BRIGHTVIEW HOLDINGS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

The following discussion contains management's discussion and analysis of our
financial condition and results of operations and should be read together with
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, 2022 and 2021 items and year to year comparisons between the
fiscal years ended September 30, 2022 and 2021. The discussion around results of
operations for the fiscal year ended September 30, 2020 and a comparison of our
results for the fiscal years ended September 30, 2021 and 2020 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, 2021, filed with the SEC on November 17, 2021 and is incorporated by
reference herein (  Fiscal Year Ended September 30, 2021 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 6 times those of our next largest commercial
landscaping competitor. We provide commercial landscaping services ranging from
landscape maintenance and enhancements to tree care and landscape development.
We operate through a differentiated and integrated national service model which
systematically delivers services at the local level by combining our network of
over 290 branches with a qualified

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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 network of branches strategically located in 34 US states, and through our network of qualified service partners, we are able to efficiently provide nationwide coverage in all 50 US states.

Maintenance Services

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

Development Services

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

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


Components of our income and expenses

Net service income

Maintenance Services

Our Maintenance Services revenues are generated primarily through landscape
maintenance services and snow removal services. Landscape maintenance services
that are primarily viewed as non-discretionary, such as lawn care, mowing,
gardening, mulching, leaf removal, irrigation and tree care, are provided under
recurring annual contracts, which typically range from one to three years in
duration and are generally cancellable by the customer with 30-90 days' notice.
Snow removal services are provided on either fixed fee based contracts or per
occurrence contracts. Both landscape maintenance services and snow removal
services can also include enhancement services that represent supplemental
maintenance or improvement services generally provided under contracts of short
duration related to specific services. Revenue for landscape maintenance and
snow removal services under fixed fee models is recognized over time using an
output based method. Additionally, a portion of our recurring fixed fee
landscape maintenance and snow removal services are recorded under the series
guidance. The right to invoice practical expedient, defined within Note 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

Development Services revenue is primarily recognized over time using the
cost-to-cost input method, measured by the percentage of cost incurred to date
to the estimated total cost for each contract, which we believe to be the best
measure of progress. The full amount of anticipated losses on contracts is
recorded as soon as such losses can be estimated. These losses are immaterial to
current and historical

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operations. Changes in job performance, job conditions and estimated
profitability, including final contract settlements, may result in revisions to
costs and revenue and are recognized in the period in which the revisions are
determined.

Expenses

Cost of Services Provided

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

Selling, general and administrative expenses

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.

Depreciation expense

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

Interest charges

Interest expense relates primarily to our long term debt. See Note 9 "Long-term
Debt" to our audited consolidated financial statements included in Part II. Item
8 of this Form 10-K.

Income Tax Expense

Income tax expense 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.

Other expenses (income)

Other expense (income) consists primarily of losses on extinguishment of debt and investment gains and losses and gains 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"), and 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 income before interest, taxes, depreciation,
amortization and certain non-cash, non-recurring and other adjustment items.
Adjusted Net Income is defined as net income 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.

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

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, and 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, and 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, and 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.

Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are provided in addition
to, and should not be considered as alternatives to, net income or any other
performance measure derived in accordance with GAAP, and Free Cash Flow is
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, and 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
of our fiscal year ended September 30. The lower level of activity in seasonal
markets during our first and second fiscal quarters is partially offset by
revenue from our snow removal services. Such seasonality causes our results of
operations to vary from quarter to quarter.

Weather situation

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 plan to continue to grow our business through acquisitions in an effort to better serve our existing customers and attract new customers. These acquisitions enabled us to execute our

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"strong-on-strong" acquisition strategy in which we focus on increasing our
density and leadership positions in existing local markets, entering into
attractive new geographic markets and expanding our portfolio of landscape
enhancement services and improving technical capabilities in specialized
services. As we continue to selectively pursue acquisitions that complement our
"strong-on-strong" acquisition strategy, we believe we are the acquirer of
choice in the highly fragmented commercial landscaping industry because we offer
the ability to leverage our significant size and scale, as well as provide
stable and potentially expanding career opportunities for employees of acquired
businesses. In accordance with GAAP, the results of the acquisitions we have
completed are reflected in our consolidated financial statements from the date
of acquisition. We incur transaction costs in connection with identifying and
completing acquisitions and ongoing integration costs as we integrate acquired
companies and seek to achieve synergies. During the fiscal year ended September
30, 2022, the Company acquired eight businesses and paid approximately $93.1
million in aggregate consideration, net of cash acquired. We incurred $8.2
million of integration costs during the fiscal year ended September 30, 2022, of
which $5.3 million related to acquisitions completed prior to fiscal 2022 and
$2.9 million related to acquisitions completed during fiscal 2022. While
integration costs vary based on factors specific to each acquisition, such costs
are primarily comprised of one-time employee retention costs, employee
onboarding and training costs, and fleet and uniform rebranding costs. We
typically anticipate integration costs to represent approximately 7%-9% of the
acquisition price, and to be incurred within 12 months of acquisition
completion.

