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BrightView Holdings Inc (BV 0.13%)
Q1Â 2019 Earnings Conference Call
Feb. 07, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Good morning, and welcome to BrightView's Fiscal First Quarter 2019 Earnings Conference Call. As a reminder, this call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. The earnings press release is available on the Company's website, investor.brightview.com. Additionally, the online webcast includes the presentation slides that will be referenced as part of today's discussion, and a downloadable copy is also available online.
I will now turn the call over to Dan Schleiniger, BrightView's Vice President of Investor Relations. Please go ahead.
Daniel Schleiniger -- Vice President of Investor Relations
Thank you, operator, and good morning, everyone. I'm joined on today's call by Andrew Masterman, our Chief Executive Officer; and John Feenan, our Chief Financial Officer.
Before we begin, I want to remind listeners that some of the comments made today including responses to questions and information reflected in the presentation slides will be forward-looking and actual results may differ materially from those projected. Please refer to the Company's recent SEC filings for more detail on the risks and uncertainties that could impact the Company's future operating results and financial condition.
Comments may also include a discussion of certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures and other associated disclosures are contained in the earnings release on the Company's website. Disclaimers on forward-looking statements and non-GAAP financial measures apply both to the prepared remarks as well as the Q&A.
Finally, unless otherwise stated, all references to quarterly or annual results or periods refer to our fiscal years ended September 30 of each calendar year. The results for the first quarter of fiscal 2019, that we will discuss on today's call, are for the three months ended December 31st, 2018.
So with that, I'll turn the call over to BrightView's CEO, Andrew Masterman, who will provide an overview of our recent results, business strategy, and future outlook.
Andrew V. Masterman -- Chief Executive Officer
Thanks, Dan. Good morning, everyone, and thank you for joining us on today's call.
Please turn to our agenda on Slide 4. This morning we are going to take you through our results for the first quarter of fiscal 2019 and how the quarter's unusual snowfall impacted those results. We will also update you on the progress we've been making toward building a sustainable platform from which to continue growing the BrightView business and generate long-term growth for our stockholders. As you will hear, over the last two years, we have implemented a number of initiatives to redesign the way we source new business and manage our existing customers. We've also made investments in both training and technology to provide our teams with a knowledge base and tools to better run their local businesses and make important decisions.
Another key driver in our plan for future growth is our strong-on-strong acquisition strategy. On our last call, I mentioned that we had acquired Russell Landscaping in Hartford, Connecticut. It has been only a few months since we closed on that acquisition, but we couldn't be more pleased with how the initial stages of the integration into BrightView have gone so far. Since acquiring Russell, we have made two additional acquisitions. I'm very pleased to report that, due to the early completion of these transactions, we are already in position to achieve our $75 million guidance for realized revenue from acquisitions for full year fiscal 2019, including what we call the wraparound from last year's acquisitions. Looking ahead, our M&A team continues to work with an attractive and sustainable acquisition pipeline of strong, local and regional commercial landscaping companies in our target regions. We plan for the main drivers of our first quarter results, and we are seeing many of the positive underlying trends that we expected in our business. That is why we'll -- we feel confident in reaffirming the full-year fiscal 2019 guidance that we provided on our November earnings call.
Turning now to the first quarter on Slide 5. Our financial results reflect many of the challenging prior year comparisons, strategic initiatives, and operating conditions we highlighted in our guidance. We also experienced an unusual beginning to the snow season, especially in the Northeast and Mid-Atlantic, two historically important snow removal markets, which further pressured our top line and profitability in the quarter. As a result, total revenue of $526 million was down 4.6% versus the prior year quarter. Maintenance Services segment revenue declined 3.5% versus last year. The quarter included $22.7 million of acquisition revenue largely from the wraparound contribution of 2018 M&A activity. This had some offsetting factors. First of all, we faced a $17.5 million revenue comparison with last year's disaster recovery activity, following Hurricanes Irma and Maria. The national account turnover that we mentioned on our last call brought an unfavorable global comparison of nearly $3 million to this quarter's results. We expect this to be the last quarter with a material impact from that turnover.
Our managed exit strategy reduced revenue by $10.8 million, and our counterseasonal snow removal services also experienced an unusual quarter due to the timing and volume of snowfall. Revenue from snow removal services in December was down nearly 50% versus the prior year, which more than offset the strong snow removal revenue generated in the historically late months of October and November. John will explain how and why this impacted our profitability in the quarter.
To put the revenue impact into perspective, as of the end of December, one of our most important metro areas for snow removal services, Boston, had received less than 1-inch of snow this winter, more than 10 inches below average, and its slowest start since 1999. Denver, which is another strong snow removal market, recorded just 8.2 inches of snow through the end of calendar '18 versus its average of 20.8 inches for the period.
Drilling down to our underlying commercial landscaping business, as expected, revenues were relatively flat in December quarter as we wound down the seasonal markets. Development Services revenue declined 7.5% versus the prior year, and our 2019 guidance -- we mentioned that this segment faced a challenging adjusted EBITDA comparison due to the final quarterly contribution from large projects in 2018. The lower revenue in the quarter was both due to this comparison with large projects as well as temporary delays in some of our current projects due to weather. We expect to make up some of the delays over the course of the year.
