BrightView Holdings Inc

Previous wording

The following discussion and analysis supplements our management’s discussion and analysis for the year ended September 30, 2023 as contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 16, 2023, and presumes that readers have read or have access to such discussion and analysis. The following discussion and analysis should also be read together with the unaudited consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that reflect our plans and strategy for our business, and involve risks, uncertainties and other factors outside of the Company's control. You should review the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, as updated by subsequent filings with the Securities and Exchange Commission, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.

Current wording

The following discussion and analysis supplements our management’s discussion and analysis for the year ended September 30, 2023 as contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 16, 2023, and presumes that readers have read or have access to such discussion and analysis. The following discussion and analysis should also be read together with the unaudited consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that reflect our plans and strategy for our business, and involve risks and uncertainties. You should review the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, as updated by subsequent filings with the Securities and Exchange Commission, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.

Previous wording

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

Current wording

We are the largest provider of commercial landscaping services in the United States, with revenues approximately 5 times those of our next largest commercial landscaping competitor. We provide commercial landscaping services ranging from landscape maintenance and enhancements to tree care and landscape development. We operate through a differentiated and integrated national service model which systematically delivers services at the local level by combining our network of over 290 branches with a qualified service partner network. Our branch delivery model underpins our position as a single-source end-to-end landscaping solution provider to our diverse customer base at the national, regional and local levels, which we believe represents a significant competitive advantage. We believe our commercial customer base understands the financial and reputational risk associated with inadequate landscape maintenance and considers our services to be essential and non-discretionary.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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 acquired since December 18, 2013.

Previous wording

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

Current wording

Other (income) consists primarily of investment gains related to investments held in Rabbi Trust.

Previous wording

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

Current wording

Interest expense, net consists primarily of interest expense related to our long-term debt as well as interest income related to our cash and cash equivalents. See Note 7 “Long-term Debt” in the unaudited consolidated financial statements included under Part I, Item 1, “Financial Statements”.

Previous wording

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

Current wording

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

Previous wording

In addition to our organic growth, we have grown, and expect to continue to grow, our business through acquisitions in an effort to better service our existing customers and to attract new customers. These acquisitions have allowed us to execute our “strong-on-strong” acquisition strategy in which we focus on increasing our density and leadership positions in existing local markets, entering into attractive new geographic markets and expanding our portfolio of landscape enhancement services and improving technical capabilities in specialized services. As we continue to selectively pursue acquisitions that complement our “strong-on-strong” acquisition strategy, we believe we are the acquirer of choice in the highly fragmented commercial landscaping industry because we offer the ability to leverage our significant size and scale, as well as provide stable and potentially expanding career opportunities for employees of acquired businesses. In accordance with GAAP, the results of the acquisitions we have completed are reflected in our consolidated financial statements from the date of acquisition. We incur transaction costs in connection with identifying and completing acquisitions and ongoing integration costs as we integrate acquired companies and seek to achieve synergies. During the three months ended December 31, 2023, the Company incurred $0.6 million of integration costs related to acquisitions completed prior to fiscal 2024. 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.

Current wording

In addition to our organic growth, we have grown, and expect to continue to grow, our business through acquisitions in an effort to better service our existing customers and to attract new customers. These acquisitions have allowed us to execute our “strong-on-strong” acquisition strategy in which we focus on increasing our density and leadership positions in existing local markets, entering into attractive new geographic markets and expanding our portfolio of landscape enhancement services and improving technical capabilities in specialized services. As we continue to selectively pursue acquisitions that complement our “strong-on-strong” acquisition strategy, we believe we are the acquirer of choice in the highly fragmented commercial landscaping industry because we offer the ability to leverage our significant size and scale, as well as provide stable and potentially expanding career opportunities for employees of acquired businesses. In accordance with GAAP, the results of the acquisitions we have completed are reflected in our consolidated financial statements from the date of acquisition. We incur transaction costs in connection with identifying and completing acquisitions and ongoing integration costs as we integrate acquired companies and seek to achieve synergies. During the six months ended March 31, 2024, the Company incurred $2.1 million of integration costs related to acquisitions completed prior to fiscal 2024. 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, fleet and uniform rebranding costs and adjustments to performance-based contingent consideration. We typically anticipate integration costs to represent approximately 7%-9% of the acquisition price, and to be incurred within 12 months of acquisition completion.

