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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should be read together with “Item 6. Selected Financial Data” and our audited consolidated financial statements and the related notes thereto included elsewhere in this Form 10-K.

This section of this Form 10-K generally discusses the fiscal years ended September 30, 2020 and 2019 items and year to year comparisons between the fiscal years ended September 30, 2020 and 2019. The discussion around results of operations for the fiscal year ended September 30, 2018 and a comparison of our results for the fiscal years ended September 30, 2019 and 2018 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for fiscal year ended September 30, 2019, filed with the SEC on November 21, 2019 and is incorporated by reference herein (Fiscal Year Ended September 30, 2019 10-K).

Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review “Item 1A. Risk Factors” and the “Special Note Regarding Forward-Looking Statements” sections of this Form 10-K 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.

Overview

Our Company

We are the largest provider of commercial landscaping services in the United States, with revenues approximately 10 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 240 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 32 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.

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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 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 audited 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 have been immaterial in prior periods. 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, operating equipment and vehiclecosts. 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, goodwill impairment, gains and losses on divestitures, 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 us on December 18, 2013 and in connection with businesses we have acquired since December 18, 2013.

Interest Expense

Interest expense relates primarily to our long term debt. See Note 10 “Long-term Debt” to our audited consolidated financial statements included in Part II. Item 8 of this Form 10-K.

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Income Tax (Expense) Benefit

The benefit for income taxes 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.

In addition, on December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act reduced the U.S. corporate income tax rate from 35% to 21%. As a result of the enactment, our corporate tax rate for fiscal 2019 is 21%. Based on the applicable tax rates and number of days in fiscal 2018 before and after the 2017 Tax Act, we had a 2018 blended corporate tax rate of 24.5% for fiscal 2018.

Other Income (Expense)

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

How We Assess the Performance of our Business

We manage operations through the two operating segments described above. 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”), Free Cash Flow and Adjusted Free Cash Flow.

We believe 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 (loss) income 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 and Adjusted Free Cash Flow are helpful supplemental measures 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 sales of property and equipment. Adjusted Free Cash Flow represents Free Cash Flow as further adjusted for the acquisition of certain legacy properties associated with our acquired ValleyCrest business. We believe Free Cash Flow and Adjusted Free Cash Flow are useful to provide additional information to assess our ability to pursue business opportunities and investments and to service our debt. Free Cash Flow and Adjusted Free Cash Flow have limitations as analytical tools, including that they do not account for our future contractual commitments and exclude investments made to acquire assets under finance leases and required debt service payments.

Management regularly uses these measures as tools in evaluating our operating performance, financial performance and liquidity, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and capital investments. Management uses Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Free Cash Flow and Adjusted Free Cash Flow to supplement comparable GAAP measures in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. In addition, we believe that Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Free Cash Flow and Adjusted Free Cash Flow are frequently used by investors and other interested parties in the evaluation of issuers, many of which also present Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Free Cash Flow and Adjusted Free Cash Flow when reporting their results in an effort to facilitate an understanding of their operating and financial results and liquidity. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.

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Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are provided in addition to, and should not be considered as alternatives to, net income (loss) or any other performance measure derived in accordance with GAAP, and Free Cash Flow and Adjusted Free Cash Flow are provided in addition to, and should not be considered as an alternative to, cash flow from operating activities or any other measure derived in accordance with GAAP as a measure of our liquidity. Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Free Cash Flow and Adjusted Free Cash Flow have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under GAAP. In addition, because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company. Additionally, these measures are not intended to be a measure of free cash flow available for management’s discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements.

For a reconciliation of the most directly comparable GAAP measures, see “Non-GAAP Financial Measures” below.

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 following the change of our fiscal year end date to September 30, effective September 30, 2017. 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. Since October 1, 2019, we have acquired six businesses with approximately $99.5 million of aggregate annualized revenue, for aggregate consideration of $90.3 million, net of cash. We anticipate incurring integration related costs in respect of these acquisitions of $8.2 million, of which $5.3 million had been incurred as of September 30, 2020, with the remainder to be incurred in fiscal 2021. Additionally, we incurred $8.1 million of integration costs during fiscal 2020 related to acquisitions completed prior to fiscal 2020. While integration costs vary based on factors specific to each acquisition, such costs are primarily comprised of fleet and uniform rebranding, and to a lesser extent, other administrative costs associated with training employees and transitioning from legacy accounting and IT systems. We typically anticipate integration costs to represent approximately 7%-9% of the acquisition price, and to be incurred within 12 months of acquisition completion.

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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.

Equity-based Compensation

Prior to the IPO, the Company had a Management Equity Incentive Plan, (the “Plan”), under which BrightView Parent L.P. awarded Class A Units and/or Class B Units to our employees and members of our Board of Directors. Many of our outstanding equity-based compensation awards granted to our employees vest upon a service condition and certain performance criteria of the Company, while some outstanding awards were also eligible to vest upon a liquidity event, including an initial public offering. In connection with the IPO, we recorded $1.5 million of equity-based compensation expense as a result of such vesting. The Class B Units held by current and former employees were cancelled in connection with the IPO and we issued shares of common stock (a portion of which was restricted stock subject to vesting) and stock options in respect of such Class B Units at the time of the IPO (the “Class B Equity Conversion”). In addition, we issued shares of common stock (all of which was restricted stock, vesting ratably on an annual basis over a three-year period, commencing on the first anniversary of the grant date) and stock options that were granted to certain officers and employees in connection with the IPO (the “IPO Equity Grant”). The issuance of stock options (i) in connection with the Class B Equity Conversion, is expected to result in $37.9 million of equity-based compensation expense after estimated forfeitures, of which $11.4 million was recognized immediately upon issuance, $5.2 million of expense was recognized in the fourth quarter of fiscal 2018, and the remainder of which we expect to recognize in future periods, and (ii) in connection with the IPO Equity Grant, is expected to result in $16.3 million of equity-based compensation expense after estimated forfeitures, of which we recognized $1.5 million in the fourth quarter of fiscal 2018 and the remainder of which we expect to recognize in future periods. Furthermore, we expect equity-based compensation expense to be higher in the future as our awards will be expensed over the requisite service and performance period. See Note 14 “Equity-Based Compensation” to our audited consolidated financial statements included in Part II. Item 8 of this Form 10-K for additional information about our equity-based compensation plans.

COVID-19 Update

The global outbreak of the disease caused by the novel coronavirus (“COVID-19”) was declared a pandemic by the World Health Organization in March 2020. In response to the COVID-19 pandemic and its resurgence many jurisdictions within the United States and abroad implemented stay at home orders, restricted travel and closed or restricted businesses, causing a deterioration in economic conditions in the United States and globally.

Although our Maintenance and Development operations are considered essential services, there were some jurisdictions that, beginning in March 2020, limited or halted our operations or the operations of the general contractors with which we work. While these orders have been lifted, future governmental orders or other restrictions may limit, restrict or prohibit either Maintenance’s or Development’s operations in certain locations in the future. Further limitations could have a material adverse impact on our business, financial condition and results of operations.

The impact of the COVID-19 pandemic and related economic conditions on the Company’s results are highly uncertain and outside the Company’s control. The scope, duration and magnitude of the direct and indirect effects of the COVID-19 pandemic and its resurgence are evolving rapidly and in ways that are difficult or impossible to anticipate. Due to the impact of the COVID-19 pandemic on our results for the fourth quarter and full year of 2020, and uncertainty related to the extent of the ongoing impact of the pandemic, the Company’s results in the fourth quarter and full year of 2020 may not be indicative of the Company’s future results. We have experienced and may experience a loss in revenue as a result of restrictions on our ability to operate our business. In addition, the economic deterioration resulting from the impacts of the COVID-19 pandemic will likely continue to negatively impact our results of operations and financial condition. We expect this negative impact on economic conditions to persist, but the degree of the impact on our business is unpredictable as it will depend on the extent and duration of the economic contraction. For additional information on the risks posed by COVID-19, see “Item 1A – Risk Factors”.

