income) Expense

Other income was $0.6 million for the three months ended June 30, 2023 compared to expense of $14.6 million in the 2022 period. The increase of $15.2 million was driven principally by the losses on the extinguishment of debt in connection with Amendment No. 6 to the Credit Agreement incurred in the 2022 period and the change in value of investments held in the Rabbi Trust.

#### Interest Expense

Interest expense for the three months ended June 30, 2023 increased $12.6 million, or 85.1%, to $27.4 million, from $14.8 million in the 2022 period. The increase was driven principally by increased interest rates, partially offset by the impact of the interest rate derivative contracts.

#### Income Tax Expense

For the three months ended June 30, 2023, Income tax expense was $7.6 million, compared to $4.5 million in the 2022 period. The increase was primarily attributable to the increase in the Company’s pretax income of $24.4 million in the current period compared to $15.3 million in the prior period.

#### Net Income

Net income for the three months ended June 30, 2023 increased $6.0 million to $16.8 million, from $10.8 million in the 2022 period due to the changes noted above. Net income as a percentage of revenue was 2.2% for the nine months ended June 30, 2023 compared to 1.4% in the 2022 period.

#### Adjusted EBITDA

Adjusted EBITDA increased $7.5 million for the three months ended June 30, 2023, to $101.8 million, from $94.3 million in the 2022 period. Adjusted EBITDA as a percentage of revenue was 13.3% and 12.6% for the three months ended June 30, 2023 and 2022, respectively. The increase in Adjusted EBITDA was primarily driven by an increase of $4.8 million, or 5.4% in Maintenance Services Segment Adjusted EBITDA and an increase of $3.2 million, or 15.3% in Development Services Segment Adjusted EBITDA, as discussed further below in Segment Results.

#### Adjusted Net Income

Adjusted net income for the three months ended June 30, 2023 increased $1.6 million to $41.4 million, from $39.8 million in the 2022 period due to the changes noted above.

### Nine Months Ended June 30, 2023 compared to Nine Months Ended June 30, 2022

#### Net Service Revenues

Net service revenues for the nine months ended June 30, 2023 increased $21.1 million, or 1.0%, to $2,072.3 million, from $2,051.2 million in the 2022 period. The increase was driven by an increase in Development Services revenues of $32.5 million which was partially offset by a decrease in Maintenance Services revenues of $7.7 million as discussed further below in Segment Results.

#### Gross Profit

Gross profit for the nine months ended June 30, 2023 increased $7.1 million, or 1.5%, to $493.3 million, from $486.2 million in the 2022 period. Gross margin increased 10 basis points, to 23.8%, in the nine months ended June 30, 2023, from 23.7% in the 2022 period. The increases in gross profit and gross margin were driven by the increase Development Services revenues and a decrease in subcontractor costs. These increases were partially offset by increases in labor and materials costs as well as depreciation.

#### Selling, General and Administrative Expense

Selling, general and administrative expense for the nine months ended June 30, 2023 increased $13.5 million, or 3.4%, to $413.0 million, from $399.5 million in the 2022 period. As a percentage of revenue, Selling, general and administrative expense increased 40 basis points for the nine months ended June 30, 2023 to 19.9%, from 19.5% in the 2022 period. The increase was driven principally by increases in compensation-related costs and the impact of acquisitions, partially offset by decreases in COVID-19 related expenses during the period.

#### Amortization Expense

Amortization expense for the nine months ended June 30, 2023 decreased $5.0 million, or 12.9%, to $33.7 million, from $38.7 million in the 2022 period. The decrease was due to a $3.8 million decrease in the amortization of historical intangible assets recognized in connection with the KKR Acquisition and the ValleyCrest Acquisition, based on the pattern consistent with expected future cash flows calculated at that time and a $1.2 million decrease in amortization expense for intangible assets recognized in connection with our acquired businesses subsequent to the ValleyCrest Acquisition.