Previous wording

Based on our most recent annual analysis as of July 1, 2023, 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 4.7%. Since the Maintenance reporting unit fair value did not substantially exceed the carrying value, we may be at risk for an impairment loss in the future if interest rates and market conditions continue to trend unfavorably or if our forecasts assumed in the fair value calculation are not realized. As of December 31, 2023, there was $1,803.5 million of goodwill recorded related to the Maintenance reporting unit.

Current wording

Based on our most recent annual analysis as of July 1, 2023, the fair values for all identified reporting units exceeded the carrying values, and therefore no indicators of impairment existed for the reporting units; however, the fair value of the Maintenance reporting unit exceeded the carrying value by 4.7%. Since the Maintenance reporting unit fair value did not substantially exceed the carrying value, we may be at risk for an impairment loss in the future if interest rates and market conditions continue to trend unfavorably or if our forecasts assumed in the fair value calculation are not realized. As of March 31, 2024, there was $1,797.7 million of goodwill recorded related to the Maintenance reporting unit.

Previous wording

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

Current wording

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.

Previous wording

Amortization expense for the three months ended December 31, 2023 decreased $1.8 million, or 15.1%, to $10.1 million, from $11.9 million in the 2022 period. The decrease was principally due to a $1.0 million decrease in amortization expense for intangible assets recognized in connection with our acquired businesses subsequent to the ValleyCrest Acquisition and a $0.8 million decrease in the amortization of historical intangible assets recognized in connection with the KKR Acquisition and the ValleyCrest Acquisition, based on the pattern consistent with expected future cash flows calculated at the time of acquisition.

Current wording

Amortization expense for the three months ended March 31, 2024 decreased $2.3 million, or 20.9%, to $8.7 million, from $11.0 million in the 2023 period. The decrease was principally due to a $0.9 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, combined with a $1.3 million decrease in amortization expense for intangible assets recognized in connection with our acquired businesses subsequent to the ValleyCrest Acquisition.

Previous wording

Other income was $1.2 million for the three months ended December 31, 2023 compared to expense of $0.7 million in the 2022 period. The increase of $0.5 million was driven principally by the change in value of investments held in the Rabbi Trust.

Current wording

Other income was $0.8 million for the three months ended March 31, 2024 compared $0.6 million in the 2023 period. The increase of $0.2 million was driven principally by the change in value of investments held in the Rabbi Trust.

Previous wording

Adjusted EBITDA decreased $1.9 million for the three months ended December 31, 2023, to $46.7 million, from $48.6 million in the 2022 period. Adjusted EBITDA as a percentage of revenue was 7.5% and 7.4% for the three months ended December 31, 2023 and 2022, respectively. The decrease in Adjusted EBITDA was primarily driven by an decrease of $8.5 million, or 16.8% in Maintenance Services Segment Adjusted EBITDA, partially offset by an increase of $3.1 million, or 18.8% in Development Services Segment Adjusted EBITDA, as discussed further below in Segment Results.

Current wording

Adjusted EBITDA increased $18.0 million for the three months ended March 31, 2024, to $64.8 million, from $46.8 million in the 2023 period. Adjusted EBITDA as a percentage of revenue was 9.6% and 7.2% for the three months ended March 31, 2024 and 2023, respectively. The increase in Adjusted EBITDA was primarily driven by an increase of $14.8 million, or 28.6% in Maintenance Services Segment Adjusted EBITDA, combined with an increase of $1.3 million, or 9.9% in Development Services Segment Adjusted EBITDA, as discussed further below in Segment Results.

Previous wording

Adjusted net income for the three months ended December 31, 2023 increased $4.2 million to $3.0 million, from $(1.2) million in the 2022 period due to the changes noted above.

Current wording

Adjusted Net Income for the three months ended March 31, 2024 increased $23.6 million to $16.9 million, from a loss of $6.7 million in the 2023 period due to the changes noted above.