We have taken numerous steps, and expect to continue to take further actions to address the negative impact and risks posed by the COVID-19 pandemic, such as increasing health and safety measures to protect our employees and follow local health and safety guidelines in the jurisdictions we operate, implementing prudent actions to preserve cash, and limiting discretionary spend. Additionally, on March 27, 2020, the President of the United States signed the Coronavirus Aid Relief, and Economic Security (CARES) Act into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. We are utilizing the deferment of employer side social security payments as well as the technical correction for tax depreciation. Although we will seek to utilize current and future legislation enacted to provide relief from the impact of the COVID-19 pandemic as appropriate, there is no guarantee we will meet any eligibility requirements to participate or, even if we are able to participate, that such legislation will provide meaningful benefit to our business or financial condition.

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Results of Operations

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

Fiscal Year Ended September 30,

Selling, general and administrative expense 527.4 452.2

Other income, net 1.3 —

(Loss) income before income taxes (51.2 ) 57.2

Income tax benefit (expense) 9.6 (12.8 )

Net (loss) income $ (41.6 ) $ 44.4

Cash flows from operating activities $ 245.1 $ 169.7

Fiscal Year Ended September 30, 2020 compared to Fiscal Year Ended September 30, 2019

Net Service Revenues

Net service revenues for the fiscal year ended September 30, 2020 decreased $58.6 million, or 2.4%, to $2,346.0 million, from $2,404.6 million in the 2019 period. The decrease was driven by decreases in Maintenance Services revenues of $74.3 million partially offset by an increase in Development Services revenues of $15.2 million as discussed further below in Segment Results.

Gross Profit

Gross profit for the fiscal year ended September 30, 2020 decreased $42.9 million, or 6.7%, to $595.3 million, from $638.2 million in 2019. The decrease in gross profit was driven by the decrease in revenues described above, as well as an $18.3 million charge to Costs of services provided related to a change in estimates and actuarial assumptions associated with the Company’s self-insured liability amounts. Gross margin decreased 110 basis points from 26.5% in the 2019 period to 25.4% for the fiscal year ended September 30, 2020 which was also related to a change in estimates and actuarial assumptions associated with the Company’s self-insured liability amounts.

Selling, General and Administrative Expense

Selling, general and administrative expense for the fiscal year ended September 30, 2020 increased $75.2 million, or 16.6%, to $527.4 million, from $452.2 million in the 2019 period. This increase was largely driven by an increase of $22.2 million related to the sale of BrightView Tree Company, consisting principally of a goodwill impairment of $15.5 million and a loss on sale of $5.7 million. The increase was also driven by an increase of $20.1 million related to our acquired businesses, consisting of an increase of $14.9 million of incremental overhead and an increase of $5.2 million in business integration costs. In addition, the increase was attributable to $9.7 million of expenses related to the Company’s response to the COVID-19 pandemic, principally temporary and incremental salary and related expenses, and personal protective equipment, cleaning and supply purchases; as well as an increase of $11.0 million for salaries and other employee related expenses, principally incentive compensation; an increase of $8.3 million for stock compensation and related taxes; and a $5.8 million expense related to a change in estimates and actuarial assumptions associated with the Company’s self-insured liability amounts. As a percentage of revenue, selling, general and administrative expense increased 370 basis points for the fiscal year ended September 30, 2020 to 22.5%, from 18.8% in the 2019 period.

Amortization Expense

Amortization expense for the fiscal year ended September 30, 2020 decreased $0.5 million, or 0.9%, to $55.8 million, from $56.3 million in the 2019 period. The decrease was principally due to a $6.6 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, partially offset by a $6.1 million increase in amortization expense for intangible assets recognized in connection with our acquired businesses subsequent to the ValleyCrest Acquisition.

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Other Income (Expense)

Other income was $1.3 million for the fiscal year ended September 30, 2020 compared to $0.0 million of income in the 2019 period. The income in the 2020 period was due to a gain on investments held in the Rabbi Trust.

Interest Expense

Interest expense for the fiscal year ended September 30, 2020 decreased $7.9 million, or 10.9%, to $64.6 million, from $72.5 million in the 2019 period. The decrease was driven by a lower weighted average interest rate on our term loans in the 2020 period of 3.51% compared to 4.90% in the 2019 period, partially offset by the impact of our interest rate swaps for the period.

Income Tax (Expense) Benefit

For the fiscal year ended September 30, 2020, Income tax benefit was $9.6 million, compared to an Income tax expense of $12.8 million in the 2019 period. The change to an income tax benefit from an income tax expense is primarily attributable to the Company’s pretax loss of $51.2 million in the current period compared to pretax income of $57.2 million in the prior period.

Net Income (Loss)

For the fiscal year ended September 30, 2020, net income decreased $86.0 million, to a net loss of $41.6 million, from net income of $44.4 million in the 2019 period. The decrease in net income was primarily due to the changes noted above.

Adjusted EBITDA

Adjusted EBITDA decreased $33.5 million for the fiscal year ended September 30, 2020, to $271.6 million, from $305.1 million in the 2019 period. Adjusted EBITDA as a percent of revenue was 11.6% and 12.7% for the fiscal year ended September 30, 2020 and 2019, respectively. The decrease in Adjusted EBITDA was driven by a decrease of $31.9 million, or 11.3% in Maintenance Services Segment Adjusted EBITDA and a decrease of $1.5 million, or 1.8% in Development Services Segment Adjusted EBITDA, as discussed further below in Segment Results.

Adjusted Net Income

Adjusted Net Income for the fiscal year ended September 30, 2020 decreased $23.3 million, to $94.7 million, from $118.0 million in the 2019 period due to the changes noted above.

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 Fiscal Years Ended September 30, 2020 and 2019

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

Fiscal Year Ended September 30, Percent Change

Segment Adjusted EBITDA Margin 14.4 % 15.6 % (120 ) bps

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Maintenance Services Net Service Revenues

Maintenance Services net service revenues for the fiscal year ended September 30, 2020 decreased by $74.3 million, or 4.1%, compared to the 2019 period. Revenues from landscape maintenance services were $1,576.0 million for the fiscal year ended September 30, 2020, an increase of $7.7 million over the 2019 period, and revenues from snow removal services were $163.1 million, a decrease of $82.0 million over the 2019 period. The decrease in snow removal services was primarily attributable to a decreased frequency of snowfall events, the geographical distribution of the snowfall events which negatively impacted the Mid-Atlantic, Northeast, and Midwest regions, the lower volume of snowfall per event and the lower relative snowfallin the fiscal year ended September 30, 2020 (for our current branch structure, snowfall for the fiscal years ended September 30, 2020 and 2019 was 61.6% and 86.3%, respectively, of the historical 10-year average for that twelve-month period). The increase in landscape services revenues was driven by a $101.9 million revenue contribution from acquired businesses, partially offset by a decrease of $94.2 million the majority of which was due to a reduction in demand for ancillary services as a result of the COVID-19 pandemic.

Maintenance Services Segment Adjusted EBITDA

Segment Adjusted EBITDA for the fiscal year ended September 30, 2020 decreased $31.9 million, to $250.1 million, compared to $282.0 million in the 2019 period. Segment Adjusted EBITDA Margin decreased 120 basis points, to 14.4%, in the fiscal year ended September 30, 2020, from 15.6% in the 2019 period. The decreases in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were due to the decrease in net service revenues described above.