#### Other (Income) Expense

Other income was $2.1 million for the nine months ended June 30, 2023 compared to expense of $15.1 million in the 2022 period. The decrease of $17.2 million was driven principally by the losses on the extinguishment of debt in connection with Amendment No. 6 to the Credit Agreement incurred in the 2022 period and the change in value of investments held in the Rabbi Trust.

#### Interest Expense

Interest expense for the nine months ended June 30, 2023 increased $43.8 million, or 127.0%, to $78.3 million, from $34.5 million in the 2022 period. The increase was driven principally by increased interest rates coupled with the increase in the borrowings under the Series B Term Loan associated with the execution of Amendment No. 6 to the credit agreement dated December 18, 2013 (as so amended, the “Credit Agreement”), partially offset by the impact of the interest rate derivative contracts.

#### Income Tax Benefit

Income tax benefit for the nine months ended June 30, 2023, was $5.5 million, compared to $0.3 million in the 2022 period. The change was primarily attributable to the change in the Company’s pretax loss of $29.6 million in the current period compared to $1.6 million in the prior period, coupled with the geographical distribution of pre-tax earnings across legal entities and the expense related to the vesting of restricted stock units that was recorded discretely in the current period.

#### Net Loss

For the nine months ended June 30, 2023, Net loss was $24.1 million, compared to $1.3 million in the 2022 period due to the changes noted above. Net loss as a percentage of revenue was 1.2% for the nine months ended June 30, 2023 compared to 0.1% in the 2022 period.

#### Adjusted EBITDA

Adjusted EBITDA increased $0.5 million for the nine months ended June 30, 2023, to $197.1 million, from $196.6 million in the 2022 period. Adjusted EBITDA as a percentage of revenue was 9.5% and 9.6% for the nine months ended June 30, 2023 and 2022, respectively. The increase in Adjusted EBITDA was primarily driven by an increase of $5.4 million, or 11.2% in Development Services Segment Adjusted EBITDA, partially offset by a decrease of $1.2 million, or 0.6% in Maintenance Services Segment Adjusted EBITDA, as discussed further below in Segment Results.

#### Adjusted Net Income

Adjusted net income for the nine months ended June 30, 2023 decreased $32.9 to $33.5 million, from $66.4 million in the 2022 period due to the changes noted above.

### Non-GAAP Financial Measures

In addition to our GAAP financial measures, we review various non-GAAP financial measures including Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share (“Adjusted EPS”) and Free Cash Flow.

We believe that Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are helpful supplemental measures to assist us and investors in evaluating our operating results as they exclude certain items whose fluctuations from period to period do not necessarily correspond to changes in the operations of our business. Adjusted EBITDA represents net income (loss) before interest, taxes, depreciation, amortization and certain non-cash, non-recurring and other adjustment items. Adjusted Net Income is defined as net income (loss) including interest and depreciation and excluding other items used to calculate Adjusted EBITDA and further adjusted for the tax effect of these exclusions and the removal of the discrete tax items. Adjusted EPS is defined as Adjusted Net Income divided by the weighted average number of common shares outstanding for the period used in the calculation of basic EPS. We believe that the adjustments applied in presenting Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are appropriate to provide additional information to investors about certain material non-cash items and about non-recurring items that we do not expect to continue at the same level in the future.

We believe Free Cash Flow is a helpful supplemental measure to assist us and investors in evaluating our liquidity. Free Cash Flow represents cash flows from operating activities less capital expenditures, net of proceeds from the sale of property and equipment. We believe Free Cash Flow is useful to provide additional information to assess our ability to pursue business opportunities and investments and to service our debt. Free Cash Flow has limitations as an analytical tool, including that it does not account for our future contractual commitments and excludes investments made to acquire assets under finance leases and required debt service payments.

Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and Free Cash Flow are not recognized terms under GAAP and should not be considered as an alternative to net income (loss) as a measure of financial performance or cash flows provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. The presentations of these measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to the same or other similarly titled measures of other companies and can differ significantly from company to company.