Last year, we made a strategic decision to optimize our customer portfolio through a targeted, managed exit initiative. We made this decision so that we could redirect our labor force from low margin accounts to ones that add to the bottom line today, and have potential for continued future growth. In fiscal 2018, we exited $23.1 million in revenue from large unprofitable accounts from small limited growth potential customers. The impact of this initiative on our revenue continues in fiscal 2019 with $10.8 million in the first quarter. We now expect to be near or slightly above the $25 million high-end of our guidance for the full year. It is important for me to emphasize that servicing long-term profitable accounts is the right decision for our business. We believe it will increase our operational efficiency, allow our account managers to retain our accretive customer relationships, and thus improve the quality of our earnings moving forward.
Turning now to profitability on Slide 6. Adjusted EBITDA for the first quarter was $50.1 million, down from $66.4 million last year. With the exception of the unusual revenue pattern in our snow removal services, and its corresponding impact on profitability, the first quarter's revenues results were largely in line with our guidance and expectations. Most importantly, new sales in both the Maintenance Services and Development Services segments are ahead of last year's pace. More on that in a minute.
We are committed to the strategic growth drivers summarized on Slide 7. In fact, I want to tell you about how each was gaining traction. The training that we provide to our Branch Managers and Account Managers, as well as the streamlining of our customer portfolio has focused our team's efforts and given them the ability to apply their training to grow share of wallet with our existing customers. We saw better customer retention numbers already last year, and we expect the benefits of these efforts to shine through in our 2019 results, especially in the green seasons when we will stay focused on selling ancillary services, such as irrigation, fertilization, and tree care to our customers. Two years ago when I joined BrightView, we had a centralized approach to sales that was implemented at the time of the Company's formation a couple of years prior to that. There are many efficiencies to be gained from BrightView's national scale, but centralized sales is not one of them. We need our business development teams on the ground in our branches and in touch with the customers and communities they serve. This is why last year we restructured our sales team, establishing a network of over 150 experienced professionals who're trained in best practices and paired with their local branches to work together to profitably expand our customer base across multiple channels.
One of the most important metrics that we use to track our expanding customer base in the Maintenance segment is net new sales. This is the amount of net positive future contract revenue that our team secures during the seasonal part of the year, and is a strong indicator for how revenue will trend in the upcoming quarters, particularly during the green third and fourth fiscal quarters. Without getting into specifics, the net new sales that we generated organically in our Maintenance segment last quarter were the highest they've been in three years. This is evidence of the redesign of our sales team that's producing more stable customer portfolios and stronger new business pipelines to support future growth in our underlying Maintenance business.
Additionally, the pace of bookings for new project work in the Development segment is ahead of last year, and the longer-term pipeline remains strong. While a national scale does not directly impact sales, being a large company does give us the ability to procure equipment and materials most cost effectively and make investments in new technologies that few, if any, competitors can match. Together with Kronos, we developed our proprietary Electronic Time Capture or ETC software in order to better manage our labor hours and costs. Last year, we rolled out thousands of iPhones equipped with ETC to our crew leaders for daily labor management in our Maintenance services branches. This too helped drive an important improvement in labor usage in the Maintenance segment, which was one of the key factors in our 80 basis point margin expansion in fiscal 2018. I'm excited to report that ETC is now being implemented in our Development segment, with its unique tool in place across the entire business and another year under our belt using ETC in our Maintenance segment, we expect to be able to drive operational efficiencies across the entire Company and capture additional margin expansion opportunities.
The fourth key driver of growth is our strong-on-strong strategy to execute accretive M&A opportunities. This has yielded three deals so far in fiscal 2019. These transactions, plus the wraparound contribution from our 2018 acquisitions, should already be sufficient to deliver our full-year fiscal 2019 target for realized revenue. We are confident in the size of the opportunity that you can see on Slide 8, to continue consolidating the top quartile of our industry.
In addition to Russell at Hartford, we acquired Emerald Landscape in Northern California in early January, adding an experienced and tactical team of more than 200 landscapers working out of six branches spread across the San Francisco Bay Area. And, within the last few days, we acquired Benchmark Landscapes in Central Texas. Benchmark operates from Austin to San Antonio, offering a full suite of commercial landscaping solutions. Their team of more than 200 employees across four branches will complement our existing branch network to consolidate our presence in one of the fastest growing markets in America. We're excited to welcome both the Emerald and Benchmark teams to the BrightView family, and we'll continue working with our M&A pipeline to support growth in 2019 and beyond.
Each deal is unique, and the timing of new deals is uncertain by definition. But our acquisition pipeline remains robust, and our team takes a very selective approach to ensure that we are integrating accretive customer relationships, top tier operators, and talented landscapers into the BrightView brand.
I'll now turn the call over to John, who will discuss our financial performance in greater detail.
John A. Feenan -- Executive Vice President and Chief Financial Officer
Thanks, Andrew. Good morning to everyone.
Please turn to Slide 10 of the presentation. In line with our guidance, the first quarter of fiscal 2019 faced challenges related to episodic events, timing and other non-recurring factors. However, our full year outlook has not changed. We've now lapped the comparison with the significant hurricane activity of the first quarter of 2018 and the completion of the large projects in our Development segment. Beginning with the second quarter of 2019, our corporate expenses also become more comparable, particularly with respect to the expenses we added in order to become a public company. And most importantly, the underlying performance of our business is showing the improvement that we expected when we articulated our full year guidance for fiscal 2019. We are seeing favorable business trends that will continue our approach to pricing, service enhancements, customer retention and new business development, all key components of our strategy to generate growth from our underlying business, especially in the upcoming green season.