Development Services Segment Results

Fiscal Year Ended September 30, Percent Change

Segment Adjusted EBITDA $ 80.2 $ 81.7 (1.8 )%

Segment Adjusted EBITDA Margin 13.1 % 13.7 % (60 ) bps

Development Services Net Service Revenues

Development Services net service revenues for the fiscal year ended September 30, 2020 increased $15.2 million, or 2.6%, compared to the 2019 period. The increase in development services revenues was driven by higher first half project volumes and a stronger first half project completion percentage compared to the prior year.

Development Services Segment Adjusted EBITDA

Segment Adjusted EBITDA for the fiscal year ended September 30, 2020 decreased $1.5 million, to $80.2 million, compared to $81.7 million in the 2019 period. Segment Adjusted EBITDA Margin decreased 60 basis points, to 13.1%, in the fiscal year ended September 30, 2020, from 13.7% in the 2019 period. The decreases in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were due principally to the completion of certain large projects in the prior year and construction delays as a result of the COVID-19 pandemic, partially offset by the increase in net service revenues described above.

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Non-GAAP Financial Measures

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.

Fiscal Year Ended September 30,

Adjusted EBITDA

Net (loss) income $ (41.6 ) $ 44.4

Plus:

Interest expense, net 64.6 72.5

Income tax expense (benefit) (9.6 ) 12.8

Establish public company financial reporting compliance (a) 0.9 4.8

Business transformation and integration costs (b) 32.5 17.5

Offering-related expenses (c) 4.4 1.0

Equity-based compensation (d) 24.0 15.7

COVID-19 related expenses (e) 13.8 —

Changes in self-insured liability estimates (f) 24.1 —

Sale of tree company (g) 22.2 —

Adjusted Net Income

Plus:

Establish public company financial reporting compliance (a) 0.9 4.8

Business transformation and integration costs (b) 32.5 17.5

Offering-related expenses (c) 4.4 1.0

Equity-based compensation (d) 24.0 15.7

COVID-19 related expenses (e) 13.8 —

Changes in self-insured liability estimates (f) 24.1 —

Sale of tree company (g) 22.2 —

Income tax adjustment (h) (41.4 ) (21.7 )

Free Cash Flow

Cash flows from operating activities $ 245.1 $ 169.7

Minus:

Plus:

Proceeds from sale of property and equipment 4.8 6.8

Fiscal Year Ended September 30,

Severance and related costs $ 3.8 $ 3.0

Rebranding of vehicle fleet — 0.5

Business integration 13.4 8.2

IT infrastructure, transformation, and other (i) 15.3 5.8

Business transformation and integration costs $ 32.5 $ 17.5

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Fiscal Year Ended September 30,

Tax impact of pre-tax income adjustments $ 37.9 $ 19.8

Discrete tax items 3.5 1.9

Income tax adjustment $ 41.4 $ 21.7

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Unaudited Quarterly Results of Operations

The following table sets forth our historical quarterly results of operations as well as certain operating data for each of our most recent eight fiscal quarters. This unaudited quarterly information (other than Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share, Free Cash Flow and Adjusted Free Cash Flow) has been prepared on the same basis as our audited consolidated financial statements appearing elsewhere in this Form 10-K, and includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary to present fairly the financial information for the fiscal quarters presented. This information should be read in conjunction with the audited consolidated financial statements and related notes thereto included elsewhere in this Form 10-K.

Three Months Ended

(Loss) earnings per share:

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Three Months Ended

Adjusted EBITDA

Plus:

COVID-19 related expenses (e) 8.7 4.0 1.1 — — — — —

Changes in self-insured liability estimates (f) — 24.1 — — — — — —

Sale of tree company (g) 22.2 — — — — — — —

Adjusted Net Income

Plus:

COVID-19 related expenses (e) 8.7 4.0 1.1 — — — — —

Changes in self-insured liability estimates (f) — 24.1 — — — — — —

Sale of tree company (g) 22.2 — — — — — — —

Free Cash Flow

Minus:

Plus:

Proceeds from sale of property and equipment 1.0 1.1 1.6 1.0 — 3.8 1.2 1.8

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Three Months Ended

Rebranding of vehicle fleet — — — — 0.1 0.1 0.1 0.3

Three Months Ended

Our operations and strategic objectives require continuing investment. Our resources include cash generated from operations and borrowings under long-term debt agreements.

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 (as defined below) and the Receivables Financing Agreement (as defined below). Our principal uses of cash are to provide working capital, meet debt service requirements, fund capital expenditures and finance strategic plans, including acquisitions. 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.

As discussed in Note 1 “Business” in the Notes to the audited consolidated financial statements include in Part II. Item 8 of this Form 10-K, we completed an IPO in July 2018 and in conjunction with and following such IPO we repaid approximately $501.1 million of outstanding indebtedness.

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 (each as defined below), 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.

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

September 30, September 30,

Cash and cash equivalents $ 157.1 $ 39.1

Short-term borrowings and current maturities of long-term debt $ 12.3 $ 10.4

The Company is party to a credit agreement dated December 18, 2013 (as amended, the “Credit Agreement”), a five-year revolving credit facility that matures on August 15, 2023 (the “Revolving Credit Facility”) and, through a wholly-owned subsidiary, a receivables financing agreement dated April 28, 2017 (as amended, the “Receivables Financing Agreement”). See “Description of Indebtedness”.

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 first lien 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 10 “Long-term Debt” to our audited consolidated financial statements included elsewhere in Part II. Item 8 of this Form 10-K.

On July 17, 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it will no longer persuade or compel banks to submit rates for the calculation of LIBOR to the LIBOR administrator after 2021. The announcement also indicates that the continuation of LIBOR on the current basis cannot be guaranteed after 2021. In the event that LIBOR is phased out at such time, as is currently expected, the Credit Agreement and the Receivables Financing Agreement each provide that the Company and the applicable administrative agent may amend such Credit Agreement or Receivables Financing Agreement, as applicable, to replace the LIBOR definition with a successor rate based on prevailing market convention, subject to notifying the lending syndicate of such change and not receiving within 5 business days of such notification written objections to such replacement rate from (i) with respect to the Receivables Financing Agreement, lenders holding at least a majority of the aggregate principal amount of commitments then outstanding thereunder or (ii) with respect to any class of loans under the Credit Agreement, lenders holding at least a majority of the aggregate principal amount of loans and commitments then outstanding in such class. The consequences of these developments cannot be entirely predicted, but could include an increase in the interest cost of our variable rate indebtedness.

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, including the ongoing impact of the COVID-19 pandemic. 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:

Fiscal Year Ended September 30,

Investing activities $ (108.8 ) $ (145.5 )

Financing activities $ (18.3 ) $ (20.3 )

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Cash Flows provided by Operating Activities

Net cash provided by operating activities for the fiscal year ended September 30, 2020 increased $75.4 million, to $245.1 million, from $169.7 million in the 2019 period. This increase was primarily due to an increase in cash provided by improvements in net working capital, including accounts payable and other operating liabilities, unbilled and deferred revenue, and accounts receivable. The increase was partially offset by a decrease in cash provided by net income (loss).

Cash Flows used in Investing Activities

Net cash used in investing activities was $108.8 million in the fiscal year ended September 30, 2020, a decrease in the use of cash of $36.7 million compared to $145.5 million for the 2019 period. Capital expenditures decreased $37.2 million to $52.7 million for the fiscal year ended September 30, 2020, compared to $89.9 million in the 2019 period. Additionally, net cash provided from divestitures was $28.5 million for the fiscal year ended September 30, 2020, due to the sale of two of the Company’s subsidiary entities in separate transactions on September 30, 2020. The decrease in cash used in investing activities was partially offset by an increase in cash paid for acquisitions of $26.3 million as well as a decrease in proceeds from sale of property and equipment of $2.0 million.