Industry and economic conditions

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

COVID-19 Update

The impact of the COVID-19 pandemic and related economic conditions on the
Company's results continue to be highly uncertain and outside the Company's
control. Although our Maintenance and Development operations are considered
essential services, future governmental orders or other restrictions may limit,
restrict or prohibit operations in the future. Further limitations could have a
material adverse impact on our business, financial condition and results of
operations. The scope, duration and magnitude of the direct and indirect effects
of the COVID-19 pandemic are difficult or impossible to anticipate. Due to the
uncertainty related to the extent of the ongoing impact of the pandemic, the
Company's results in fiscal year 2022 may not be indicative of the Company's
future results. For additional information on the risks posed by COVID-19, see
"Item 1A - Risk Factors".

Results of Operations

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


                                                  Fiscal Year Ended September 30,
(In millions)                                       2022                   2021
Net service revenues                          $        2,774.6       $        2,553.6
Cost of services provided                              2,099.8                1,902.8
Gross profit                                             674.8                  650.8
Selling, general and administrative expense              534.9                  508.0
Amortization expense                                      51.5                   52.3
Income from operations                                    88.4                   90.5
Other expense (income)                                    15.5                   (2.7 )
Interest expense                                          53.3                   42.3
Income before income taxes                                19.6                   50.9
Income tax expense                                         5.6                    4.6
Net income                                    $           14.0       $           46.3
Adjusted EBITDA(1)                            $          287.9       $          302.3
Adjusted Net Income (1)                       $          100.9       $          126.3

Cash flow from operating activities $106.9 $

    148.4
Free Cash Flow(1)                             $            6.7       $           96.7



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

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Year ended September 30, 2022 compared to the year ended September 30, 2021

Net Service Revenues

Net service revenues for the fiscal year ended September 30, 2022 increased
$221.0 million, or 8.7%, to $2,774.6 million, from $2,553.6 million in the 2021
period. The increase was driven by increases in Maintenance Services revenues of
$99.1 million and Development Services revenues of $123.9 million as discussed
further below in Segment Results.

Gross profit

Gross profit for the year ended September 30, 2022 increase $24.0 millioni.e. 3.7%, to $674.8 millionof $650.8 million over the 2021 period, mainly due to higher revenues from maintenance services and development services. Gross margin decreased by 120 basis points to 24.3% for the year ended September 30, 2022compared to 25.5% for the 2021 period, due to the increase in material and fuel costs as a percentage of revenue.

Selling, general and administrative expenses

Selling, general and administrative expense for the fiscal year ended September
30, 2022 increased $26.9 million, or 5.3%, to $534.9 million, from $508.0
million in the 2021 period. The increase was primarily due to the impact of
acquisitions as well as the reinstatement of the employer match for the employee
savings plan coupled with a slight increase in travel costs. As a percentage of
revenue, selling, general and administrative expense decreased 60 basis points
for the fiscal year ended September 30, 2022 to 19.3%, from 19.9% in the 2021
period.

Amortization Expense

Amortization expense for the fiscal year ended September 30, 2022 decreased $0.8
million, or 1.5%, to $51.5 million, from $52.3 million in the 2021 period. The
decrease was principally due to a $4.2 million decrease in the amortization of
historical intangible assets recognized in connection with the KKR Acquisition
and the ValleyCrest Acquisition, based on the pattern consistent with expected
future cash flows calculated at that time, partially offset by a $3.4 million
increase in amortization expense for intangible assets recognized in connection
with our acquired businesses subsequent to the ValleyCrest Acquisition.