As Andrew just mentioned, we've also made significant progress with our strong-on-strong acquisition strategy. With that, I want to reiterate our outlook for fiscal 2019. More specifically, we expect to deliver total revenue of between $2.4 billion and $2.47 billion, generate adjusted EBITDA of between $310 million and $318 million, expand adjusted EBITDA margin by 10 basis points to 30 basis points, and maintain net capital expenditures at approximately 2.5% of revenue. We also expect that the material revenue impact from our Managed Exit initiative will continue in fiscal 2019, with a larger impact in the first half of the year. In order to maximize the long-term benefit of the strategic effort, we now expect the total impact from Managed Exits in 2019 to be near or slightly above the $25 million high-end of our guidance range.
Let's move now to our financial results on slide 11. For the first quarter of fiscal 2019, BrightView's total revenue was $526 million, down 4.6% versus the prior year quarter. Revenue declined in both operating segments, largely due to the challenges we outlined in our guidance. The Maintenance segment benefited from acquisition revenue, but faced a difficult comparison with Hurricanes Irma and Maria, the tail end of some national account turnover, and the revenue impact from our strategic Managed Exit initiative.
Snow removal services revenue also declined versus the first quarter of fiscal 2018, due largely to the comparatively weak snowfall in the month of December. And in the Development segment, we faced a continuing challenge revenue comparison with the higher margin work performed on certain large projects.
Our adjusted EBITDA for the quarter was $50.1 million, reflecting our guidance on hurricanes in the Maintenance segment, large projects in the Development segment, and higher expenses in the Corporate segment. We came in short of our forecast for the quarter due primarily to the unusual cadence in the quarter's snowfall. The resulting decline in snow removal services revenue caused a disproportionately high impact on our Maintenance segment profitability.
Let me take a few minutes to walk you through the details of our snow removal revenue on Slide 12. Last year, we had a typically -- a fairly typical snowfall pattern with less than 15% of the first fiscal quarter snow removal revenue coming between the months of October and November. It is usually during these first two months of the quarter that our seasonal branches wind down their green landscaping activities and configure their equipment for snow removal. This year, however, due to early snowfall, more than 40% of the quarter's snow removal revenue was generated between October and November. While this was good news for snow removal top line in those two months, the early snowfall forced our seasonal branches to incur elevated costs related to labor, that was sized for several more weeks of green maintenance work, equipment that needed to be quickly reconfigured for snow removal, and the use of subcontractors to help get the work done. As the results imply, December snow removal revenue was up significantly from last year, and more than offset the gains realized in October and November. This shift within the quarter also led to a less efficient snow removal business compared with December of the prior year when our crews were right sized, our equipment was converted, and our subcontractor usage was managed more effectively. In other words, we had an atypical start to the winter snow season with unusual geographic concentration away from the Northeast, Mid-Atlantic and parts of the Rocky Mountain region, less ice, which meant less salting and sanding as compared with the prior year, and an unusual and unfavorable monthly snowfall distribution. We recognize that we are talking a lot about snow, but we feel it's important, because the atypical nature of the snowfall was the main factor that brought our profitability below our expectations for the quarter.
Moving now to our balance sheet and capital allocation on Slide 13. Capital expenditures totaled $17.3 million in the first quarter of fiscal 2019, down from $29.8 million in the previous year's quarter, which included the $21.6 million acquisition of the legacy ValleyCrest facilities. Excluding the legacy asset acquisitions, and adding back the proceeds from the sale of property and equipment, total net capital expenditures as a percentage of revenue was 3% in the first quarter of fiscal 2019, up from 1.4% in the prior year quarter, due to the timing of some equipment purchases versus last year. We do continue to expect net capital expenditures for the full fiscal year to be at or below 2.5% of revenue. Our leverage ratio temporarily ticked up to 4.1 times as of the end of the first quarter of 2019 versus 3.8 times at the end of fiscal year 2018. Based on our full-year adjusted EBITDA guidance and expectations for cash generation, we see our leverage ratio coming in below 3.5 times by the end of fiscal '19 with the positive trend beginning in the fiscal second quarter.
Moving to Slide 14. The long-term thesis of stable, predictable growth in our business remains intact, despite sometimes being short to -- subject to short-term seasonal effects. We have restructured and trained our sales team, properly supported and incentivized our branch level teams, implemented a single ERP system, as well as developed and introduced sophisticated labor management technologies. The work continues in 2019 with more investments and upgrades on the back end and a better prepared structure on the customer- facing side of the business. In line with our guidance for the year, I truly believe that the steps we have taken combined with the initiatives that are yet to come, will generate significant long-term value for BrightView stockholders.
With that, let me turn the call back over to Andrew.
Andrew V. Masterman -- Chief Executive Officer
Thank you, John. Turning now to Slide 16. As expected, we had a challenging first quarter to start fiscal 2019. But as John and I have outlined, with the exception of snow removal, the results were largely in line with our expectations, and more importantly, we feel good about the underlying health of our business.