Cash Flows provided by (used in) Financing Activities

Net cash flows used in financing activities of $18.3 million for the fiscal year ended September 30, 2020 included proceeds from our Receivables Financing Agreement of $80.0 million and proceeds from our Revolving Credit Facility of $70.0 million drawn principally in response to the COVID-19 pandemic, both of which were fully repaid during the period. Additionally term loan repayments of $10.4 million and finance lease obligations repayments of $9.9 million were made during the period.

Net cash flows used in financing activities of $20.3 million for the fiscal year ended September 30, 2019 consisted of scheduled and voluntary principal payments on long-term borrowings of $143.0 million and repayments of finance lease obligations of $5.8 million, offset by net proceeds from our Receivables Financing Agreement of $120.0 million and net proceeds from our Revolving Credit Facility of $10.0 million.

Free Cash Flow

Free Cash Flow increased $110.6 million to $197.2 million for the fiscal year ended September 30, 2020 from $86.6 million in the 2019 period. The increase in Free Cash Flow was due to an increase in cash flows from operating activities of $75.4 million as well as a decrease in capital expenditures of $37.2 million, partially offset by a decrease in proceeds from the sale of property and equipment of $2.0 million.

Working Capital

Net Working Capital:

Net working capital is defined as current assets less current liabilities. Net working capital decreased $35.7 million, to $183.0 million, at September 30, 2020, from $218.7 million at September 30, 2019, primarily driven by an increase in accrued expenses and other current liabilities of $61.2 million, a decrease in inventories of $20.0 million, an increase in current portion of operating lease liabilities of $18.3 million, an increase in accounts payable of $17.0 million, a decrease in accounts receivable, net of $14.5 million, a decrease in unbilled revenue of $13.0 million, and an increase in current portion of self-insurance reverses of $11.0 million, partially offset by an increase in cash and cash equivalents of $118.0 million.

Description of Indebtedness

Series B Term Loan due 2025

On August 15, 2018, the Company entered into Amendment No. 5 to the Credit Agreement (the “Amendment”). The Credit Agreement was amended to provide for: (i) a $1,037.0 million seven-year term loan (the “Series B Term Loan”) and (ii) a $260.0 million five-year revolving credit facility. The Series B Term Loan matures on August 15, 2025 and bears interest at a rate per annum of LIBOR, plus 2.5%. The Company used the net proceeds from the Series B Term Loan to repay all amounts outstanding under the Company’s First Lien Term Loans. An original discount of $2.8 million was incurred when the Series B Term Loan was issued and is being amortized using the effective interest method over the life of the debt resulting in an effective yield of 2.5%.

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In addition to scheduled payments, the Company is obligated to pay a percentage of excess cash flow, as defined in the Credit Agreement, as accelerated principal payments. The percentage varies with the ratio of the Company’s debt to its cash flow. The excess cash flow calculation did not result in any accelerated payment due for the periods ended September 30, 2020, September 30, 2019, and September 30, 2018.

Revolving credit facility

The Company’s five-year $260.0 million Revolving Credit Facility matures on August 15, 2023 and bears interest at a rate per annum of LIBOR plus a margin ranging from 2.50% to 2.00%, with the margin determined based on the Company’s first lien net leverage ratio. The Revolving Credit Facility replaces the previous $210.0 million revolving credit facility under the Credit Agreement. The Company had no outstanding balance under either facility as of September 30, 2020 and September 30, 2019. There is a quarterly commitment fee equal to either 1⁄2 of 1% or 3/8 of 1% of the unused balance of the Revolving Credit Facility depending on the Company’s leverage ratio. The Company had $78.0 million and $94.1 million of letters of credits issued and outstanding as of September 30, 2020 and September 30, 2019, respectively. The interest rates on the Revolving Credit Facility and previous revolving credit facility were 2.3%, 2.5%, and 2.5% for the years ended September 30, 2020, September 30, 2019, and September 30, 2018, respectively.

During the fiscal year ended September 30, 2020, the Company borrowed and fully repaid $70.0 million against the Revolving Credit Facility. During the fiscal year ended September 30, 2019, the Company borrowed and fully repaid $10.0 million against the Revolving Credit Facility.

Receivables financing agreement

On April 28, 2017, the Company, through a wholly-owned subsidiary, entered into the Receivables Financing Agreement. The Receivables Financing Agreement provides a borrowing capacity of $175.0 million through April 27, 2020. On February 21, 2019, the Company entered into the First Amendment to the Receivables Financing Agreement (the “Amendment Agreement”) which increased the borrowing capacity to $200.0 million and extended the term through February 20, 2022. All amounts outstanding under the Receivables Financing Agreement are collateralized by substantially all of the Accounts receivables and Unbilled revenue of the Company.

During the year ended September 30, 2020, the Company borrowed $80.0 million and voluntarily repaid $80.0 million under the Receivables Financing Agreement. During the year ended September 30, 2019, the Company borrowed $120.0 million and voluntarily repaid $120.0 million under the Receivables Financing Agreement.

For additional information on our material indebtedness, including our First Lien Term Loans, Second Lien Term Loans, Series B Term Loans and Revolving Credit Facility and our outstanding borrowings under the Receivables Financing Agreement, see “Note 10 “Long-term Debt” in our audited consolidated financial statements included elsewhere in this Form 10-K.

As of September 30, 2020, September 30, 2019, and September 30, 2018, we were in compliance with all of our debt covenants and no event of default had occurred or was ongoing.

Contractual Obligations and Commercial Commitments

The following table summarizes our future minimum payments for all contractual obligations and commercial commitments for years subsequent to September 30, 2020:

(In millions) Total Less than 1 Year 1 – 3 Years 3 – 5 Years More than 5 Years

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Off-balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our consolidated financial statements because they involve significant judgments and uncertainties. Management believes that the application of these policies on a consistent basis enables us to provide the users of the consolidated financial statements with useful and reliable information about our operating results and financial condition. Certain of these estimates include determining fair value. All of these estimates reflect our best judgment about current, and for some estimates, future economic and market conditions and their effect based on information available as of the date of these consolidated financial statements. If these conditions change from those expected, it is reasonably possible that the judgments and estimates described below could change, which may result in future impairments of goodwill, intangibles and long-lived assets, increases in reserves for contingencies, establishment of valuation allowances on deferred tax assets and increase in tax liabilities, among other effects. Also see Note 2 “Summary of Significant Accounting Policies” to our audited consolidated financial statements included elsewhere in this Form 10-K, which discusses the significant accounting policies that we have selected from acceptable alternatives.

Acquisitions

From time to time we enter into strategic acquisitions in an effort to better service existing customers and to attain new customers. When we acquire a controlling financial interest in an entity or group of assets that are determined to meet the definition of a business, we apply the acquisition method described in ASC Topic 805, Business Combinations. In accordance with GAAP, the results of the acquisitions we have completed are reflected in our consolidated financial statements from the date of acquisition forward.

We allocate the purchase consideration paid to acquire the business to the assets and liabilities acquired based on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as goodwill. If during the measurement period (a period not to exceed twelve months from the acquisition date) we receive additional information that existed as of the acquisition date but at the time of the original allocation described above was unknown to us, we make the appropriate adjustments to the purchase price allocation in the reporting period the amounts are determined.

Significant judgment is required to estimate the fair value of intangible assets and in assigning their respective useful lives. Accordingly, we typically engage third-party valuation specialists, who work under the direction of management, to assist in valuing significant tangible and intangible assets acquired.

The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management, but are inherently uncertain.

We typically use an income method to estimate the fair value of intangible assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants, and include the amount and timing of future cash flows (including expected growth rates and profitability), a brand’s relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.

Determining the useful life of an intangible asset also requires judgment. All of our acquired intangible assets (e.g., trademarks, non-compete agreements and customer relationships) are expected to have finite useful lives. Our estimates of the useful lives of finite-lived intangible assets are based on a number of factors including competitive environment, market share, brand history, operating plans and the macroeconomic environment of the regions in which the brands are sold.