Other expenses (income)

Other expense was $15.5 million for the fiscal year ended September 30, 2022
compared to $2.7 million of income in the 2021 period. The $18.2 million
increase in expense was driven principally by the losses on the extinguishment
of debt in connection with the amendment dated April 22, 2022 ("Amendment No.
6") to our credit agreement dated December 18, 2013 (as amended, the "Credit
Agreement") and the change in value of investments held in the Rabbi Trust.

Interest charges

Interest expense for the fiscal year ended September 30, 2022 increased $11.0
million, or 26.0%, to $53.3 million, from $42.3 million in the 2021 period. The
increase was driven by an increased weighted average interest rate on the Series
B Term Loan in the 2022 period of 3.76% compared to 2.65% in the 2021 period,
coupled with the increase in the borrowings under the Series B Term Loan
associated with Amendment No. 6 to the Credit Agreement, partially offset by the
impact of our interest rate swaps for the period.

income tax expense

For the fiscal year ended September 30, 2022, income tax expense increased $1.0
million, or 21.7%, to $5.6 million, compared to $4.6 million in the 2021 period.
The change in income tax expense is primarily attributable to the tax planning
benefit that was included in the Company's income tax expense for the 2021
period, partially offset by a decrease in pretax income to $19.6 million
compared to pretax income of $50.9 million in the 2021 period.

Net revenue

For the year ended September 30, 2022net income decreased by $32.3 millionat $14.0 millionof $46.3 million in the 2021 period. The decrease in net profit is mainly attributable to the aforementioned changes.

Adjusted EBITDA

Adjusted EBITDA decreased $14.4 million for the fiscal year ended September 30,
2022, to $287.9 million, from $302.3 million in the 2021 period. Adjusted EBITDA
as a percent of revenue was 10.4% and 11.8% for the fiscal year ended September
30, 2022 and 2021, respectively. The decrease in Adjusted EBITDA was principally
driven by a decrease of $20.8 million, or 6.9% in Maintenance Services Segment
Adjusted EBITDA, partially offset by an increase of $8.5 million, or 13.0% in
Development Services Segment Adjusted EBITDA, as discussed further below in
Segment Results.

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Adjusted Net Income

Adjusted Net Income for the fiscal year ended September 30, 2022 decreased $25.4
million to $100.9 million, from $126.3 million in the 2021 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 years ended September 30, 2022 and 2021

The following tables present net services revenue, Adjusted EBITDA by segment and Adjusted EBITDA margin by segment for each of our segments. Changes in Adjusted EBITDA margin by segment are shown in basis points, or basis points.

Maintenance Services Segment Results

                                               Fiscal Year Ended September 30,          Percent Change
(In millions)                                    2022                   2021            2022 vs. 2021
Net Service Revenues                       $        2,082.0       $        1,982.9                  5.0 %
Segment Adjusted EBITDA                    $          278.8       $          299.6                 (6.9 )%
Segment Adjusted EBITDA Margin                         13.4 %               

15.1% (170) basis points

Net revenue from maintenance services

Maintenance Services net service revenues for the fiscal year ended September
30, 2022 increased by $99.1 million, or 5.0%, compared to the 2021 period.
Revenues from landscape maintenance services were $1,825.7 million for the
fiscal year ended September 30, 2022, an increase of $127.7 million over the
2021 period. The increase in landscape maintenance service revenues was
primarily driven by a $74.5 million, or 4.4%, increase in underlying commercial
landscape services underpinned by a combination of contract services growth and
to a greater extent ancillary services growth, as well as a $53.2 million
revenue contribution from acquired businesses. Offsetting this was a decrease of
$28.6 million in snow removal services, net of $21.1 million from acquired
businesses, due to overall less snowfall during the year ended September 30,
2022 as compared to the 2021 period.

Maintenance Services Segment Adjusted EBITDA

Segment Adjusted EBITDA for the fiscal year ended September 30, 2022 decreased
$20.8 million, to $278.8 million, compared to $299.6 million in the 2021 period.
Segment Adjusted EBITDA Margin decreased 170 basis points, to 13.4%, in the
fiscal year ended September 30, 2022, from 15.1% in the 2021 period. The
decreases in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were
principally driven by the decrease in snow removal revenues, higher fuel costs
and the reinstatement of the employer match for the employee savings plan,
partially offset by increases in revenues from underlying commercial landscape
services and acquisitions discussed above.