Previous wording

Net service revenues for the three months ended December 31, 2023 decreased $29.2 million, or 4.5%, to $626.7 million, from $655.9 million in the 2022 period. The decrease was driven by a decrease in Maintenance Services revenues of $40.9 million, partially offset by an increase in Development Services revenues of $11.0 million as discussed further below in Segment Results.

Current wording

Net service revenues for the six months ended March 31, 2024 decreased $6.7 million, or 0.5%, to $1,299.6 million, from $1,306.3 million in the 2023 period. The decrease was driven by a decrease in Maintenance Services revenues of $28.3 million which was partially offset by an increase in Development Services revenues of $19.8 million as discussed further below in Segment Results.

Previous wording

Gross profit for the three months ended December 31, 2023 decreased $13.8 million, or 9.3%, to $133.8 million, from $147.6 million in the 2022 period. Gross margin decreased 120 basis points, to 21.3%, in the three months ended December 31, 2023, from 22.5% in the 2022 period. The decreases in gross profit and gross margin were driven by the decrease in Maintenance Services revenues as well as the increase in labor costs in our Development segment associated with the mix of projects relative to the prior year. Partially offsetting this was more efficient management of material costs versus the prior period.

Current wording

Gross profit for the six months ended March 31, 2024 decreased $8.8 million, or 3.0%, to $285.9 million, from $294.7 million in the 2023 period. Gross margin decreased 60 basis points, to 22.0%, in the six months ended March 31, 2024, from 22.6% in the 2023 period. The decreases in gross profit and gross margin were driven by the decrease in Maintenance Services revenues as well as the increase in labor costs associated with the mix of projects relative to the prior year. Partially offsetting this was a reduction of material costs and equipment-related costs versus the prior period, associated with the mix of projects.

Previous wording

Selling, general and administrative expense for the three months ended December 31, 2023 decreased $7.7 million, or 5.6%, to $129.9 million, from $137.6 million in the 2022 period. As a percentage of revenue, Selling, general and administrative expense decreased 30 basis points for the three months ended December 31, 2023 to 20.7%, from 21.0% in the 2022 period. The decrease was driven principally by decreases in compensation-related costs, offset by an increase in business transformation and integration costs during the period.

Current wording

Selling, general and administrative expense for the six months ended March 31, 2024 decreased $21.4 million, or 7.7%, to $255.0 million, from $276.4 million in the 2023 period. As a percentage of revenue, Selling, general and administrative expense decreased 160 basis points for the six months ended March 31, 2024 to 19.6%, from 21.2% in the 2023 period. The decrease was driven principally by lower labor-related costs resulting from the Company's cost management initiatives, offset by an increase in business transformation and integration costs during the period.

Previous wording

Interest expense for the three months ended December 31, 2023 decreased $6.1 million, or 26.3%, to $17.1 million, from $23.2 million in the 2022 period. The decrease was driven principally by the decrease in the long term debt balance, partially offset by an increase in rates.

Current wording

Interest expense for the six months ended March 31, 2024 decreased $17.9 million, or 35.2%, to $33.0 million, from $50.9 million in the 2023 period. The decrease was driven principally by lower interest expense as a result of the decrease in the long-term debt balance combined with an increase in interest income associated with the increase in the cash and cash equivalents balance.

Previous wording

We believe that Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS are helpful supplemental measures to assist us and investors in evaluating our operating results as they exclude certain items whose fluctuations from period to period do not necessarily correspond to changes in the operations of our business. Adjusted EBITDA represents net (loss) before interest, taxes, depreciation, amortization and certain non-cash, non-recurring and other adjustment items. Adjusted Net Income (Loss) is defined as net (loss) including interest and depreciation and excluding other items used to calculate Adjusted EBITDA and further adjusted for the tax effect of these exclusions and the removal of the discrete tax items. Adjusted EPS is defined as Adjusted Net Income (Loss) divided by the Adjusted Weighted Average Number of Common Shares Outstanding. We define Adjusted Weighted Average Number of Common Shares Outstanding as the weighted average number of common shares outstanding used in the calculation of basic earnings per share plus shares of common stock related to the Series A Preferred Stock on an as-converted basis, assumed to be converted for the entire period. We believe that the adjustments applied in presenting Adjusted EBITDA, Adjusted Net Income (Loss) 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.