The costs of finite-lived intangible assets are amortized to expense over their estimated lives. The value of residual goodwill is not amortized, but is tested at least annually for impairment as described in the following note.

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Goodwill

Goodwill represents the excess of purchase price over the fair values underlying net assets acquired in an acquisition. Goodwill is not amortized, but rather is tested annually for impairment, or more frequently if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. We test goodwill for impairment annually in the fourth quarter of each year using data as of July 1 of that year.

Goodwill is allocated to, and evaluated for impairment at, our four 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 not to 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.

Based on our most recent annual analysis as of July 1, 2020, the fair values for three of our four reporting units exceeded the carrying values, and therefore no indicators of impairment existed for those three reporting units. The fair value of one of those passing reporting units, the Maintenance reporting unit, exceeded the carrying value by 5.3%. 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 forecasted trends assumed in the fair value calculation are not realized. As of September 30, 2020, there was $1.675 billion of goodwill recorded related to the Maintenance reporting unit. Our annual analysis also concluded that the fair value of the BrightView Tree Company reporting unit did not exceed the carrying value, which indicated an impairment. As a result, and in conjunction with the initiation and conclusion of the sale of the BrightView Tree Company reporting unit in the fourth quarter of fiscal 2020, a goodwill impairment loss of $15.5 million was recognized in the fourth quarter of fiscal 2020. See Note 8 “Intangible Assets, Goodwill, Acquisitions and Divestitures” to our audited consolidated financial statements included in Part II. Item 8 of this Form 10-K for additional information about the Company’s goodwill.

Long-lived Assets (Excluding Goodwill)

Long-lived assets with finite lives are depreciated and amortized generally on a straight-line basis over their estimated useful lives. These lives are based on our previous experience for similar assets, potential market obsolescence and other industry and business data. Property and equipment and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value. Changes in estimated useful lives or in the asset values could cause us to adjust our book value or future expense accordingly.

Net Service Revenues

We perform landscape maintenance and enhancement services, development services, other landscape services and snow removal services. Revenue is recognized based upon the service provided and the contract terms and is reported net of discounts and applicable sales taxes.

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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 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 4 “Revenue” to our audited 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 have been immaterial in prior periods. 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.

Risk Management and Insurance

We carry general liability, auto liability, workers’ compensation, professional liability, directors’ and officers’ liability, and employee health care insurance policies. In addition, we carry umbrella liability insurance policies to cover claims over the liability limits contained in the primary policies. Our insurance programs for workers’ compensation, general liability, auto liability and employee health care for certain employees contain self-insured retention amounts, deductibles and other coverage limits (“self-insured liability”). Claims that are not self-insured as well as claims in excess of the self-insured liability amounts are insured. We use estimates in the determination of the required accrued self-insured claims. These estimates are based upon calculations performed by third-party actuaries, as well as examination of historical trends, and industry claims experience. We adjust our estimate of accrued self-insured claims when required to reflect changes based on factors such as changes in health care costs, accident frequency and claim severity. We believe the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these highly judgmental accruals. However, the use of any estimation technique in this area is inherently sensitive given the magnitude of claims involved and the length of time until the ultimate cost is known. We believe our recorded obligations for these expenses are consistently measured. Nevertheless, changes in healthcare costs, accident frequency and claim severity can materially affect the estimates for these liabilities.

Equity-based Compensation

We account for equity-based compensation plans under the fair value recognition and measurement provisions in accordance with applicable accounting standards, which require all equity-based payments to employees and non-employees, including grants of stock options, to be measured based on the grant date fair value of the awards. We use the Black-Scholes-Merton valuation model to estimate the fair value of stock options granted to employees and non-employees. The model requires certain assumptions including the estimated expected term of the stock options, the risk-free interest rate and the exercise price, of which certain assumptions are highly complex and subjective. The expected option life represents the period of time that the options granted are expected to be outstanding based on management’s best estimate of the timing of a liquidity event and the contractual term of the stock option. As there is not sufficient trading history of our common stock, we use a group of our competitors which we believe are similar to us, adjusted for our capital structure, in order to estimate volatility. Our exercise price is the stock price on the date in which shares were granted.

Prior to our IPO, our stock price was calculated based on a combination of the income and market multiple approaches. Under the income approach, specifically the discounted cash flow method, forecasted cash flows are discounted to the present value at a risk-adjusted discount rate. The valuation analyses determine discrete free cash flows over several years based on forecast financial information provided by management and a terminal value for the residual period beyond the discrete forecast, which are discounted at an appropriate rate to estimate our enterprise value. Under the market multiple approach, specifically the guideline public company methods, we selected publicly traded companies with similar financial and operating characteristics as us and calculated valuation multiples based on the guideline public company’s financial information and market data. Subsequent to the IPO, the estimation of our stock price is no longer necessary as we rely on the market price to determine the market value of our common stock. For additional information related to the assumptions used, see Note 14 “Equity-Based Compensation” to our audited consolidated financial statements included elsewhere in Part II. Item 8 of this Form 10-K.

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Income Taxes

The determination of our provision for income taxes requires management’s judgment in the use of estimates and the interpretation and application of complex tax laws. Judgment is also required in assessing the timing and amounts of deductible and taxable items. We establish contingency reserves for material, known tax exposures relating to deductions, transactions, and other matters involving some uncertainty as to the proper tax treatment of the item. Our reserves reflect our judgment as to the resolution of the issues involved if subject to judicial review. Several years may elapse before a particular matter, for which we have established a reserve, is audited and finally resolved or clarified. While we believe that our reserves are adequate to cover reasonably expected tax risks, issues raised by a tax authority may be finally resolved at an amount different than the related reserve. Such differences could materially increase or decrease our income tax provision in the current and/or future periods. When facts and circumstances change (including a resolution of an issue or statute of limitations expiration), these reserves are adjusted through the provision for income taxes in the period of change.

Recently Issued Accounting Pronouncements

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which was further updated in March and April 2016. The updated accounting guidance clarifies the principles for recognizing revenue and provides a single, contract-based revenue recognition model in order to create greater comparability for financial statement users across industries and jurisdictions. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the guidance in the first quarter of fiscal 2019 using the modified retrospective approach transition method.

The Company concluded that is has substantially similar performance obligations under the amended guidance as compared with deliverables previously recognized. Additionally, the Company made policy elections within the amended standards that are consistent with current accounting policies. The adoption of ASU 2014-09 had an immaterial impact on the timing of revenue recognition and did not have a significant impact on the Company’s consolidated financial statements. The Company recognized the cumulative effect of adopting the new standard as an adjustment to the opening balance of retained earnings resulting in an increase in the Accumulated deficit of $1.1 million. The additional revenue recognition disclosures required by the amended standard are presented in Note 4 “Revenue”. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Intra-Entity Transfers of Assets Other ThanInventory

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This guidance requires that an entity recognizes the income tax consequences of anintra- entity transfer of an asset other than inventory when the transfer occurs. The Company adopted the guidance in the first quarter of fiscal 2019. The adoption of ASU No. 2016-16 did not have a material impact on the Company’s consolidated financial statements.

Hedging Activities

In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities which amends and simplifies existing guidance to allow companies to more accurately present the economic effects of risk management activities in the consolidated financial statements. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. For cash flow and net investment hedges as of the adoption date, the guidance requires a modified retrospective approach. The amended presentation and disclosure guidance is required only prospectively. The Company adopted the guidance in the first quarter of fiscal 2019. The adoption of ASU 2017-12 did not have a material impact on the Company’s consolidated financial statements.