Net new sales in our Maintenance segment are the highest they've been in three years and bookings in our Development segment are ahead of last year's pace, which are among the many reasons we are confident in maintaining our full-year fiscal 2019 outlook. The reality is, that this is a people business. Our team members are our most important assets, so we focus substantial investments on making sure that they are ready, trained, safe and enabled. With that in mind, in early December of 2018, we held our national meeting, bringing together our branch and staff leadership groups from both segments and corporate. This event, which is typically held every two years, gives us the opportunity to communicate our vision and align everyone behind the initiatives that we will pursue to realize that vision. We had a packed agenda of speakers and presentations covering our main growth objectives, sharing best practices from inside our business and providing external perspectives on a range of topics. I came away energized by the enthusiasm and team spirit that I felt throughout the meeting.
There're still plenty of opportunities for improvement, but it's clear we have the organization moving in the right direction and aligned from a strategic point of view. Our teams are winning profitable business and identifying accretive long-term growth opportunities at the local level. At the corporate level, we remain committed to generating stockholder value by allocating capital to generate profitable top line growth and strengthen our balance sheet in the short, medium and long-term.
Thank you for your attention this morning. We will now open the call for your questions.
Questions and Answers:
Operator
(Operator Instructions) Thank you. Your first question comes from George Tong of Goldman Sachs. Your line is open.
George K. Tong -- Goldman Sachs -- Analyst
Hi, thanks, good morning. This quarter you had Managed Exits of $10.8 million, and you now expect to be near or slightly above the $25 million high-end guidance for the full year. As you move through the year, do you see opportunity for identifying additional opportunities for Managed Exits of unprofitable or slow-growing contracts?
Andrew V. Masterman -- Chief Executive Officer
Good morning, George. With the forecast we have right now at the high end of the $25 million range, we see kind of a diminishing profile over the course of this upcoming fiscal year. We feel confident that we're going to continue to bleed this down kind of within that range we gave. However, Managed Exits are something which is a particular thrust and a particular program, we went specifically at now, it is, however, going to be an ongoing process of continuing to make sure that the portfolio of accounts we manage have that positive impact within the branch. So within this year, the particular program will continue to diminish over the quarters.
George K. Tong -- Goldman Sachs -- Analyst
Got it. That's helpful. As a follow-up, your Managed Exits, what you redirect your labor force from low margin accounts to more profitable accounts, can you discuss the kind of margin lift you expect from Managed Exits and other items that bridge you to your guidance of 10 bps to 30 bps of EBITDA margin expansion this year?
Andrew V. Masterman -- Chief Executive Officer
If you take the overall Managed Exits, these programs or these accounts come out at a zero margin basis. So the thing is, if you just take the $25 million in revenue, it has no impact on margin. So that naturally will lift with it.
Operator
Your next question comes from Judah Sokel of J.P. Morgan. Your line is open.
Judah Sokel -- J.P. Morgan -- Analyst
Hi, thank you for taking my questions. I was hoping to unpack...
Andrew V. Masterman -- Chief Executive Officer
Good morning, Judah.
Judah Sokel -- J.P. Morgan -- Analyst
Thank you. I was hoping to unpack any updates that are embedded inside of guidance? Obviously, it was reiterated from a dollar standpoint, but a few of the things that might have changed were, A, worse to no trends, B, more Managed Exits, and perhaps anything else -- and perhaps more M&A. So we know the Managed Exits was raised from about $20 million at the midpoint to $25 million, so that's $5 million of less revenue. Snow, I was hoping you could quantify the amount of your updated assumption for snow for the year, and perhaps what your updated assumption for M&A is for the year inside of that guidance? Thank you.
Andrew V. Masterman -- Chief Executive Officer
Sure, Judah. Let me go with each of those three points. The first one, on Managed Exits. The Managed Exits profile, we were managing within that range, that doesn't impact our full year guidance at all when it comes to just managing toward the upper end of the range. And again, those Managed Exits have no impact on EBITDA. So there would be no correlating impact from an earnings standpoint. When it comes to your second point or your question on -- and boy, your second point was M&A?
Judah Sokel -- J.P. Morgan -- Analyst
Yes, snow and M&A, exactly.
Andrew V. Masterman -- Chief Executive Officer
Snow and M&A. So your question on snow, we have a $5.6 million shortfall in snow versus last year. Initially, we were thinking we were going to be between $5 million to $15 million off in snow year-over-year just given the patterns of snowfall. We believe that that snowfall impact especially also given January, it will be in the -- a little higher than that, probably around $20 million to $25 million, in that range on snow impact for the full fiscal year. And lastly on M&A, with the recent acquisition announcement today of Benchmark Landscapes, we've now accomplished enough acquisition revenue to fulfill the full $75 million forecast that we have for this year. Any further M&A will have upside on that. And M&A, as you know, is an unpredictable art as far as when it actually will fall. With that being said, the pipeline remains robust, and we feel confident that we will continue to close in the pace of $60 million of annualized revenue acquisitions in this year.
Judah Sokel -- J.P. Morgan -- Analyst
Okay, thanks. And for my follow-up, I just wanted to ask about the margin impact of snow. Maybe you could just help us think about what happened in the quarter, and what we should expect going forward? You quantified the top line impact, but that $20 million to $25 million shortfall in snow, what will happen to that and what happened in the quarter from the early snow season as well? Thank you.