Developmental Services Sector Results

                                                Fiscal Year Ended September 30,           Percent Change
(In millions)                                    2022                     2021            2022 vs. 2021
Net Service Revenues                       $          698.8         $          574.9                 21.6 %
Segment Adjusted EBITDA                    $           73.7         $           65.2                 13.0 %
Segment Adjusted EBITDA Margin                         10.5 %                   11.3 %           (80) bps


Net income from development services

Development Services net service revenues for the fiscal year ended September
30, 2022 increased $123.9 million, or 21.6%, compared to the 2021 period. The
increase was driven by a $65.2 million revenue contribution from acquired
businesses combined with an increase of $58.7 million due to additional project
volumes.

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Developmental Services segment adjusted EBITDA

Segment Adjusted EBITDA for the fiscal year ended September 30, 2022 increased
$8.5 million, to $73.7 million, compared to $65.2 million in the 2021 period,
principally as a result of the increases in revenues described above, partially
offset by higher materials costs and the reinstatement of the employer match for
the employee savings plan. Segment Adjusted EBITDA Margin decreased 80 basis
points, to 10.5% for the period from 11.3% in the 2021 period, primarily as a
result of higher materials and fuel costs as a percentage of revenue, partially
offset by lower labor costs as a percentage of revenue.

Non-GAAP Financial Measures

Set forth below are the reconciliations of net income to Adjusted EBITDA and
Adjusted Net Income and cash flows from operating activities to Free Cash Flow.

                                                         Fiscal Year Ended September 30,
(in millions)                                             2022                     2021
Adjusted EBITDA
Net income                                          $           14.0         $           46.3
Plus:
Interest expense, net                                           53.3                     42.3
Income tax expense                                               5.6                      4.6
Depreciation expense                                            98.9                     84.7
Amortization expense                                            51.5                     52.3
Business transformation and integration costs (a)               21.5                     28.5
Offering-related expenses (b)                                    0.1                      0.6
Equity-based compensation (c)                                   19.0                     20.0
COVID-19 related expenses (d)                                   11.4                     23.0
Debt extinguishment (e)                                         12.6                        -
Adjusted EBITDA                                     $          287.9         $          302.3
Adjusted Net Income
Net income                                                      14.0                     46.3
Plus:
Amortization expense                                            51.5                     52.3
Business transformation and integration costs (a)               21.5                     28.5
Offering-related expenses (b)                                    0.1                      0.6
Equity-based compensation (c)                                   19.0                     20.0
COVID-19 related expenses (d)                                   11.4                     23.0
Debt extinguishment (e)                                         12.6                        -
Income tax adjustment (f)                                      (29.2 )                  (44.4 )
Adjusted Net Income                                 $          100.9         $          126.3
Free Cash Flow
Cash flows from operating activities                $          106.9         $          148.4
Minus:
Capital expenditures                                           107.3                     61.2
Plus:
Proceeds from sale of property and equipment                     7.1                      9.5
Free Cash Flow                                      $            6.7         $           96.7



(a)

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

                                                         Fiscal Year Ended September 30,
(in millions)                                             2022                     2021
Severance and related costs                         $            1.6         $            0.3
Business integration (g)                                         8.2                     14.0
IT infrastructure, transformation, and other (h)                11.7                     14.2
Business transformation and integration costs       $           21.5         $           28.5




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(b)

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

(vs)

Represents stock-based compensation expense and related taxes recognized for outstanding stock-based incentive plans.

(D)

Represents expenses related to the Company's response to the COVID-19 pandemic,
principally temporary and incremental salary and related expenses, personal
protective equipment, cleaning and supply purchases, and other. Additionally,
fiscal year 2022 includes refunds related to employee retention credits allowed
under the CARES Act.

(e)

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

(F)

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

                                               Fiscal Year Ended September 

30,

(in millions)                                   2022                    

2021

Tax impact of adjustments to pre-tax income $ $29.4

  33.7
Discrete tax items                                    (0.2 )                  10.7
Income tax adjustment                      $          29.2         $          44.4



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

(h)

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

Cash and capital resources

Liquidity

Our principal sources of liquidity are existing cash and cash equivalents, cash
generated from operations and borrowings under the Credit Agreement and the
Receivables Financing Agreement (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.

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.

