BrightView - Q3 2023

Transcript

Operator (participant)

Greetings, welcome to the BrightView Q3 Fiscal 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If you would like to ask a question, then please press star followed by one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Chris Stoczko, Vice President of Finance. Please go ahead.

Chris Stoczko (VP of Finance)

Thank you for joining BrightView's third quarter fiscal 2023 earnings conference call. Jim Abrahamson, BrightView's Interim President and Chief Executive Officer, and Brett Urban, Chief Financial Officer, are on the call. Please remember that some of the comments made today, including responses to questions and information reflected on the presentation slides, are forward-looking, and actual results may differ materially from those projected. Please refer to the company's SEC filings for more detail on the risks and uncertainties that could impact the company's future operating results and financial conditions. Comments made today will also include discussion of certain non-GAAP financial measures. Reconciliations to comparable GAAP financial measures are provided in today's press release. Disclaimers on forward-looking statements and non-GAAP financial measures apply both to today's prepared remarks as well as the Q&A. I will now turn the call over to Jim.

Jim Abrahamson (Chair of the Board of Directors)

Thank you, Chris. Good morning, everyone. I'll start on slide four of the earnings presentation. I plan to focus my prepared remarks on our solid results in the quarter, provide an overview of our expanded strategic initiatives, discuss our progress on the search for our next CEO, and provide some perspective on the impact of our expanded strategy, coupled with the renewed focus and energy of our leadership team, given the significant value creation opportunity ahead of us. As a BrightView board member for the past eight years, and more recently in my role as Interim President and CEO, I'm focused on leading the creation and execution of our expanded strategic plan and improving company performance in concert with our excellent BrightView team.

We are capitalizing on opportunities to drive performance as we grow our revenue and our EBITDA, while expanding margins, increasing free cash flow, strengthening our balance sheet, and thereby enhancing shareholder value. We are proud to report that our results for the third quarter reflect substantive progress against each of those financial objectives. We are particularly encouraged about our disciplined approach to pursuing high-quality business opportunities while increasing our cost efficiencies that has translated into strong EBITDA growth, margin expansion, and increased cash flow. Following the strategic assessment of our business, we launched the first phase of Project Accelerate during the second quarter. As a reminder, this is a company-wide program designed to reduce overhead costs.

We have now expanded and intensified the scope of Project Accelerate with new strategic initiatives centered around growing our revenues, operating even more efficiently, thereby expanding our profit margins and generating even more cash to delever our balance sheet. We recently broadened the reach and expanded the depth of our Project Accelerate cost containment initiatives across all facets of the company. As we've added the following items to Project Accelerate, including local, local branch performance initiatives centered around profitable growth, substantially improving customer and contract revenue retention, expanded sales initiatives to increase new contract win rates across our segments, and importantly, a company-wide procurement project aimed to drive significant savings across our entire portfolio. To be clear, we are not waiting to launch these vitally important initiatives, and we have commenced the initial rollout during the third quarter.

Looking forward to the remainder of fiscal year 2023 and our initial outlook on fiscal year 2024, we expect that these initiatives will continue to drive profitable growth, enhance margins, and generate increasing cash flow to delever our balance sheet. We expect to provide additional details on the magnitude of each of these new initiatives and the resultant impact on our performance on upcoming earnings calls. An important catalyst for driving continued effectiveness of these initiatives will be the selection of our next CEO. The search is progressing well and according to our timeline. We are continuing to work closely with an executive search firm and are presently engaged with a short list of highly qualified candidates. We are excited by the prospects of bringing on board an exceptional leader and operator that will lead the company through its next phase of growth and value creation.

This new leader will be well-positioned to drive BrightView forward and will hit the ground running with a clear strategy to drive growth and enhance performance. With renewed company-wide focus and energy, coupled with outstanding new leadership and the strength of our excellent executive team, I'm confident that BrightView will have a strong foundation and an effective strategy to deliver results and drive value for our shareholders now and into the future. With that, I'll now turn it over to Brett, who will discuss our financial performance and outlook in more detail. Brett?

Brett Urban (EVP and CFO)

Thank you, Jim, and good morning to everyone. I'll start on slide six. I am pleased to report on another solid quarter. As Jim previewed, the business is growing, profitability is expanding, and cash generation has improved significantly. We grew total revenues by 2.5%, increased EBITDA by $8 million, delivered meaningful margin expansion in both segments, and generated significantly more cash, despite increased interest. Our ability to achieve these results reflects BrightView's attractive business model and gives us confidence as we pursue new opportunities and drive further financial and operational improvement. Moving to slide seven. Total revenue during the quarter increased 2.5% year-over-year to $766 million. Revenue during the quarter benefited from demand in our core businesses, favorable pricing, and M&A contributions.