John A. Feenan -- Executive Vice President and Chief Financial Officer
Yeah, Judah, good morning. This is John. Look, as you know, we don't disclose the profitability discretely on snow. Having said that, it's a very good contribution to the business. We got whip side a little bit in October and November with some of the inefficiencies that I articulated in my comments around the timing of early snowfall. And then, we were really, more important, hampered by the anemic snow in December. When I look at the revenue shortfall in December last year versus the December of this year, it was significant from a top line, and that obviously cascaded. As we've said, we don't have a ton of cost dedicated in this business, so there's not as much leverage and flexibility on the variable cost nature to react very quickly. So yeah, it had an impact in our profitability. And if we had had the snow that we had had last December, odds are we would have been right on top of our guidance.
Operator
Your next question comes from Andrew Wittmann of Baird. Your line is open.
Andrew J. Wittmann -- Robert W. Baird -- Analyst
Great, thanks. I wanted to just dig into the guidance a little bit more. At the mid point, your guidance for margin is about 12.9%, and that's in line with that 10 bps to 30 bps, you guys talked about, obviously. The labor inflation, I guess, reported in the Q was at 160 basis point hit to gross margins. The margins obviously here in 1Q started out pretty significantly. Basically, what that implies is that you need 80 basis points of EBITDA margin growth for the balance of the year. Given that that's a pretty big number, I was wondering if you could help describe the factors or bridge the factors to give us confidence you can achieve the margin targets that you've laid out.
John A. Feenan -- Executive Vice President and Chief Financial Officer
Yeah, Andrew, good morning. This is John. As I talked about, we don't have a lot of leverage, especially in the snow to leverage that labor. You are correct. We are seeing the continued labor inflation that we talked about previously, and there's a number of initiatives that we have that are in line with what we planned to do. And the waiting in the first quarter was such that it will be much lower in Q3 and Q4 as we ramp up into our true green seasons as a percentage of our revenue. So we expect that to have some type of normalization and benefit in the second part of the year.
The other thing that gives us confidence in our continued -- talking about the 10 basis points to 30 basis points of all the -- is all the other initiatives that we have on around efficiencies and productivities. We're still in early stages of our Electronic Time Capture, where we're making good traction on our pricing and we monitor that very closely. And at the end of the day, we still feel very confident in those 10 bps to 30 bps.
And I think the other piece that we'll get is that, as we get out of this Managed Exit business, which was not profitable for us, that will be another part of that lift into the second half of the year. The other final point on that is the revenue trend is quite good, that Andrew talked about. We're seeing some really interesting metrics and some improvements that we haven't seen historically as far as what we expect to see on net new, coming in Q2 through Q4, and that will obviously will leverage our labor there as well.
Andrew J. Wittmann -- Robert W. Baird -- Analyst
Great. And just to dig into one of the things that you mentioned in your response. Just the pricing environment, I think is really important obviously always I think particularly today given some of the inflationary factors. What have you seen or experiences you're working your way into the summer season for your green business in terms of your ability to capture the price increase needed to, at least offset, if not recapture some of those inflationary factors that you felt over the past 12 months?
John A. Feenan -- Executive Vice President and Chief Financial Officer
Yeah, it's a great question. We are being pretty aggressive on our pricing. One of the things that we've changed is, we've gone away from holding our teams to percentage increases to absolute dollars, that's a really important point. So let me drill down and give you a little color on that. So if I have an account manager at a local branch, where historically, they may have been held accountable to a percentage increase. When we dug into that data, that could be a percentage increase, they were hitting on a very small part of the business. We've now changed that whole dynamic where we have absolute dollar quantum targets that we're looking at very closely. We've made very good traction on that in the beginning part of the year. And as you can imagine, because we're just coming into the green season, you'll start to see that in the next couple of quarters. So that gives us the confidence that we're in line with our pricing initiatives.
Operator
Your next question comes from Tim Mulrooney of William Blair. Your line is open.
Tim Mulrooney -- William Blair -- Analyst
Good morning.
Andrew V. Masterman -- Chief Executive Officer
Good morning, Tim.
John A. Feenan -- Executive Vice President and Chief Financial Officer
Good morning, Tim.
Tim Mulrooney -- William Blair -- Analyst
So bookings in your Development business for 2019, you said are ahead of 2018, that's good news. Can you help us understand how that flows through your business? Does that mean that -- and that you expect organic growth in the Development business in 2019 or for the remaining three quarters? How does that timing work from book-to-bill?
Andrew V. Masterman -- Chief Executive Officer
Yeah. That timing layers in over the course of multiple quarters that we talked about. When I speak about our bookings on my comments, that was specifically related to this fiscal year that we are increasing our bookings ratio relative to where we are at the same point last year. So it's going to be realized revenue, it's new projects coming in to hit the guidance that we expected within development. We're ahead of where we were last year.
Tim Mulrooney -- William Blair -- Analyst
Okay. Thanks, Andrew. And for my follow-up, John, free cash flow of negative $9 million in the first quarter, so you're starting off in a different position than you were last year. Can you walk us through some of your assumptions on free cash flow? Where you expect to be for the full year? And remind us what your target conversion ratio is? Thank you.
John A. Feenan -- Executive Vice President and Chief Financial Officer
Yeah. The conversion ratio historically for this business has been in the low-80s, so hit that one first. But let me walk you through the cash flow, I think it's a great question because I'm sure that's on other folks mind. When you look at our public information, and I'll walk you through kind of the net income down. Our net income of negative $8.8 million versus $19.3 million in the prior year, you see obviously a big negative variance there. When you look at all the non-cash and other adjustments, and add those back, our cash income was actually $1 million higher, right at $28.8 million versus $27.8 million, and that's in our public information.