Set forth below are the reconciliations of net income (loss) to Adjusted EBITDA and Adjusted Net Income, and cash flows from operating activities to Free Cash Flow. Adjusted EPS is defined as Adjusted Net Income (shown below) divided by the weighted average number of common shares outstanding for the period used in the calculation of basic EPS and presented in Note 13 “Earnings (Loss) Per Share of Common Stock” in the Notes to our unaudited consolidated financial statements.

*(in millions)*

| Adjusted EBITDA | Three Months Ended June 30, 2023 | 2022 | Nine Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) | $16.8 | $10.8 | $(24.1) | $(1.3) |
| Plus: |  |  |  |  |
| Interest expense, net | 27.4 | 14.8 | 78.3 | 34.5 |
| Income tax expense (benefit) | 7.6 | 4.5 | (5.5) | (0.3) |
| Depreciation expense | 26.4 | 25.7 | 80.9 | 71.5 |
| Amortization expense | 10.8 | 13.2 | 33.7 | 38.7 |
| Business transformation and integration costs (a) | 8.9 | 4.3 | 17.5 | 12.7 |
| Offering-related expenses (b) | — | 0.1 | — | 0.1 |
| Equity-based compensation (c) | 3.9 | 4.8 | 15.9 | 14.2 |
| COVID-19 related expenses (d) | — | 3.5 | 0.4 | 13.9 |
| Debt extinguishment (e) | — | 12.6 | — | 12.6 |
| **Adjusted EBITDA** | **$101.8** | **$94.3** | **$197.1** | **$196.6** |
| **Adjusted Net Income** |  |  |  |  |
| Net income (loss) | $16.8 | $10.8 | $(24.1) | $(1.3) |
| Plus: |  |  |  |  |
| Amortization expense | 10.8 | 13.2 | 33.7 | 38.7 |
| Business transformation and integration costs (a) | 8.9 | 4.3 | 17.5 | 12.7 |
| Offering-related expenses (b) | — | 0.1 | — | 0.1 |
| Equity-based compensation (c) | 3.9 | 4.8 | 15.9 | 14.2 |
| COVID-19 related expenses (d) | — | 3.5 | 0.4 | 13.9 |
| Debt extinguishment (e) | — | 12.6 | — | 12.6 |
| Income tax adjustment (f) | 1.0 | (9.5) | (9.9) | (24.5) |
| **Adjusted Net Income** | **$41.4** | **$39.8** | **$33.5** | **$66.4** |
| **Free Cash Flow** |  |  |  |  |
| Cash flows provided by operating activities | $34.3 | $23.4 | $89.3 | $65.7 |
| Minus: |  |  |  |  |
| Capital expenditures | 15.2 | 23.9 | 57.9 | 88.1 |
| Plus: |  |  |  |  |
| Proceeds from sale of property and equipment | 3.2 | 2.8 | 6.8 | 5.4 |
| **Free Cash Flow** | **$22.3** | **$2.3** | **$38.2** | **$(17.0)** |

(a) Business transformation and integration costs consist of (i) severance and related costs; (ii) business integration costs and (iii) information technology infrastructure, transformation costs, and other.

*(in millions)*

|  | Three Months Ended June 30, 2023 | 2022 | Nine Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Severance and related costs | $4.1 | $0.6 | $6.0 | $0.9 |
| Business integration (g) | 2.8 | 0.3 | 5.3 | 4.8 |
| IT infrastructure, transformation, and other (h) | 2.0 | 3.4 | 6.2 | 7.0 |
| Business transformation and integration costs | $8.9 | $4.3 | $17.5 | $12.7 |

(b) Represents transaction related expenses incurred for IPO related litigation and completed or contemplated subsequent registration statements.

(c) Represents equity-based compensation expense and related taxes recognized for equity incentive plans outstanding.

(d) Represents expenses related to the Company’s response to the COVID-19 pandemic, principally temporary and incremental salary and related expenses, personal protective equipment, cleaning and supply purchases, and other.

(e) Represents losses on the extinguishment of debt related to Amendment No. 6 to the Credit Agreement and includes the write-off of deferred finance fees and original issue discount.