In our Land business, total revenue increased to $555 million, reflecting roughly flat Land organic growth and positive contributions from acquisition. Organic growth was impacted by our increased focus on pursuing higher quality contract opportunities. This focus and the continued execution of our disciplined pricing strategy was one of the primary reasons for the significant margin improvement. More on that later in the call. We grew our Development business a robust 9.1% organically due to our ability to convert our strong backlog. We remain very optimistic about our Development business and the pipeline of projects for the remainder of fiscal 2023. We are seeing continued momentum leading into fiscal 2024. Turning now to profitability and the details on Slide eight.

Total adjusted EBITDA for the third quarter was $102 million, an increase of $8 million, driven by both land and development growth and disciplined cost management. Our increased profitability is a result of our focus on higher quality business, price-cost dynamics, operational performance, and good progress on our cost initiatives related to Project Accelerate. With the expansion of Project Accelerate, we now expect the benefit to exceed the $20 million annualized target we discussed last quarter. We plan to provide more specific details on the timing of these initiatives and the financial contribution on our next earnings call. Before I leave slide eight, I want to reiterate how excited we are with the EBITDA results in the quarter. We delivered on our commitment to grow our profits and expand our margins, and intend to continue that trend in future quarters.

Turning to slide nine, I'll provide more details on margin expansion. In the Maintenance segment, total adjusted EBITDA of $94 million increased by approximately $5 million from the prior year. This resulted in significant margin expansion of 70 basis points year-over-year, and marks the third consecutive quarter of margin expansion in our core Land business. We continue to be focused on higher quality contracts and strategic with our pricing efforts. While these efforts have led to a modest short-term softening of Land organic growth, we believe this strategy, in the long run, will ultimately result in continued margin accretion, as we saw in our Q3 results. In the Development segment, adjusted EBITDA for the third quarter was $24.1 million, an increase of approximately 15% compared to the prior year.

Development margin expanded 60 basis points year-over-year and was at the high end of our guidance range of 50-60 basis points. This marks our fourth consecutive quarter of development margin expansion. We expect this dynamic to continue. Let's now turn to slide 10 to review our capital expenditures, debt, and Free Cash Flow for the quarter. Net CapEx for the third quarter was $12 million, compared to $21 million in the prior year, reflecting nearly a 50% year-over-year decrease. As evidenced by these results, we are continuing our approach of carefully managing our capital expenditures. We have made significant progress so far this year and are further reducing our target for capital expenditures to be meaningfully less than 3% of total revenue for fiscal year 2023.

We expect this to benefit our Free Cash Flow by an incremental $5 million-$10 million versus prior expectations. Sequentially, we reduced our net debt and improved our leverage ratio to 4.8x through disciplined cash management and increased profitability. We are committed to reducing leverage over time through EBITDA expansion and debt reduction. Free Cash Flow improved again on a year-over-year basis, increasing to $22 million for the quarter. Free Cash Flow benefited from improved profitability and reduced capital expenditures, more than offsetting the doubling of cash interest. We feel great about our Free Cash Flow improvement and expect it to continue for the remainder of fiscal 2023. Let's now turn to slide 11 to review our outlook for the fourth quarter and full year fiscal 2023.

While we are pleased with our results year to date and have seen continued progress in our efforts to improve margins and cash flow, our top-line results and outlook for the fourth quarter reflect a focus on driving more profitable growth in our key parts of our business. Given these factors, we are modestly revising our full-year revenue guidance. As you can see on the slide, for fiscal year 2023, we now expect total revenues of $2.80 billion-$2.82 billion and total adjusted EBITDA of $295-$300 million. For the fourth quarter, this equates to total revenues of $730 million-$750 million and total adjusted EBITDA of $98 million-$102 million.

Our guidance for the fourth quarter assumes the following: land organic growth that is relatively flat as we focus on higher quality contracts and continue the execution of our pricing strategy, maintenance margin expansion of 40-50 basis points, which is significantly above our prior guidance, development organic growth above 10%, and development margin expansion of 50-60 basis points. The expansion of our Project Accelerate initiative is important to consider as we think about our longer-term performance. Our ability to execute and deliver against these efforts is expected to provide meaningful contributions to our results in fiscal 2024 and beyond. Let's turn to slide 12 to wrap up. We are very pleased with our year-to-date results as we continue to see momentum in our business and execute against key initiatives.