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,
(In millions)                                           2022               2021
Cash and cash equivalents                           $        20.1     $        123.7
Short-term borrowings and current maturities of
long-term debt                                      $        12.0     $         10.4
Long-term debt                                      $     1,330.7     $      1,130.6
Total debt                                          $     1,342.7     $      1,141.0


The Company is a party to the Credit Agreement, a five-year revolving credit facility which, pursuant to the amending agreement, currently matures on April 22, 2027 (the “Revolving Credit Facility”) and, through a wholly owned subsidiary, receivables financing

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agreement dated April 28, 2017 (as amended, the “Receivables Financing Agreement”). Each of the Company’s credit facilities bears interest in part at a guaranteed overnight rate. 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 9 "Long-term Debt" to our audited consolidated financial
statements included elsewhere in Part II. Item 8 of this Form 10-K.

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

Cash flow

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

                          Fiscal Year Ended September 30,
(In millions)               2022                  2021
Operating activities   $         106.9       $         148.4
Investing activities   $        (193.7 )     $        (158.7 )
Financing activities   $         (16.8 )     $         (23.1 )
Free Cash Flow (1)     $           6.7       $          96.7



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

Cash flow generated by operating activities

Net cash provided by operating activities for the fiscal year ended September
30, 2022 decreased $41.5 million, to $106.9 million, from $148.4 million in the
2021 period. This decrease was due to a decrease in the cash provided by
accounts payable and other operating liabilities principally due to the impact
of the repayment of the payroll tax deferral under the CARES Act. This was
partially offset by an increase in cash provided by accounts receivable and
unbilled and deferred revenue.

Cash flows used in investing activities

Net cash used in investing activities was $193.7 million in the fiscal year
ended September 30, 2022, an increase of $35.0 million compared to $158.7
million for the 2021 period. The increase was driven by an increase of $46.1
million in cash used for capital expenditures driven principally by receipted
orders previously impacted by pandemic-related supply chain challenges,
partially offset by a decrease of $17.3 million in cash used for acquisitions in
comparison to the 2021 period.

Cash flows used in financing activities

Net cash used in financing activities of $16.8 million for the fiscal year ended
September 30, 2022 included proceeds from the April 22, 2022 refinancing of our
term loan with the Series B Term Loan, net of issuance costs of $1,180.1
million, partially offset by repayments of our term loan of $1,006.3 million and
repayments of the previous draw on our Revolving Credit Facility of $165.0
million. Proceeds from our Receivables Financing Agreement, net of issuance
costs of $391.7 million were partially offset by repayments of our Receivables
Financing Agreement of $374.4 million. Additionally, repurchases of common stock
and distributions totaled $163.8 million and repayments of finance lease
obligations totaled $27.0 million in the period.

Free movement of capital

Free Cash Flow decreased $90.0 million to $6.7 million for the fiscal year ended
September 30, 2022 from $96.7 million in the 2021 period. The decrease in Free
Cash Flow was due to a decrease in net cash provided by operating activities and
an increase in cash used for capital expenditures, as described above.

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Working Capital

(In millions)               September 30, 2022      September 30, 2021
Net Working Capital:
Current assets              $             677.1     $             710.8
Less: Current liabilities                 488.4                   496.1
Net working capital         $             188.7     $             214.7



Net working capital is defined as current assets less current liabilities. Net
working capital decreased $26.0 million, to $188.7 million, at September 30,
2022, from $214.7 million at September 30, 2021, primarily driven by a decrease
in cash and cash equivalents of $103.6 million coupled with an increase in
deferred revenue of $11.1 million and an increase in accounts payable of $6.8
million. This was partially offset by an increase in other current assets of
$32.2 million, a decrease in accrued expenses and other current liabilities of
$27.4 million, an increase in unbilled revenue of $19.0 million and an increase
in accounts receivable, net of $18.7 million.