On the balance sheet side of the house, look, we watch that very closely. There were really two main drivers in there, and part of it is the conversion of the Company from a calendar year end to a fiscal year end were we would normally look at the timing of certain things. But the two main areas were accounts payable, which were related mainly to that conversion of year end in timing, and also our variable comp because of the timing of changing our calendar year end to fiscal year end. When -- those two items make up roughly $75 million of the $77 million shift that you see in our public statements. The interesting thing and not surprising, we expect both of those to reverse one in the second quarter, the incentive comp, and then the others normalize out through the balance of the year. And so that gives us great confidence that will continue our strong cash generation that we articulated in our guidance. And again, the composition of that cash will be used for two things. We've been very steadfast in that. To delever the organization, which I mentioned in my comments, that we're confident, will be below 3.5 times by year-end, and also the accretive acquisitions.
Operator
Your next question comes from Phil Ng of Jefferies. Your line is open.
Philip Ng -- Jefferies -- Analyst
Hey, guys. (multiple speakers)
Andrew V. Masterman -- Chief Executive Officer
Hi, Phil.
Philip Ng -- Jefferies -- Analyst
Good morning. With lot of the contracts likely negotiated ready at this point for the green season, what's the risk that the Managed Exits continue to surprise over the course of the year? And just wanted some color on the type of competitor and customer you're seeing these Managed Exits from, because, I would imagine, since you're much bigger and you have more scale than your peers, you would -- if you are earning limited EBITDA, I guess, how your competitors are making the economics work?
Andrew V. Masterman -- Chief Executive Officer
Yeah. We are about, I want to say, two months into the busy renewal season that we have in the seasonal markets, and so there is still February, March and April, three more months left in the contract renewals in the seasonal period -- in the seasonal markets. So we're not -- we're actually almost done, we're a little less than halfway done in the renewal periods. And so there is actually quite a bit more time there to continue to gain growth. And like I said in my comments, we're already hitting at a pace where we feel very confident about the 1%, at least 1% organic growth that we put within our guidance that supports the overall range.
When it comes to Managed Exits and where they're going, I really can't speak to the competition about exactly how they are managing the business. We just know our profile, and where we need to perform in the business and value for the services we deliver. I don't see as we go forward -- we're pretty much -- again, we're kind of getting toward the back half of the end of this particular initiative, and I see going forward actually a declining balance of the dollars associated with Managed Exits as we move forward in the subsequent quarters.
Philip Ng -- Jefferies -- Analyst
Okay, that's really encouraging here. In terms of your Development business, it's great that bookings have accelerated. How should we think about the timing of these projects coming through in contribution? And are there any other tough comps that we need to be mindful over the course of the year, and what's your ability to kind of make up some of the business you saw get pushed out due to weather in 1Q? Thanks.
Andrew V. Masterman -- Chief Executive Officer
Yeah. If you look at the development business, we obviously had some of the exits of some of some of these very large programs happen in Q1, and kind of be a little residual role. We still believe confidently that we're going to grow but even given that kind of year-over-year comp, that is not going forward a difficult comp, that will be layering in with the growth we're seeing in development that both development and maintenance will organically grow their business year-over-year.
Operator
Your next question comes from Shlomo Rosenbaum of Stifel. Your line is open.
Shlomo H. Rosenbaum -- Stifel -- Analyst
Hi, thank you very much. Hey, Andrew and John, just wondering, given what happened with snow, can you just let us know how much did the impact of the snow in the quarter set you back in terms of your annual guidance? In other words, if we're trying to bridge the $310 million to $318 million, are we starting instead of a $314 million or so more at a $309 million or just as we're trying to kind of calibrate what other way we should be thinking about it? And then after that, if you can just give us, is there any insight you can give us into more detail on the cadence, because clearly, I mean, the way that you guys were looking at it was that, this is an inline quarter except for snow, it just didn't feel like that to most of the rest of us, despite the detail that you gave last quarter. I was wondering if there some way you can help us just give it more color so that we can get the second quarter numbers right in kind of the cadence through the year.
Andrew V. Masterman -- Chief Executive Officer
Sure. I'll take the first part of that, when you look at the overall guidance that we have. Yes, snow is a big factor of that. Development was a little factor of the mesh on the earnings. Development will catch up. That will absolutely happen. We feel very good about the net new sales layering in, very positive trends that we have there. In addition, just managing the fixed cost profile that we have and the business as you look at the year-over-year results on fixed costs and the tight management of costs, we believe those things in combination will absolutely land us within the guidance that we've given despite initial short-term headwinds here in the first quarter relative to the snow performance.
And did I miss your second half of your question?
Shlomo H. Rosenbaum -- Stifel -- Analyst
We're just looking for just more commentary or how we can get the kind of cadence of the earnings or things we should think about in, particularly, next quarter and then through the next three quarters, so we can kind of get the modeling more calibrated the way you guys are thinking about it.
John A. Feenan -- Executive Vice President and Chief Financial Officer
Shlomo, this is John. I'll take that one. I think at the end of the day, look, we have a lot of things built up into the second half of the year. I think the second quarter, right now, we feel -- we feel very good about that. The only thing that's not in our control for the second quarter is snow, right? We've been very candid about that. Andrew talked about the risk that we think is there based on an earlier question of our full year snow revenue. Last year we did $250 million, this year we're probably going to be somewhere between $230 million and $235 million, on a full year basis, so you can wrap that into the second quarter. Outside of that, our bookings in Development are quite strong. We got very good momentum on our net new in the green business, we're just coming into those seasons. So we expect some benefit there in second quarter and then we expect strength in the second half of the year.