With a renewed level of focus and energy, we are dedicated to continuing to improve our business and have taken important steps to achieving our goals. Thank you for your interest and for your attention this morning. We will now open the call for your questions.

Operator (participant)

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure that your phone is unmuted locally. As a reminder, that is star followed by one to ask a question. Our first question comes from Tim Mulrooney from William Blair. Tim, please go ahead.

Sam Martin (Equity Research Associate)

Hey, this is Sam Pass on for Tim. Thanks for taking our questions here. Just have a few. I guess to start, I believe last quarter, your expectations were for 2%-3% Land organic growth in the back half here. Now it's looking like it'll be flat. I guess I'm wondering if you could expand on what drove that change.

Brett Urban (EVP and CFO)

Yeah, great, great question. This is Brett. You know, as you think about growth of the company, we're, we're excited with the quarter three results, we're, we're, excited about the Q4 guidance. The total company is growing. In quarter three, we grew 2.5%, organically was 1.5%, and both segments showed growth in Q3. Excited about those results. When it comes to Land organic, specifically, you know, as you think about our, our expansion of Project Accelerate and as that now expands into client retention and new sales wins, we are very focused on bringing new sales in that are higher quality business, and we're being extremely prudent and judicious with our price increase strategy when it comes to customer renewals.

Both of which have led to the margin expansion you saw in Q3 and the guidance for Q4. In the short term, as we go through this expanded Project Accelerate strategy, we'll see a, you know, a short-term modest softening of Land organic growth, relatively flat into next quarter. We do expect that focus on higher quality business when it relates to new sales, and our pricing strategy as it relates to renewals, to continue to drive outsized margin expansion in the business.

Sam Martin (Equity Research Associate)

Gotcha. That's, that's helpful. Maybe pivoting to the Accelerate program then a bit, but, you know, given that you've taken significant costs out of SG&A, with this program, do you think that you'll have to eventually bring some of those costs back, or are current SG&A levels, sustainable in your view?

Jim Abrahamson (Chair of the Board of Directors)

Thanks for the question. Always important when you're considering this, this is Jim Abrahamson. You know, being around this company for the last 18 years, I've got a good handle on the, you know, what makes it tick and, and where we saw overhead cost escalation that we were able to, you know, bring back under control. More importantly, we've taken a deeper dive really across the organization, so we're expanding this beyond just SG&A, if you would, if you're thinking corporate or call it top, top line, top level expense categories, where our focus was in the initial phase. We've now expanded that to get into, you know, the remainder of the company. We're looking across those 5 areas that we talked about on the call.

Each of those areas, such as branch performance, such as our team productivity and other areas, we, the broadening and deepening of the program is really where the opportunity is because we've got a widely distributed company. We, we think there's, there's, there's great opportunity. We don't believe this was short term in nature. We've restructured our company based on what we found, and, you know, having a good handle on how this company operates, I think we're able to prudently put these cost control measures into place, and we believe these, these will be permanent savings over a period of time. As we continue to roll these out, we'll have more guidance in the future on what our targets are. You know, we're guiding these to be, you know, permanent, permanent reductions.

Sam Martin (Equity Research Associate)

Okay, great. We'll look forward to that. Maybe I'll sneak one last one in here. You know, I think you mentioned in your prepared remarks and, and some of your commentary here about retention, just improving that for the, the customer contract level. Can you maybe share more detail on what you're exactly you're trying to do to achieve that?

Brett Urban (EVP and CFO)

Yeah, great question. You know, as you, as you think about, you know, 1.5, two years ago, when inflation was, was peaking around 9%, and we were, we were fighting that inflation by launching our, our pricing strategy, you know, we were very prudent and judicious in re-renewing customers with the right pricing dynamics. We're continuing that pricing strategy now. We've seen retention rates stabilize, but not rebound back to historical levels, call it pre-hyperinflation. So as we think about expanding that initiative and really getting back to branch performance and, and getting back to a, a high customer focus, we expect now that two years into pricing, with inflation now in the 3% range for CPI.