Description of the debt

Series B term loan due 2029

On April 22, 2022, the Company entered into Amendment No. 6 to the Credit
Agreement (the "Amendment Agreement"). Under the terms of the Amendment
Agreement, the existing Credit Agreement (as amended prior to but not including
under the Amendment Agreement, the "Amended Credit Agreement") was amended to
provide for: (i) a $1,200.0 seven-year term loan (the "Series B Term Loan") and
(ii) a $300.0 five-year revolving credit facility (the "Revolving Credit
Facility"). The Series B Term Loan matures on April 22, 2029 and bears interest
at a rate per annum of a secured overnight financing rate ("Term SOFR"), plus a
margin of either 3.25% or 3.00% or a base rate ("ABR") plus a margin of either
2.25% or 2.00%, subject to SOFR and ABR floors of 0.50% and 1.50%, respectively,
with the margin on the Series B Term Loan determined based on the Company's
first lien net leverage ratio. The Company used the net proceeds from the Series
B Term Loan to repay all amounts outstanding under the Company's Amended Credit
Agreement. As a result of the repayment of the amounts outstanding under the
Company's Amended Credit Agreement, the Company recorded a loss on debt
extinguishment of $12.6 due to accelerated amortization of deferred financing
fees and original issue discount included in the Other (expense) income line of
the Consolidated Statements of Operations. An original issue discount of $12.0
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 3.42%. Debt repayments for the Series B Term Loan totaled
$1,006.3 and $10.4 for the fiscal years ended September 30, 2022 and September
30, 2021, respectively.

In addition to scheduled payments, the Company is obligated to pay a percentage
of excess cash flow, as defined in the Amended Credit Agreement, as payments to
principal. 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 required
payment due for the periods ended September 30, 2022, September 30, 2021, and
September 30, 2020.

Revolving credit facility

The Company has a five-year $300 revolving credit facility (the "Revolving
Credit Facility") that matures on April 22, 2027 and bears interest at a rate
per annum of Term SOFR plus a margin ranging from 2.00% to 2.50%, or ABR plus a
margin ranging from 1.00 to 1.50%, subject to SOFR and ABR floors of 0.00% and
1.00%, respectively, with the margin on the Revolving Credit Facility determined
based on the Company's first lien net leverage ratio. The Revolving Credit
Facility replaced the previous $260.0 revolving credit facility under the Credit
Agreement. The Company had no outstanding balance under the Revolving Credit
Facility as of September 30, 2022 and September 30, 2021. There were $165.0
borrowings under the facility during the year ended September 30, 2022, of
which, $165.0 were repaid during the same period. There were no borrowings or
repayments under the facility for the year ended September 30, 2021. There is a
quarterly commitment fee equal to either 1/4 of 1% or 3/8 of 1% of the unused
balance of the Revolving Credit Facility depending on the Company's first lien
net leverage ratio. The Company had $49.1 and $52.3 of letters of credits issued
and outstanding as of September 30, 2022 and September 30, 2021, respectively.
The weighted average interest rate on the Revolving Credit Facility was 2.3% for
the years ended September 30, 2022 and 2021.

Receivables financing agreement

On April 28, 2017, the Company, through a wholly-owned subsidiary, entered into
a receivables financing agreement (the "Receivables Financing Agreement"). On
February 19, 2021, the Company entered into the Second Amendment to the
Receivables Financing Agreement (the "Second Amendment") which extended the term
through February 20, 2024 and increased the borrowing capacity to $235.0 through
September 20, 2021 and $250.0 thereafter. On June 22, 2022, the Company entered
into the Third Amendment to the Receivables Financing Agreement (the "Third
Amendment") which extended the term through June 22, 2025 and increased the
borrowing capacity to $275.0. All amounts outstanding under the Receivables
Financing Agreement are collateralized by

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substantially all of the Company’s accounts receivable and unbilled revenue. During the year ended September 30, 2022the company borrowed $392.0
against capacity and voluntarily reimbursed $374.4. During the year ended
September 30, 2021the company borrowed $34.5 against capacity and voluntarily reimbursed $24.6.

For additional information on our material indebtedness, including our First
Lien Term Loans, Series B Term Loans and Revolving Credit Facility and our
outstanding borrowings under the Receivables Financing Agreement, see Note 9
"Long-term Debt" in our audited consolidated financial statements included
elsewhere in this Form 10-K.

As of September 30, 2022, September 30, 2021, and September 30, 2020, 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 Company's primary contractual obligations include the payment of interest
and principal on our outstanding long term debt, our operating and finance lease
portfolios, and other operational purchase obligations

The Company has outstanding variable-rate debt through its Series B Term Loan,
Revolving Credit Facility, Receivables Financing Agreement and other debt
instruments, which hold varying maturities. See Note 9 "Long-term Debt" to our
audited consolidated financial statements included in Part II. Item 8 of this
Form 10-K for further information, including the timing of principal and
interest payments associated with the Company's long term debt.