(f) Represents the tax effect of pre-tax items excluded from Adjusted Net Income and the removal of the applicable discrete tax items, which collectively result in a reduction of income tax expense (benefit). The tax effect of pre-tax items excluded from Adjusted Net Income is computed using the statutory rate related to the jurisdiction that was impacted by the adjustment after taking into account the impact of permanent differences and valuation allowances. Discrete tax items include changes in laws or rates, changes in uncertain tax positions relating to prior years and changes in valuation allowances.

*(in millions)*

|  | Three Months Ended June 30, 2023 | 2022 | Nine Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Tax impact of pre-tax income adjustments | $(2.0) | $9.7 | $10.8 | $24.7 |
| Discrete tax items | 1.0 | (0.2) | (0.9) | (0.2) |
| Income tax adjustment | $(1.0) | $9.5 | $9.9 | $24.5 |

(g) Represents isolated expenses specifically related to the integration of acquired companies such as one-time employee retention costs, employee onboarding and training costs, and fleet and uniform rebranding costs. The Company excludes Business integration costs from the measures disclosed above since such expenses vary in amount due to the number of acquisitions and size of acquired companies as well as factors specific to each acquisition, and as a result lack predictability as to occurrence and/or timing, and create a lack of comparability between periods.

(h) Represents expenses related to distinct initiatives, typically significant enterprise-wide changes. Such expenses are excluded from the measures disclosed above since such expenses vary in amount based on occurrence as well as factors specific to each of the activities, are outside of the normal operations of the business, and create a lack of comparability between periods.

### Segment Results

We classify our business into two segments: Maintenance Services and Development Services. Our corporate operations are not allocated to the segments and are not discussed separately as any results that had a significant impact on operating results are included in the consolidated results discussion above.

We evaluate the performance of our segments on Net service revenues, Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin (Segment Adjusted EBITDA as a percentage of Net service revenues). Segment Adjusted EBITDA is indicative of operational performance and ongoing profitability. Our management closely monitors Segment Adjusted EBITDA to evaluate past performance and identify actions required to improve profitability.

### Segment Results for the Three Months Ended June 30, 2023 and 2022

The following tables present Net service revenues, Segment Adjusted EBITDA, and Segment Adjusted EBITDA Margin for each of our segments. Changes in Segment Adjusted EBITDA Margin are shown in basis points, or bps.

#### Maintenance Services Segment Results

*(in millions)*

|  | Three Months Ended June 30, 2023 | 2022 | Percent Change 2023 vs. 2022 |
| --- | ---: | ---: | ---: |
| Net Service Revenues | $564.6 | $561.8 | 0.5% |
| Segment Adjusted EBITDA | $94.0 | $89.2 | 5.4% |
| Segment Adjusted EBITDA Margin | 16.6% | 15.9% | 70 bps |

#### Maintenance Services Net Service Revenues

Maintenance Services net service revenues for the three months ended June 30, 2023 increased by $2.8 million, or 0.5%, from the 2022 period. The increase was driven by $7.5 million contribution from acquired businesses. Partially offsetting this was a decrease of $3.6 million in snow removal services and a decrease of $1.1 million in underlying commercial landscape services.

#### Maintenance Services Segment Adjusted EBITDA

Segment Adjusted EBITDA for the three months ended June 30, 2023 increased by $4.8 million to $94.0 million from $89.2 million in the 2022 period. Segment Adjusted EBITDA Margin increased 70 basis points, to 16.6%, in the three months ended June 30, 2023, from 15.9% in the 2022 period. The increases in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were driven by disciplined management of labor costs in underlying commercial landscape services, coupled with lower fuel costs and savings from cost management initiatives, partially offset by the decrease in snow removal services revenue discussed above.