CPI-W, which is a metric we track internally, is less than 2.5%. We expect our aggressiveness on pricing to start to subside. That will have an impact on customer retention and a bit more focus on back to the basics, you know, in the branches. We expect that to have an impact on retention. We are seeing it stabilize year-over-year, but we would expect in the future, as we launch the expansion of Project Accelerate, to see a rebound in retention.

Sam Martin (Equity Research Associate)

Gotcha. Thanks for, thanks for the answer here, Brett.

Brett Urban (EVP and CFO)

Yeah, absolutely. Thank you.

Sam Martin (Equity Research Associate)

Thanks.

Operator (participant)

Thank you. Our next question comes from Bob Labick from CJS Securities. Bob, please go ahead.

Pete Lukas (Director of Institutional Sales)

Hi, good morning. It's Pete Lukas for Bob. You've talked before about the bridge back to 12% to 12.5% margins being running off, old development services, using the five-year average at normal margins for snowfall and price increases as well as fuel price declines. Just wondering how Project Accelerate impacts this bridge, and is that still the 12.5% still a viable medium target for you?

Brett Urban (EVP and CFO)

Yeah, that, that, Pete, that's a great question. Look, as we said on, on the prior call, you know, we, we committed to already in 2024 through Project Accelerate to see 50 basis points of margin expansion, and that's without snow rebounding, right? You think about our guidance now, right around 10, 10.6% EBITDA, Project Accelerate, in its initial phase, would have really secured 50 basis points of margin expansion, bringing us into that low 11% range for next year. Now, with the expansion of Project Accelerate, we're, we're expecting meaningfully more margin expansion above, above what was originally communicated, and we'll communicate more on exactly what those numbers are on our next earnings call.

If you think about original Project Accelerate in the low 11% EBITDA margin range, plus a normalized snowfall, which would be somewhere between 40 and 60 basis points of additional margin, that puts us in the mid to high 11% range, plus the expansion of Project Accelerate, which, which we'll share more in the next call. As you think about getting back to the pre-pandemic margins of mid 12s for the company, as we start to solidify the expansion of Project Accelerate, that will all become incremental to that bridge that is provided.

Pete Lukas (Director of Institutional Sales)

Very helpful, thanks. Just one more, I guess. How is the scope of work trending, and are customers pulling back, or is contract size starting to grow again?

Brett Urban (EVP and CFO)

Yeah, good, great question. We have seen no sign of customer pull, customer pullback in either business. You know, in the development business, we are already beginning to sell our backlogs, you know, through the second half of next year. We have a great line of sight into the first half of next year. We see no slowing down in that business, and we're getting positive indications from some of the internal KPIs we track that we don't expect to see any slowdown. In the maintenance side of the business, we're seeing increased demand on ancillary services, which is our outside the contract services we provide to our customers. We actually saw quarter three versus quarter three of last year show an increase in those demand for services.

From a customer demand standpoint, on either side of the business, we, we see no signs of a slowdown.

Pete Lukas (Director of Institutional Sales)

Great. Just a last quick one for me. Has weather been a major impact, particularly the heat, in any of your areas? Have you seen anything there?

Brett Urban (EVP and CFO)

Yeah, the, the heat wave that just came through the country was, I would say, extremely hot in multiple areas, to say the least. From an impact on the business, I would say very little. We want to make sure our, our employees are safe. And, you know, as you think about productivity on a job, you know, the most important thing to us is safety. If there needs to be an extra couple minutes break here or there, for our employees, that's first and foremost, but we have not seen any major impact on the underlying business from, from that heat wave that just came through.

Jim Abrahamson (Chair of the Board of Directors)

Yeah, I'll just add to that. You know, I think we reported on-

Brett Urban (EVP and CFO)

Ve-

Jim Abrahamson (Chair of the Board of Directors)

there was weather, you know, California rains and everything last year, we saw a lot of disruption. This isn't the same kind of disruption. You know, this kind of heat isn't, isn't really creating the same kind of disruption that the, those rainfall issues were creating earlier on. You know, it's really steady as she goes from an overall, weather standpoint this year. Other than personally, of course, it's been a hot summer.

Pete Lukas (Director of Institutional Sales)

Great. Thanks so much. I'll jump back in the queue.

Brett Urban (EVP and CFO)

Thank you.

Operator (participant)

Thank you. Our next question comes from George Tong from Goldman Sachs. George, please go ahead.