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases. The updated accounting guidance requires lessees to recognize all leases on their balance sheet as a right-of-use asset and a lease liability with the exception of short-term leases. For income statement purposes, the criteria for recognition, measurement and presentation of expense is largely similar to previous guidance, but without the requirement to use bright-line tests in the determination of lease classification. In July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements, which allows entities the option to adopt this standard using the modified retrospective transition method and include required disclosures for prior periods. This update added a transition option which allows for the recognition of a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption without recasting the consolidated financial statements in periods prior to adoption.

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On October 1, 2019, the Company elected to adopt the standard using the modified retrospective approach applied to lease arrangements that were in place on the date of initial adoption. Results for reporting periods beginning October 1, 2019 are presented under the new standard, while prior-period amounts are not adjusted and continue to be reported in accordance with historical accounting under ASC 840, Leases.

The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. As an accounting policy election, the Company excluded short-term leases (term of 12 months or less) from the balance sheet and accounts for non-lease and lease components in a contract as a single component for all asset classes.

The Company recorded a lease liability of $76.3 million and a corresponding right-of-use asset of $70.6 million upon adoption of the new lease standard at October 1, 2019. The right-of-use asset and lease liability recorded as of October 1, 2019 include, respectively, amounts previously classified as deferred rent obligations and exit/disposal liabilities, and prepaid rent, totaling approximately $5.7 million. The Company’s finance lease assets and liabilities, which are disclosed in Note 13 “Leases”, remain largely unchanged under the new lease accounting standard. The new standard did not have a material impact on the Company’s results of operations or liquidity. The guidance did not have a material impact on its debt covenant compliance.

Measurement of Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments, which was amended in May 2019 by ASU No. 2019-04, Codification Improvements to Topic 326, Financial Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments and ASU No. 2019-05, Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief. These ASUs require entities to account for expected credit losses on financial instruments including trade receivables. The guidance is effective for the Company in the first quarter of fiscal 2021 and early adoption is permitted. The Company does not currently expect the adoption of ASU 2016-13 to have a material impact on its consolidated financial statements and disclosures.

Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement which modifies the disclosures on fair value measurements by removing the requirement to disclose the amount and reason for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. The ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income. The guidance is effective for the Company in the first quarter of fiscal 2021. Early adoption is permitted for any removed or modified disclosures and adoption of the additional disclosures can be delayed until the effective date. The Company does not currently expect the adoption of ASU 2018-13 to have a material impact on its consolidated financial statements and disclosures.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which simplifies the accounting for income taxes. The ASU removes specified exceptions and adds requirements to simplify the accounting for income taxes. The guidance is effective for the Company in the first quarter of fiscal 2022 and early adoption is permitted. The Company is currently evaluating the impact of the updated guidance on its consolidated financial statements.

Reference Rate Reform

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting which provides optional expedients and exceptions for the accounting for contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The guidance is effective for the Company upon issuance through December 31, 2022. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the third quarter of fiscal 2020 the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance on its consolidated financial statements and may apply other elections as applicable as additional changes in the market occur.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest RateRisk

We are exposed to interest rate risk as a result of our variable rate borrowings. We manage our exposureto interest rate risk by using pay-fixed interest rate swaps as cash flow hedges of a portion of our variable ratedebt. We have historically targeted hedging between 30% and 40% of the principal amount outstanding underour Term Loans.

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As of September 30, 2020, we had variable rate debt outstanding of $1.16 billion at a currentweighted average interest rate of 3.44%, substantially all of which was incurred under our Senior Secured CreditFacilities and the Receivables Financing Agreement. Each of these loans bears interest based on LIBOR plus aspread.

We use interestrate swaps to offset our exposure to interest rate movements. These outstanding interest rate swaps qualify andare designated as cash flow hedges of forecasted LIBOR-based interest payments. At September 30, 2020, we werea fixed rate payer on three fixed-floating interest rate swap contracts that effectively fixed the LIBOR-basedindex used to determine the interest rates charged on our LIBOR-based variable rate borrowings. See Note11 “Fair Value Measurements and Derivative Instruments” to our audited consolidated financial statementsincluded elsewhere in thisForm 10-K.

A 100 basis point increase in interest rates on our variable rate debt would increase our fiscal 2020 interest expense by approximately $11.6 million. A 100 basis point decrease in interest rates on our variable rate debt would decrease our fiscal 2020 interest expense by approximately $1.4 million. Actual interest rates could change significantly more than 100bps.

Commodity PriceRisk

We are exposed to market risk for changes in fuel prices through the consumption of fuel by ourvehicle fleet and mowers in the delivery of services to our customers. We purchase our fuel at prevailing marketprices. We expect to use approximately 11.2 million gallons of fuel in 2021. As of September 30, 2020, a ten percentchange in fuel prices would result in a change of approximately $2.9 million in our annual fuelcost.

We manage our exposure through the execution of a documented hedging strategy. We havehistorically entered into fuel swap contracts to mitigate the financial impact of fluctuations in fuel prices whenappropriate. We currently have open fuel-based derivative instruments. We continue to monitor our exposure andthe current pricing environment and may execute new fuel-based derivative instruments in thefuture. See Note11 “Fair Value Measurements and Derivative Instruments” to our audited consolidated financial statementsincluded elsewhere in thisForm 10-K.

Item 8. Financial Statements and Supplementary Data

The consolidated financial statements, supplementary information and financial statement schedules of the Company are set forth beginning on page F-1 of this report.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Regulations under the Exchange Act require public companies, including us, to maintain disclosure controls and procedures, which are defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the 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 management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required or necessary disclosures. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. The design of any controls and procedures also is based on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2020. Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that, as of September 30, 2020, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at a reasonable assurance level.

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles in the United States.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the process or procedures may deteriorate.

Under the supervision and with the participation our Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2020 based on the framework set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, the Company’s management concluded that the Company’s internal control over financial reporting was effective as of September 30, 2020.

The effectiveness of the Company’s internal control over financial reporting as of September 30, 2020 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm. Refer to “Opinion on Internal Control over Financial Reporting” on page F-3 herein.

Changes in Internal Control Over Financial Reporting

Regulations under the Exchange Act require public companies to evaluate any change in the Company’s internal control over financial reporting as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act. There have been no changes in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company’s ability to maintain an effective internal control environment has not been impacted by the COVID-19 pandemic. The Company is continually monitoring and assessing the impact of the COVID-19 pandemic on its internal controls to minimize the impact on their design and operating effectiveness.

Item 9B. Other Information.

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item is incorporated by reference to the applicable information in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders, which is expected to be filed with the SEC on or before January 26, 2021.

Item 11. Executive Compensation

The information required by this Item is incorporated by reference to the applicable information in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders, which is expected to be filed with the SEC on or before January 26, 2021.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item is incorporated by reference to the applicable information in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders, which is expected to be filed with the SEC on or before January 26, 2021.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated by reference to the applicable information in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders, which is expected to be filed with the SEC on or before January 26, 2021.

Item 14. Principal Accounting Fees and Services

The information required by this Item is incorporated by reference to the applicable information in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders, which is expected to be filed with the SEC on or before January 26, 2021.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this report:

(1) Consolidated Financial Statements;

See the “Index” to the Consolidated Financial Statements commencing on page F-1 of this Form 10-K.

(2) Financial Statement Schedules

All financial statement schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements and notes thereto.

(3) Exhibits

See the “Exhibit Index” beginning on page 58 of this Form 10-K.

Item 16. Form 10-K Summary

Not applicable.

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Exhibit Index

Exhibit Number Description

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21.1* Subsidiaries of BrightView Holdings, Inc.

23.1* Consent of Deloitte & Touche LLP

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101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

† Indicates a management contract or any compensatory plan, contract or arrangement.

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 18, 2020 BrightView Holdings, Inc.