#### Development Services Segment Results

*(in millions)*

|  | Three Months Ended June 30, 2023 | 2022 | Percent Change 2023 vs. 2022 |
| --- | ---: | ---: | ---: |
| Net Service Revenues | $203.4 | $186.4 | 9.1% |
| Segment Adjusted EBITDA | $24.1 | $20.9 | 15.3% |
| Segment Adjusted EBITDA Margin | 11.8% | 11.2% | 60 bps |

#### Development Services Net Service Revenues

Development Services net service revenues for the three months ended June 30, 2023 increased $17.0 million, or 9.1%, compared to the 2022 period. The increase was principally driven by an increase in Development Services project volumes of $17.0 million.

#### Development Services Segment Adjusted EBITDA

Segment Adjusted EBITDA for the three months ended June 30, 2023 increased $3.2 million, to $24.1 million, compared to the 2022 period. Segment Adjusted EBITDA Margin increased 60 basis points, to 11.8% for the quarter from 11.2% in the 2022 period. The increases in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were primarily driven by the increase in project volumes described above, partially offset by increased labor and materials costs attributable to the mix of projects relative to the prior year.

### Segment Results for the Nine Months Ended June 30, 2023 and 2022

The following tables present Net service revenues, Segment Adjusted EBITDA, and Segment Adjusted EBITDA Margin for each of our segments. Changes in Segment Adjusted EBITDA Margin are shown in basis points, or bps.

#### Maintenance Services Segment Results

*(in millions)*

|  | Nine Months Ended June 30, 2023 | 2022 | Percent Change 2023 vs. 2022 |
| --- | ---: | ---: | ---: |
| Net Service Revenues | $1,545.7 | $1,553.4 | (0.5)% |
| Segment Adjusted EBITDA | $196.2 | $197.4 | (0.6)% |
| Segment Adjusted EBITDA Margin | 12.7% | 12.7% | — bps |

#### Maintenance Services Net Service Revenues

Maintenance Services net service revenues for the nine months ended June 30, 2023 decreased by $7.7 million, or 0.5%, from the 2022 period. The decrease was driven by a decrease of $47.2 million in snow removal services due to lower snowfall, net of $15.6 million from acquired businesses. Partially offsetting this was a $39.5 million increase in landscape services revenue consisting of a $28.9 million contribution from acquired businesses and an increase of $10.6 million, or 0.8%, in underlying commercial landscape services underpinned by contract and to a lesser extent ancillary services growth.

#### Maintenance Services Segment Adjusted EBITDA

Segment Adjusted EBITDA for the nine months ended June 30, 2023 decreased by $1.2 million to $196.2 million from $197.4 million in the 2022 period. Segment Adjusted EBITDA Margin was 12.7% in each of the nine months ended June 30, 2023 and 2022. The decrease in Segment Adjusted EBITDA was driven by the decrease in snow removal services revenues described above, partially offset by increases in revenues from underlying commercial landscape services and acquisitions discussed above.

#### Development Services Segment Results

*(in millions)*

|  | Nine Months Ended June 30, 2023 | 2022 | Percent Change 2023 vs. 2022 |
| --- | ---: | ---: | ---: |
| Net Service Revenues | $533.3 | $500.8 | 6.5% |
| Segment Adjusted EBITDA | $53.6 | $48.2 | 11.2% |
| Segment Adjusted EBITDA Margin | 10.1% | 9.6% | 50 bps |

#### Development Services Net Service Revenues

Development Services net service revenues for the nine months ended June 30, 2023 increased $32.5 million, or 6.5%, compared to the 2022 period. The increase was principally driven by an increase of $21.1 million due to additional project volumes combined with an $11.4 million contribution from acquired businesses.

#### Development Services Segment Adjusted EBITDA

Segment Adjusted EBITDA for the nine months ended June 30, 2023 increased $5.4 million, to $53.6 million, compared to the 2022 period. Segment Adjusted EBITDA Margin increased 50 basis points, to 10.1% for the period from 9.6% in the 2022 period. Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin increased principally due to the increase in revenues described above coupled with disciplined management of materials costs.