George Tong (Senior Research Analyst)

Hi, thanks. Good morning. Your landscape maintenance business declined a little bit year-over-year this quarter because of reduced commercial demand. Can you talk a little bit about where that reduction in demand is coming from, whether it's a contract-based business, whether it's ancillary, and how much of that was driven by external... environmental factors versus internal initiatives to right-size pricing, for example?

Brett Urban (EVP and CFO)

Yeah, George, how you doing? This is Brett. Great to hear from you today. From a, from the maintenance services standpoint, year-over-year, that, that business grew, just to clarify, grew about half a point of growth. Within that was a, was a small decline in our snow business. You know, we have very little snow in, in quarter three, but we do have some. That business went backwards, as disclosed, about $3 million. Without the snow impact, as I call it, maintenance services in total grew about a 1%, which was Land organic growth, relatively flat, and M&A contributions of about 1% of growth. Just to clarify that the business is growing.

As you think about Land organic growth, as we mentioned before, you know, we I would say the, the bigger impact is internal initiatives, rather than external factors. You know, we are making sure the business we are bringing in from a new sales perspective is high quality, high margin business. We're ensuring that our pricing strategies, that we're continuing to be prudent in our pricing strategies on the customer renewals, that that business is margin accretive to the company.

As you think about our, our overall strategy of growing profits, which we did in Q3 and expect to do again in Q4, and growing margins, which we did in Q3 and expect to do again in Q4, that's all leading towards, you know, generating more cash for the company and ultimately, delevering the balance sheet, which we also did in, in Q3.

George Tong (Senior Research Analyst)

Great, that's helpful. Yeah, I was, I was really, I guess, asking about land organic.

Brett Urban (EVP and CFO)

Yep

George Tong (Senior Research Analyst)

... which organic performance, which was, I think, down 0.2% year-over-year. That's, that's helpful context. Then you talked a little bit about Project Accelerate, spanning making progress around cost containment, branch performance, customer retention, new sales, procurement. How, how are you internally rank ordering these various initiatives? Certainly, it takes a lot to, to, to tackle with, with Project Accelerate. What are the priorities, and what are the various timelines for when you would expect to see progress on these, and what would be the associated revenue and margin benefits?

Jim Abrahamson (Chair of the Board of Directors)

Yeah, that's, that's exactly what we're focused right now. We've, we've calibrated some targets internally. This has been a team effort. We're not just taking this... This isn't a top-down. This is a, you know, company-wide, initiative, too, and our, and our, and our operations teams have been really, really, focused on, on, on what-- on, on hitting what those targets, intend to be. Clearly, you know, the branch performance issues, that's our bread and butter, right? That's where our customers, live, and performance there is, is vitally important. In, in doing that, you know, the first thing to look at is, too, not all branches are, are, are performing equally right now.

Obviously, your, your eyes are driven to the bottom tier of those branches, and fixing the underperformers are very deliberate, you know, aggressive steps in place. That's a first step, very achievable type of opportunities to be able to look at that bottom tier or bottom quartile of branches. We've, we've created the data and the research and an action plan to start there. That's, that we expect to be able to see near-term results from, you know, fixing that bottom quartile, if you would. Overall, it's really optimizing those top quartiles, right? Showing continuous improvement and building our ancillary penetration as we're able to achieve in our best performing markets. We believe there's upside to, you know, both revenue performance as well as cost out opportunities within the branches. Obviously, you know, that's the biggest and broadest. That's, that's our business.

You know, this is a locally run business. This is a street corner business, and winning more and losing less is important there. The customer, that what we call team performance, the next phase down, is really looking at our organizational structure and what areas do we have, you know, in front of us to be able to calibrate the spans of control and the layers of management. We're looking very closely at what those opportunities are. Again, those are very quantifiable and achievable goals, items that we can take. They're discrete actions we can put into place. We'll be able to, we think, harvest some benefits from that initiative fairly quickly. That will, you know, allow us to kind of restructure and optimize and using technology to help us be a lot more efficient and effective.

If you look at, you know, retention and, and, and, and win rates, you know, those, those evolve over time, right? Putting new training programs, company-wide initiatives allow us to perform better, right? Win more, lose less. That's what every business strives to do. We've, we've seen those, those, those retention rates and those contract win rates decline. We've reported on that in the past. We believe that there's some immediate recovery back to earlier performance levels, but we think there's upside beyond it. Lastly, procurement. Very, again, a much more quantifiable, discrete project line. Procurement, we've, you know, we've identified a significant, you know, level of spend here that is currently not covered by national accounts under the programs. We think this is, again, a very achievable, early return, component that is well underway right now.