By: /s/ Andrew V. Masterman

Andrew V. Masterman

Chief Executive Officer, President and Director

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

Andrew V. Masterman (Principal Executive Officer)

John A. Feenan (Principal Financial Officer)

/s/ Louay H. Khatib Chief Accounting Officer November 18, 2020

Louay H. Khatib (Principal Accounting Officer)

/s/ Paul E. Raether Chairman of Board of Directors November 18, 2020

Paul E. Raether

/s/ James R. Abrahamson Director November 18, 2020

James R. Abrahamson

/s/ Jane Okun Bomba Director November 18, 2020

Jane Okun Bomba

/s/ Shamit Grover Director November 18, 2020

Shamit Grover

/s/ Richard W. Roedel Director November 18, 2020

Richard W. Roedel

/s/ Mara Swan Director November 18, 2020

Mara Swan

/s/ Joshua T. Weisenbeck Director November 18, 2020

Joshua T. Weisenbeck

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets as of September 30, 2020 and September 30, 2019 F-4

Notes to Consolidated Financial Statements F-9

F-1

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Report of Independent Registered Public Accounting Firm

To the stockholders and the Board of Directors of BrightView Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of BrightView Holdings, Inc. and subsidiaries (the "Company") as of September 30, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows, for each of the three years in the period ended September 30, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 18, 2020 expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/S/ Deloitte & Touche LLP

Philadelphia, PA

November 18, 2020

We have served as the Company’s auditor since 2014.

F-2

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Report of Independent Registered Public Accounting Firm

To the stockholders and the Board of Directors of BrightView Holdings, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of BrightView Holdings, Inc. and subsidiaries (the “Company”) as of September 30, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and related notes as of and for the year ended September 30, 2020, of the Company and our report dated November 18, 2020 expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/S/ Deloitte & Touche LLP

Philadelphia, PA

November 18, 2020

F-3

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BrightView Holdings, Inc.

Consolidated Balance Sheets

(In millions, except par value and share data)

Assets

Current assets:

Cash and cash equivalents $ 157.1 $ 39.1

Operating lease assets 58.8 —

Liabilities and stockholders’ equity

Current liabilities:

Current portion of long-term debt 12.3 10.4

Current portion of self-insurance reserves 48.4 37.4

Accrued expenses and other current liabilities 197.2 136.0

Current portion of operating lease liabilities 18.3 —

Deferred tax liabilities 38.9 64.4

Long-term operating lease liabilities 47.5 —

Stockholders’ equity:

Accumulated other comprehensive loss (6.9 ) (11.7 )

Total liabilities and stockholders’ equity $ 3,071.0 $ 2,928.6

The accompanying notes are an integral part of these consolidated financial statements.

F-4

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BrightView Holdings, Inc.

Consolidated Statements of Operations

(In millions, except per share data)

Fiscal Year Ended

Selling, general and administrative expense 527.4 452.2 481.2

Other income (expense) 1.3 — (23.5 )

(Loss) income before income taxes (51.2 ) 57.2 (81.3 )

Income tax benefit (expense) 9.6 (12.8 ) 66.2

(Loss) income per share:

The accompanying notes are an integral part of these consolidated financial statements.

F-5

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BrightView Holdings, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In millions)

Fiscal Year Ended

Other comprehensive income (loss) 4.8 (1.3 ) 13.6

Comprehensive (loss) income $ (36.8 ) $ 43.1 $ (1.5 )

The accompanying notes are an integral part of these consolidated financial statements.

F-6

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BrightView Holdings, Inc.

Consolidated Statements of Stockholders’ Equity

(In millions)

Shares Amount

Net loss — — — (15.1 ) — — (15.1 )

Other comprehensive income, net of tax — — — — 13.6 — 13.6

Capital contributions and issuance of common stock 27.5 0.3 506.4 — — — 506.7

Equity-based compensation — — 28.8 — — — 28.8

Repurchase of common stock and distributions (0.1 ) — (2.9 ) — — — (2.9 )

Reclassification of effects of tax reform enactment — — — 3.5 (3.5 ) — —

Other comprehensive loss, net of tax — — — — (1.3 ) — (1.3 )

Capital contributions and issuance of common stock 0.2 — — — — — —

Equity-based compensation — — 15.7 — — — 15.7

Repurchase of common stock and distributions — — (0.2 ) — — (1.0 ) (1.2 )

Adoption of ASC 606 — — — (1.1 ) — — (1.1 )

Net loss — — — (41.6 ) — — (41.6 )

Other comprehensive income, net of tax — — — — 4.8 — 4.8

Capital contributions and issuance of common stock 0.2 — 2.4 — — — 2.4

Equity-based compensation — — 23.6 — — — 23.6

Repurchase of common stock and distributions — — — — — (1.5 ) (1.5 )

The accompanying notes are an integral part of these consolidated financial statements.

F-7

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BrightView Holdings, Inc.

Consolidated Statements of Cash Flows

(In millions)

Fiscal Year Ended

Cash flows from operating activities:

Amortization of financing costs and original issue discount 3.7 3.7 10.4

Loss on debt extinguishment — — 25.1

Realized loss on hedges 19.3 7.0 9.8

Goodwill impairment 15.5 — —

Other non-cash activities, net 6.1 (0.3 ) 1.5

Change in operating assets and liabilities:

Unbilled and deferred revenue 21.2 (34.8 ) 2.6

Other operating assets (5.2 ) 17.1 (16.5 )

Accounts payable and other operating liabilities 74.0 (2.0 ) (9.9 )

Cash flows from investing activities:

Purchase of property and equipment (52.7 ) (89.9 ) (86.4 )

Proceeds from sale of property and equipment 4.8 6.8 12.0

Business acquisitions, net of cash acquired (90.3 ) (64.0 ) (104.4 )

Proceeds from divestitures 28.5 — —

Other investing activities, net 0.9 1.6 (0.5 )

Net cash used in investing activities (108.8 ) (145.5 ) (179.3 )

Cash flows from financing activities:

Repayments of finance lease obligations (9.9 ) (5.8 ) (6.3 )

Repayments of receivables financing agreement (80.0 ) (120.0 ) (108.7 )

Repayments of revolving credit facility (70.0 ) (10.0 ) (60.0 )

Proceeds from term loan, net of financing costs — — 1,016.9

Proceeds from receivables financing agreement 80.0 120.0 115.0

Proceeds from revolving credit facility 70.0 10.0 60.0

Proceeds from issuance of common stock, net of share issuance costs 1.8 — 501.2

Repurchase of common stock and distributions (1.5 ) (1.2 ) (2.9 )

Other financing activities, net 1.7 (0.3 ) —

Net cash (used in) provided by financing activities (18.3 ) (20.3 ) 21.3

Net change in cash and cash equivalents 118.0 3.9 22.4

Cash and cash equivalents, beginning of period 39.1 35.2 12.8

Cash and cash equivalents, end of period $ 157.1 $ 39.1 $ 35.2

Supplemental Cash Flow Information:

Cash paid for income taxes, net $ 8.6 $ 1.9 $ 16.2

The accompanying notes are an integral part of these consolidated financial statements.

F-8

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BrightView Holdings, Inc.

Notes to Consolidated Financial Statements

(In millions, except per share and share data)

1. Business

BrightView Holdings, Inc. (the “Company” and, collectively with its consolidated subsidiaries, “BrightView”) provides landscape maintenanceand enhancements, landscape development, snow removal and other landscape related services forcommercial customers throughout the United States. BrightView is aligned into two reportable segments:Maintenance Services and Development Services. Prior to its initial public offering completed in July 2018 (the “IPO”), the Company was a wholly-owned subsidiary of BrightView Parent L.P. (“Parent”), an affiliate of KKR & Co. Inc. (“KKR”). The Parent and Company were formed through a series of transactions entered into by KKR to acquire the Company on December 18, 2013 (the “KKR Acquisition”). The Parent was dissolved in August 2018 following the IPO.