Operator
Your next question comes from Hamzah Mazari of Macquarie. Your line is open.
Hamzah Mazari -- Macquarie -- Analyst
My question is mostly around labor. Specifically, how you're managing through labor shortage, any update on the issue H-2B visa issue and is that impacting volume growth within your core business?
Andrew V. Masterman -- Chief Executive Officer
Yeah. Hi, Hamzah. This is Andrew. Look, last year even though we had limited H-2B success, we still continue to succeed in staffing up our crews, and we continue to work on that throughout the entire business. That being said, the H-2B visa process, we are all -- we are completely on top of that. We actually on this, on January 1st, the first day of filing for H-2B visas, we filed every single one of our branches, the H-2B applications, which they've all been received and actually we are at today recruiting in dozens of branches right now and have received the approvals to move ahead for recruiting in multiple geographies. How that actually gets filled? I mean, the final approvals by the government -- I can't tell you exactly what or when and how that will be given the uncertainties with government right now. So that being said, there will be some H-2Bs, we're still managing it within local branches and managing as if we were to not get any H-2Bs is how we approach it. H-2Bs really come as upside to us in the business.
Hamzah Mazari -- Macquarie -- Analyst
Got it. And just a follow-up on, on the acquisition pipeline, you're already close to the $75 million target. Any thoughts as to what the pipeline looks like as you get further into the year? Thank you.
Andrew V. Masterman -- Chief Executive Officer
Yeah. I tell you, as we execute on deals, more deals pop in, and actually I would have to say right now, even though we executed on two acquisitions in the quarter -- actually outside of the quarter, they happened on January 1st and the other one happened a couple days ago. We actually have seen the pipeline grow as we look at it. I think I've mentioned before, the pipeline was approximately $300 million. I would say, the pipeline is growing up toward $350 million to $400 million. It's a robust pipeline.
Operator
Your next question comes from Deane Dray of RBC Capital Markets. Your line is open.
Deane Dray -- RBC Capital Markets -- Analyst
Thank you. Good morning, everyone.
Andrew V. Masterman -- Chief Executive Officer
Hey, Deane.
Deane Dray -- RBC Capital Markets -- Analyst
Hey. Just wanted to go back to, and first of all, all the detail you've provided on the snowfall being atypical is really helpful. The part I thought was interesting is, when you get the early snowfall, it really does disrupt the whole end of green season process that you go through equipment conversions and using contractors -- third-party contractors to get through that. Did you size what that margin hit was on the maintenance side of that disruption?
Andrew V. Masterman -- Chief Executive Officer
Look, I think, it had an impact, because as you could imagine among all the different branches, there were -- this was a massive snowstorm on November 15th, which caught everybody, frankly everyone, a little bit by surprise in the early nature of it. That being said, the fall through, I think was toward the high-end of conversion that you have between -- like snow and the hurricanes. And as you see, for those kind of unusual events, and so it hit us -- it hit us fairly hard. We were ready and poised in December to execute well, and then it didn't stop. So that really -- that balance of a very difficult hard hitting November early snow offset by no-snow in December were really the critical things which hurt us. So it was an outsized drop-through in that November period.
Deane Dray -- RBC Capital Markets -- Analyst
Got it. Well, that'll just be a comp issue for next year, we'll have to have some special coaching for. I get that. Hey, not that the Managed Exit dead horse and look, appreciate the spirit of which all this is done. But I was surprised you dodged the question on what the competitive repercussions were, because the expectation is, you may get some of these accounts back. So where do you think that stands in terms of -- are these gone forever or would there ever be any renegotiations?
Andrew V. Masterman -- Chief Executive Officer
Oh, there is absolutely renegotiations. In fact, we've already seen some U-turns that happen throughout the business. What happens with the competition? They come in, and many times they hope they will go and actually underestimate what actually it takes to do the business. We know what it takes. That's why we go in proud with what we believe it takes to be able to do the business with the proper margins. Many times customers will come in, and absolutely as you just said, we'll acknowledge that there wasn't quite to the standards, in fact you had when the competition came in, and we have seen tangible examples of U-turns that occur when that -- my point more so on the competition is, I don't know, necessarily the cost structure how those competition works in the margin, that was specifically related to the more the point on how they could take the business where they take it. I don't know that. What I do know is that, that the performance level that we have, we leave properties with a high rate of high level of detail and precision that look fantastic on the last day that we leave them, and almost across the board, as we go back and revisit them through all, state of the property deteriorates.
Operator
Your next question comes from Dan Dolev of Nomura. Your line is open.
Dan Dolev -- Nomura Instinet -- Analyst
So just I understand in the last quarter your underlying commercial landscaping growth was $6.2 million plus, this time is minus $3.2 million, so is it $9.4 million sequential delta that's just a tough compare that you were facing or is there something else in there? Basically impacting the organic growth, because I feel like everything else is already excluded in the bridge, right, the snow, et cetera.