We, we have employed some top-tier, you know, consulting firms that are helping us roll that out. We, we believe that we're going to be harvesting results from Project Accelerate over the course of you know, right away here in Q4. More importantly, this will be, you know, implemented and rolled out into our FY 2024 plans, when we'll have more information for you on the next, at the next go around.

Brett Urban (EVP and CFO)

... I think you can see where, you know, this is a company that, you know, it's a big company, it's widely distributed, but we've got specific focus in these areas, and we've got a great leadership team to implement this, so it's, it's a, it's a team, team effort.

George Tong (Senior Research Analyst)

Very helpful. Thank you.

Brett Urban (EVP and CFO)

Thanks, Jordan.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star followed by one on your telephone keypad. Our next question comes from Justin Hauke from Baird. Justin, please go ahead.

Justin Hauke (Senior Research Analyst)

Yes. Hi, good morning. I wanted to ask about M&A, and the reason why is just because, you know, ever since the company's been public, you know, you guys have always had kind of even when things haven't been announced, there's always been an assumption, you know, a couple points of revenue contribution annually from M&A. I think this is the first quarter that you've had where you didn't, you know, press release that you've done any acquisitions. Obviously, you've got this focus on Free Cash Flow and deleveraging, and with the, you know, CEO search underway. I'm just curious, as we think about 2024, you know, as it stands right now, is M&A kind of officially on pause for the, for the near term?

you know, we shouldn't be thinking about contribution from it next year, or what's the status of, of what you're doing there?

Brett Urban (EVP and CFO)

Yeah, Justin, great question. You kind of said a couple things in your question around, you know, CEO search underway, focus on margin accretion and delevering the balance sheet. That's definitely our focuses, right? Our focus is priority number one, to generate additional Free Cash Flow, year-over-year, which we've done. For the first nine months of the year, that Free Cash Flow generation is up over $55 million year-over-year. We're using that cash to pay down debt, and we're growing our earnings in a way to delever the balance sheet. That is our focus right now as it comes to the company. As far as it relates to M&A specifically, I would not say it's on pause. We are not on official pause.

We are still being very selective, and strategic with our acquisitions. We've seen multiples come down, into the 5x range or lower, like we've presented on previous calls. We still have a very robust M&A pipeline, north of $700 million. As deals come across, we-we're just being very selective and strategic in those deals. As you think about modeling for 2024, we're not ready to give guidance yet for 2024 as it relates to M&A, but it will be likely less than the 2% target we've provided in years past.

Justin Hauke (Senior Research Analyst)

Okay, that makes sense. Thank, thank you for kind of, clarifying. Then I guess.

Brett Urban (EVP and CFO)

No problem.

Justin Hauke (Senior Research Analyst)

The other question I had, just on, on fuel costs, you know, obviously, they've, they've come down. Like, in the past, you guys have quantified sometimes where, you know, where that is. I'm just curious how much of a margin lift that has been, and is that something where, where fuel costs are right now, will they continue to be a tailwind for the next couple of quarters?

Brett Urban (EVP and CFO)

Yeah, great question. You know, fuel in Q3 was roughly a $2 million benefit to the P&L year-over-year. That's split, you know, roughly 75% maintenance, 25% development, as you think about the segment splits there of fuel. Call 20-30 basis points, fuel accretion in the quarter. We'd expect that to continue into Q4 at a similar pace. You know, fuel is a bit on the rise right now. You know, it's about $3.75 a gal. Last Q4, we were about $4.75-$5 a gal. It should still be a tailwind when it comes to fuel year-over-year. We'd expect that somewhere in the 20-30 basis point range for Q4.

Justin Hauke (Senior Research Analyst)

Great. Okay, that's helpful. Thank you very much.

Brett Urban (EVP and CFO)

No problem.

Operator (participant)

Thank you. That is now the end of the Q&A session, so I'll now hand it back over to Brett Urban for closing remarks.

Brett Urban (EVP and CFO)

Thank you, operator. Once again, I want to thank our team members for their dedication to designing, creating, maintaining, and enhancing the best landscapes on Earth. Thank you to everyone for participating in our call today and for your interest in BrightView. We look forward to talking with you again. Talk soon.

Operator (participant)

This concludes today's call. Thank you for joining. You may now disconnect your lines.