The Company has operating and finance leases for branch and administrative
offices, vehicles, certain machinery and equipment, and furniture. The Company's
leases have remaining lease terms of one month up to 11.3 years. See Note 12
"Leases" to our audited consolidated financial statements included in Part II.
Item 8 of this Form 10-K for additional information, including the maturity
schedule of future principal and interest payments associated with our finance
and operating lease portfolios.

Purchase obligations include commitments for various products and services made
in the normal course of business to meet operational requirements, including the
procurement of capital assets. As of September 30, 2022 the Company had $48.1
million of operational purchase obligations, with $39.6 million payable within
twelve months. These purchase obligation amounts represent only those items for
which we are contractually obligated as of September 30, 2022.

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.

Significant 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.

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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.

Good will

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

If the fair value exceeds the carrying value, no further evaluation is required,
and no impairment loss is recognized. If the carrying amount of a reporting
unit, including goodwill, exceeds the estimated fair value, the excess of the
carrying value over the fair value is recorded as an impairment loss, the amount
of which 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, 2022, the fair values for
all three of our reporting units exceeded the carrying values, and therefore no
indicators of impairment existed for those three reporting units; however, the
fair value of the Maintenance reporting unit exceeded the carrying value by
7.8%. Since the Maintenance reporting unit fair value did not substantially
exceed the carrying value we may be at risk for an impairment loss in the future
if forecasted trends assumed in the fair value calculation are not realized. As
of September 30, 2022, there was $1,786.9 million of goodwill recorded related
to the Maintenance reporting unit. See Note 7 "Intangible Assets, Goodwill and
Acquisitions" to our audited consolidated financial statements included in Part
II. Item 8 of this Form 10-K for additional information.

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

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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 income

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.

Maintenance Services

Our Maintenance Services revenues are generated primarily through landscape
maintenance services and snow removal services. Landscape maintenance services
that are primarily viewed as non-discretionary, such as lawn care, mowing,
gardening, mulching, leaf removal, irrigation and tree care, are provided under
recurring annual contracts, which typically range from one to three years in
duration and are generally cancellable by the customer with 30-90 days' notice.
Snow removal services are provided on either fixed fee based contracts or per
occurrence contracts. Both landscape maintenance services and snow removal
services can also include enhancement services that represent supplemental
maintenance or improvement services generally provided under contracts of short
duration related to specific services. Revenue for landscape maintenance and
snow removal services under fixed fee models is recognized over time using an
output based method. Additionally, a portion of our recurring fixed fee
landscape maintenance and snow removal services are recorded under the series
guidance. The right to invoice practical expedient, defined within Note 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

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.

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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. This
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.

We use a Monte Carlo simulation to estimate the fair value of performance stock
units granted to employees. This model requires certain assumptions including
the risk-free interest rate and the number of shares expected to vest. The
number of shares expected to vest represents the expected achievement of certain
performance conditions. Our vesting price is the stock price on the date in
which shares were granted.

For additional information related to the assumptions used, see Note 13 "Equity
Based Compensation" to our audited consolidated financial statements included
elsewhere in Part II. Item 8 of this Form 10-K.

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 may 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.
Such 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

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 Company adopted the guidance in the first
quarter of fiscal 2021. The adoption of ASU No. 2016-13 did not have a material
impact on the Company's 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 Company adopted the guidance in the
first quarter of fiscal 2021. The adoption of ASU No. 2018-13 did not have a
material impact on the Company's consolidated financial statements and
disclosures.

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Contents

Simplify income tax accounting

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740):
Simplifying the Accounting for Income Taxes which removes specified exceptions
and adds requirements to simplify the accounting for income taxes. The Company
adopted the guidance in the first quarter of fiscal 2022. The adoption of ASU
2019-12 did not have a material impact on the Company's consolidated financial
statements and disclosures.

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 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. In January 2021,
the FASB issued ASU 2021-01 to clarify the scope of certain optional expedients
for derivatives that are affected by the discounting transition. 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.

Business Combinations

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic
805): Accounting for Contract Assets and Contract Liabilities from Contracts
with Customers which requires that an entity (acquirer) recognize and measure
contract assets and contract liabilities acquired in a business combination in
accordance with Topic 606 as if it had originated the contracts. The guidance is
effective for the Company in the first quarter of fiscal 2023 and is not
expected to have a material impact on the Company's consolidated financial
statements.

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