John A. Feenan -- Executive Vice President and Chief Financial Officer
Well, with the -- Dan, this is John. What's included in that 3.5% that you're talking about is obviously the impact of acquisitions and the impact of snow. If you look at the pure organic-only, land organic-only in the quarter, last quarter, as you recall, we were slightly positive on just the land organic. This quarter, if you have that same apples-to-apples comparison, we called out in our press release that we were 8.9% (ph) negative in that land organic growth, exclusive of snow, exclusive of M&A. The breakout of that 8.9% is approximately 5% of that was related to hurricanes and 3.1% was related to Managed Exits. If you strip out those two, we were slightly negative, which we talked about was related to national -- at the last hangover on national accounts, and we expect that now to revert positive as we go through the balance of 2019. So that's the detail on that.
Dan Dolev -- Nomura Instinet -- Analyst
Got it, OK. That's what I wanted to know. And then just my follow up, I caught that correctly, you said you're going to be toward the high end of the revenue guidance or I misunderstood you?
Andrew V. Masterman -- Chief Executive Officer
No, not the revenue guidance, toward high end of the Managed Exits.
Dan Dolev -- Nomura Instinet -- Analyst
That's the only comment. So you haven't specified where you're going to end up in the actual revenue or EBITDA guidance?
Andrew V. Masterman -- Chief Executive Officer
No, I think what we will see is, as we get toward our May disclosures, we will have gone through most of the selling season. So we're going to have a better comfort level. We'll have snow completed and we'll have most of the seasonal contracts completed, so we will be able to tighten that guidance slightly as we get into May.
Operator
Your next question comes from Kevin McVeigh of Credit Suisse. Your line is open.
Kevin McVeigh -- Credit Suisse -- Analyst
Great. Just a follow up on that. Could you frame out what would cause you to kind of come in at the low end of the range versus the high end of the range that you introduced on both the revenue and EBITDA?
Andrew V. Masterman -- Chief Executive Officer
Sure, yeah. What, let me get a step back. As I said in my comments, we have seen positive sales momentum on our net new, that's sales minus retention, which gives us already with only four months into the fiscal year. Confidence around the low end today. We are positive as we roll in over the next three months with the selling season going on that -- before the green season actually starts -- that will start signaling in. So one of the thing comes to the contracts that are signed to completed and to the degree to which they are, again positive momentum and actually even in the green market. The pipeline we have in the green market is the largest pipeline we've had as a Company when it comes to the landscape maintenance pipeline. In addition, what else (inaudible). I mean we have to see where the snow season actually ends up, and that will then allow us to tighten that range as snow season layers out.
Kevin McVeigh -- Credit Suisse -- Analyst
That's helpful. And then just, it sounds like the M&A pipeline is clearly firmed up. Have the multiples changed in terms of getting better value, given the tightness of labor, or is it still -- just any thoughts on that?
Andrew V. Masterman -- Chief Executive Officer
As we spoken about before, the multiples stay, and we will be staying within those ranges. Of course, there are companies that want to get more for their businesses and we walk away from those. So we maintain kind of the discipline within prior guidance that we've given about where we do deals.
Operator
Your next question comes from Gregory White of Barings. Your line is open.
Gregory White -- Barings LLC -- Analyst
Hi guys. A lot of my questions have been answered. So just maybe I want to use this as an opportunity to get a little more understanding on the snow removal side. You mentioned a couple of key areas, Northeast, Boston, Denver et cetera. I'm just trying to get a better understanding of your regional exposure? Do you guys have exposure to this CRS (ph) at all for snow removal?
Andrew V. Masterman -- Chief Executive Officer
Very well. Most of our exposure is in the typical large Northeastern areas of Boston, New York, New Jersey, the Midwest, so Chicago, Columbus, Pittsburgh, Cincinnati kind of areas, and then there's another concentration, Baltimore, Washington D.C., down into Northern Virginia, and then lastly, the Rocky Mountain area, although that really is a Denver Salt Lake City area, and it's relatively speaking smaller.
Gregory White -- Barings LLC -- Analyst
Okay, understood. Actually that level of granularity to carry my follow-up. So that's all I have for you today. Thank you.
Andrew V. Masterman -- Chief Executive Officer
Okay.
Operator
Ladies and gentlemen, we are now out of time. I'd like to turn the call back over to Mr. Masterman for closing remarks.
Andrew V. Masterman -- Chief Executive Officer
Thank you very much. Once again I would like to thank everyone for participating in the call today and for your interest in BrightView. If you have any follow-up questions, please don't hesitate to reach out to us. We look forward to speaking with you when we report our second quarter of fiscal 2019 results in May. Thank you very much.
Operator
This concludes today's conference call. You may now disconnect.
Duration: 57 minutes
Call participants:
Daniel Schleiniger -- Vice President of Investor Relations
Andrew V. Masterman -- Chief Executive Officer
John A. Feenan -- Executive Vice President and Chief Financial Officer
George K. Tong -- Goldman Sachs -- Analyst
Judah Sokel -- J.P. Morgan -- Analyst
Andrew J. Wittmann -- Robert W. Baird -- Analyst
Tim Mulrooney -- William Blair -- Analyst
Philip Ng -- Jefferies -- Analyst
Shlomo H. Rosenbaum -- Stifel -- Analyst
Hamzah Mazari -- Macquarie -- Analyst
Deane Dray -- RBC Capital Markets -- Analyst
Dan Dolev -- Nomura Instinet -- Analyst
Kevin McVeigh -- Credit Suisse -- Analyst
Gregory White -- Barings LLC -- Analyst
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