### Liquidity and Capital Resources

### Liquidity

Our principal sources of liquidity are existing cash and cash equivalents, cash generated from operations and borrowings under the Credit Agreement and the Receivables Financing Agreement. Our principal uses of cash are to provide working capital, meet debt service requirements, fund capital expenditures and finance strategic plans, including acquisitions and share repurchases under the share repurchase program announced in December 2021. We may also seek to finance capital expenditures under finance leases or other debt arrangements that provide liquidity or favorable borrowing terms. We continue to consider acquisition opportunities, but the size and timing of any future acquisitions and the related potential capital requirements cannot be predicted. While we have in the past financed certain acquisitions with internally generated cash, in the event that suitable businesses are available for acquisition upon acceptable terms, we may obtain all or a portion of the necessary financing through the incurrence of additional long-term borrowings.

Based on our current level of operations and available cash, we believe our cash flow from operations, together with availability under the Revolving Credit Facility under the Credit Agreement and the Receivables Financing Agreement, will provide sufficient liquidity to fund our current obligations, projected working capital requirements, debt service requirements and capital spending requirements for the next twelve months.

A substantial portion of our liquidity needs arise from debt service requirements, and from the ongoing cost of operations, working capital and capital expenditures.

*(in millions)*

|  | June 30, 2023 | September 30, 2022 |
| --- | ---: | ---: |
| Cash and cash equivalents | $9.6 | $20.1 |
| Short-term borrowings and current maturities of long-term debt | $12.0 | $12.0 |
| Long-term debt | 1,336.2 | 1,330.7 |
| Total debt | $1,348.2 | $1,342.7 |

The Company is party to the Credit Agreement, a five-year revolving credit facility that, pursuant to the Amendment Agreement, currently matures on April 22, 2027 (the “Revolving Credit Facility”) and, through a wholly-owned subsidiary, a receivables financing agreement dated April 28, 2017 (as amended, the “Receivables Financing Agreement”). Each of the Company's credit facilities bear interest based in-part on a secured overnight financing rate.

We can increase the borrowing availability under the Credit Agreement or increase the term loans outstanding under the Credit Agreement by up to $303.0 million, in the aggregate, in the form of additional commitments under the Revolving Credit Facility and/or incremental term loans under the Credit Agreement, or in the form of other indebtedness in lieu thereof, plus an additional amount so long as we do not exceed a specified senior secured leverage ratio and, in the case of second lien indebtedness, a specified senior secured leverage ratio. We can incur such additional secured or other unsecured indebtedness under the Credit Agreement if certain specified conditions are met. Our liquidity requirements are significant primarily due to debt service requirements. See Note 7 “Long-term Debt” to our unaudited consolidated financial statements included under Part I, Item 1, “Financial Statements”.

Our business may not generate sufficient cash flows from operations or future borrowings may not be available to us under our Revolving Credit Facility or the Receivables Financing Agreement in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. Our ability to do so depends on, among other factors, prevailing economic conditions, many of which are beyond our control. In addition, upon the occurrence of certain events, such as a change in control, we could be required to repay or refinance our indebtedness. We may not be able to refinance any of our indebtedness, including the Series B Term Loan under the Credit Agreement, on commercially reasonable terms or at all. Any future acquisitions, joint ventures, or other similar transactions may require additional capital and there can be no assurance that any such capital will be available to us on acceptable terms or at all.

### Cash Flows

Information about our cash flows, by category, is presented in our statements of cash flows and is summarized below:

*(in millions)*

|  | Nine Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $89.3 | $65.7 |
| Investing activities | $(63.0) | $(172.1) |
| Financing activities | $(36.8) | $9.0 |
| Free Cash Flow (1) | $38.2 | $(17.0) |

(1) See “Non-GAAP Financial Measures” above for a reconciliation to the most directly comparable GAAP measure.

#### Cash Flows provided by Operating Activities

Net cash provided by operating activities for the nine months ended June 30, 2023 increased $23.6 million, to $89.3 million, from $65.7 million in the 2022 period. This increase was due to a decrease in cash used by accounts payable and other operating liabilities and an increase in cash provided by other operating assets. This was partially offset by an increase in cash used by accounts receivable, an increase in net loss and a decrease in the cash provided by unbilled and deferred revenue.