Basis of Presentation

These consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries which are directly or indirectly owned by the Company. Results of acquired companies are included in the consolidated financial statements from the effective date of the acquisition. All intercompany transactions and account balances have been eliminated.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. On an ongoing basis, management reviews its estimates, including those related to allowances for doubtful accounts, revenue recognition, self-insurance reserves, estimates related to the Company’s assessment of goodwill for impairment, useful lives for depreciation and amortization, realizability of deferred tax assets, and litigation based on currently available information. Changes in facts and circumstances may result in revised estimates and actual results may differ from estimates.

Initial Public Offering

On July 2, 2018, the Company completed its IPO in which the Company issued and sold 24,495,000 shares of common stock. The shares sold in the offering were registered under the Securities Act of 1933, as amended, pursuant to the Company’s Registration Statement on Form S-1 (File No. 333-225277) (the “Registration Statement”), which was declared effective by the SEC on June 27, 2018. The shares of the Company’s common stock were sold at an initial offering price of $22.00 per share, which generated net proceeds of approximately $501.2 to the Company, after deducting underwriting discounts and estimated offering expenses of approximately $37.7. The Company used the net proceeds from the IPO to repay all $110.0 of the Company’s second lien term loans, all $55.0 then outstanding under the Company’s Revolving Credit Facility (as defined below) and approximately $336.1 of the Company’s first lien term loans and accrued and unpaid interest thereon. These repayments resulted in an extinguishment of debt in the amount of approximately $501.1, which was recognized in the fourth quarter of 2018. The Company incurred $6.8 of transaction related expenses during the year ended September 30, 2018, which are included in Selling, general and administrative expense in the accompanying Consolidated Statements of Operations, of which $5.4 was paid from the net proceeds generated by the IPO.

BrightView was party to a Monitoring Agreement, dated as of December 18, 2013 (the “Monitoring Agreement”), with KKR and MSD Partners (“MSD Partners” and together with KKR, the “Sponsors”), which was terminated on July 2, 2018 in accordance with its terms upon the completion of the IPO. Affiliates of KKR and MSD Partners retained 55.9% and 13.0% ownership interest, respectively, in the Company after the IPO.

The Company’s Third Amended and Restated Certificate of Incorporation (the “Charter”) became effective in connection with the completion of the IPO on July 2, 2018. The Charter, among other things, provides that the Company’s authorized capital stock consists of 500,000,000 shares of common stock, and 50,000,000 shares of preferred stock, par value $0.01 per share. The Company’s bylaws were also amended and restated as of July 2, 2018.

After the completion of the IPO and as of September 30, 2020, affiliates of the Sponsors continue to control a majority of the voting power of the Company’s common stock. As a result, the Company is considered a “controlled company” within the meaning of the corporate governance standards of the New York Stock Exchange (“NYSE”).

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Reverse Stock Split

In connection with preparing for the IPO, the Company’s Board of Directors approved a 2.33839-for-one reverse stock split of the Company’s common stock. The reverse stock split became effective June 8, 2018. All common share and per share amounts in the consolidated financial statements and notes have been retrospectively adjusted to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in aggregate par value of “Common stock” to “Additional paid-in-capital” on the consolidated balance sheets.

2. Summary of Significant Accounting Policies

Cash and CashEquivalents

Cash and cash equivalents include deposits in banks and money market funds with maturities of less thanthree months at the time of deposit orinvestment.

Accounts Receivable

Accounts receivables are recorded at the invoiced amount and do not bear interest. The Companyreserves for all accounts that are deemed to be uncollectible and reviews its allowance for doubtful accountsregularly. The allowance is based on the age of receivables and a specific identification of receivables considered atrisk (see Note5 “Accounts Receivable”).Account balances are written off against the allowance when the potential for recovery is considered remote.

Accounts receivable also includes customer balances that have been billed or are billable to the Company’s customersbut will not be collected until completion of the project or as otherwise specified in the contract. Theseamounts generally represent 5-10% of the total contractvalue.

Inventories

Inventories as of September 30, 2020 consist primarily of landscape and irrigation materials and snow removal products which are classified as raw materials. Inventories prior to the September 30, 2020 sale of BrightView Tree Company consist primarily of trees, landscape and irrigation materials and snow removal products. The cost elements of tree inventories include physical plants, related planting materials, and labor costs. Inventories are valued at the lower of cost (first in, first out) or net realizable value. When market values are below the Company’s costs, the Company records an expense to increase Cost of services provided.

Property and Equipment

Property and equipment is carried at cost, including the cost of internal labor for software for internal use,less accumulated depreciation, except for those assets acquired through a business combination, in which casethey have been stated at estimated fair value as of the date of the business combination, less accumulated depreciation. Costs of replacementsor maintenance and repairs that do not improve or extend the life of the related assets are expensed asincurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets andincluded in Cost of services provided or Selling, general and administrative expense asappropriate.

Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over the fair values underlying net assets acquired inan acquisition. Goodwill is not amortized, but rather is tested annually for impairment or more frequently ifevents or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company tests goodwill for impairment annually in the fourth quarter of each year using data as of July 1 of that year.

Goodwill is allocated to, and evaluated for impairment at, the Company’s four identified reporting units. Goodwill istested for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluationis an assessment of factors to determine whether it is more likely than not that a reporting unit’s fair value isless than its carrying amount. The Company may elect not to perform the qualitative assessment for some orall reporting units and perform the quantitative impairment test. The quantitative goodwill impairment testrequires the Company to compare the carrying value of the reporting unit’s net assets to the estimated fair value of thereporting unit. The Company determines the estimated fair values of each of the reporting units using a combination of the income and market multiple approaches.Theestimates used in each approach include significant management assumptions, including long-term future growthrates, operating margins, discount rates and future economic and marketconditions.

If the estimated fair value exceeds the carrying value, no further evaluation is required, and no impairment lossis recognized. If the carrying amount of a reporting unit, including goodwill, exceeds the estimated fair value,the excess of the carrying value over the estimated fair value is recorded as an impairment loss, the amount of which is nottoexceed the total amount of goodwill allocated to the reporting unit.

Definite-lived intangible assetsconsist principally of acquired customer contracts and relationships, non-compete agreements and trademarks. Acquired customerrelationships are amortized in an accelerated pattern consistent with expected future cash flows. Non-compete agreements and trademarks areamortized straight-line over their estimated usefullives.

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Impairment of Long-livedAssets

Property and equipment and definite-lived intangible assets are reviewed for impairment whenever eventsor changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverabilityof assets to be held and used is measured by a comparison of the carrying amount of an asset toestimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an assetexceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carryingamount of the asset exceeds the fairvalue.

Financing Costs

Financing costs, consisting of fees and other expenses associated with borrowings, are amortized over theterms of the related borrowings using the effective interest rate method (see Note 10 “Long-term Debt”). Financing costs are presentedin the Consolidated Balance Sheets as a direct reduction from the carrying amount of the relatedborrowings.

Self-InsuranceReserves

The Company carries general liability, vehicle liability, workers’ compensation, professional liability, directors’ and officers’ liability, cyber security and employee health care insurance policies. In addition, the Company carries umbrella liability insurance policies to cover claims over the liability limits contained in the primary policies. The Company’s insurance programs for general liability, vehicle liability, workers’ compensation and employee health care for certain employees contain self-insured retention amounts. Claims that are not self-insured as well as claims in excess of the self-insured retention amounts are insured. The Company uses estimates in the determination of the required reserves. These estimates are based upon calculations performed by third-party actuaries, as well as examination of historical trends, demographic factors and industry claims experience. A receivable for an insurance recovery is generally recognized when the loss has occurred and collection is considered probable (see Note 15 “Commitments and Contingencies”).