#### Cash Flows used in Investing Activities

Net cash used in investing activities decreased $109.1 million to $63.0 million for the nine months ended June 30, 2023 from $172.1 million in the 2022 period. The decrease was driven by a decrease of $75.7 million in cash used for acquisitions coupled with a decrease of $30.2 million in capital expenditures in comparison to the prior period.

#### Cash Flows (used) provided by Financing Activities

Net cash flows used in financing activities of $36.8 million for the nine months ended June 30, 2023 included repayments of our Receivables Financing Agreement of $448.0 million, repayments of our Revolving Credit Facility of $33.5 million, repayments of finance lease obligations of $20.9 million and contingent business acquisition payments of $18.5 million. These repayments were partially offset by proceeds from our Receivables Financing Agreement, net of issuance costs of $460.0 million and proceeds from our Revolving Credit Facility of $33.5 million.

#### Free Cash Flow

Free Cash Flow increased $55.2 million to an inflow of $38.2 million for the nine months ended June 30, 2023 from an outflow of $17.0 million in the 2022 period. The increase in Free Cash Flow was due to an increase in net cash provided by operating activities coupled with a decrease in cash used for capital expenditures, each as described above.

### Working Capital

*(in millions)*

| Net Working Capital: | June 30, 2023 | September 30, 2022 |
| --- | ---: | ---: |
| Current assets | $686.7 | $677.1 |
| Less: Current liabilities | 516.4 | 488.4 |
| Net working capital | $170.3 | $188.7 |

Net working capital is defined as current assets less current liabilities. Net working capital decreased $18.4 million to $170.3 million at June 30, 2023, from $188.7 million at September 30, 2022, primarily driven by a decrease in other current assets of $36.0 million coupled with an increase in deferred revenue of $20.1 million and a decrease in cash and cash equivalents of $10.5 million. This was partially offset by an increase in accounts receivable, net of $48.1 million coupled with an increase in unbilled revenue of $8.0 million.

### Description of Indebtedness

As of June 30, 2023, we were in compliance with all of our debt covenants and no event of default has occurred or was ongoing. See Note 7 “Long-term Debt” to our unaudited consolidated financial statements included under Part I, Item 1, “Financial Statements”.

### Contractual Obligations and Commercial Commitments

As of June 30, 2023, there were no material changes outside the ordinary course of business in our contractual obligations and commercial commitments from those reported as of September 30, 2022 in our Annual Report on Form 10-K.

### Critical Accounting Policies and Estimates

Management has evaluated the accounting policies used in the preparation of the Company’s consolidated financial statements and related notes and believe those policies to be reasonable and appropriate. Certain of these accounting policies require the application of significant judgment by management in selecting appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on historical experience, trends in the industry, information provided by customers and information available from other outside sources, as appropriate. The most significant areas involving management judgments and estimates may be found in the Annual Report on Form 10-K, in the “Critical Accounting Policies and Estimates” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” There have been no material changes to our critical accounting policies as compared to the critical accounting policies described in the Annual Report on Form 10-K for the year ended September 30, 2022.

### Recently Issued Accounting Policies

The information set forth in Note 2 “Recent Accounting Pronouncements” to our unaudited consolidated financial statements under Part I, Item 1, “Financial Statements” is incorporated herein by reference.

## Market risk

As filed, 213 characters.

For quantitative and qualitative disclosures about market risk, see “Item 7A. Quantitative and Qualitative Disclosure of Market Risk” in the Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

## Controls and procedures

As filed, 1,612 characters.

### Disclosure Controls and Procedures

We maintain disclosure controls and procedures as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

In accordance with Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision of our CEO and our CFO, the effectiveness of disclosure controls and procedures as of June 30, 2023. Based on this evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective as of June 30, 2023 at a reasonable assurance level.

### Changes in Internal Control over Financial Reporting

There has not been any change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 188 characters.

There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, as filed with the SEC on November 17, 2022.

Filed Aug 3, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-037535. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.