Current wording

We believe that Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS are helpful supplemental measures to assist us and investors in evaluating our operating results as they exclude certain items whose fluctuations from period to period do not necessarily correspond to changes in the operations of our business. Adjusted EBITDA represents net income (loss) before interest, taxes, depreciation, amortization and certain non-cash, non-recurring and other adjustment items. Adjusted Net Income (Loss) is defined as net income (loss) including interest and depreciation and excluding other items used to calculate Adjusted EBITDA and further adjusted for the tax effect of these exclusions and the removal of the discrete tax items. Adjusted EPS is defined as Adjusted Net Income (Loss) divided by the Adjusted Weighted Average Number of Common Shares Outstanding. We define Adjusted Weighted Average Number of Common Shares Outstanding as the weighted average number of common shares outstanding used in the calculation of basic earnings per share plus shares of common stock related to the Series A Preferred Stock on an as-converted basis, assumed to be converted for the entire period. We believe that the adjustments applied in presenting Adjusted EBITDA, Adjusted Net Income (Loss) 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.

Previous wording

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

Current wording

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

Previous wording

Set forth below are the reconciliations of net (loss) to Adjusted EBITDA and Adjusted Net Income (Loss), and cash flows from operating activities to Free Cash Flow.

Current wording

Set forth below are the reconciliations of net income (loss) to Adjusted EBITDA and Adjusted Net Income (Loss), and cash flows from operating activities to Free Cash Flow. Adjusted EPS is defined as Adjusted Net Income (Loss) (shown below) divided by the Adjusted Weighted Average Number of Common Shares Outstanding for the period used in the calculation of basic EPS which is presented in Note 14 “Earnings (Loss) Per Share of Common Stock” in the Notes to our unaudited consolidated financial statements.

Previous wording

Represents the tax effect of pre-tax items excluded from Adjusted Net Income (Loss) and the removal of the applicable discrete tax items, which collectively result in a reduction of income tax (benefit). The tax effect of pre-tax items excluded from Adjusted Net Income (Loss) 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.

Current wording

Represents the tax effect of pre-tax items excluded from Adjusted Net Income (Loss) and the removal of the applicable discrete tax items, which collectively result in a reduction of income tax expense (benefit). The tax effect of pre-tax items excluded from Adjusted Net Income (Loss) 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 tax impact of the gain on divestiture of U.S. Lawns, changes in laws or rates, changes in uncertain tax positions relating to prior years and changes in valuation allowances.

Previous wording

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.

Current wording

Represents isolated expenses specifically related to the integration of acquired companies such as one-time employee retention costs, employee onboarding and training costs, fleet and uniform rebranding costs, and adjustments to performance based contingent consideration. 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.

Previous wording

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

Current wording

The following tables present Net service revenues, Segment Adjusted EBITDA, and Segment Adjusted EBITDA Margin for each of our segments for the three months ended March 31, 2024 and 2023. Changes in Segment Adjusted EBITDA Margin are shown in basis points, or bps.

Previous wording

Development Services net service revenues for the three months ended December 31, 2023 increased $11.0 million, or 6.3%, compared to the 2022 period. The increase was principally driven by an increase in Development Services project volumes of $11.0 million.

Current wording

Development Services net service revenues for the three months ended March 31, 2024 increased $8.8 million, or 5.7%, compared to the 2023 period. The increase was driven by an increase in Development Services project volumes.

Previous wording

Maintenance Services net service revenues for the three months ended December 31, 2023 decreased by $40.9 million, or 8.5%, from the 2022 period. Snow removal services revenue decreased $22.1 million, primarily due to lower snowfall relative to the prior period 1. Commercial landscaping services decreased $18.8 million, or 4.5%, largely underpinned by a decline in our ancillary services business.

Current wording

Maintenance Services net service revenues for the six months ended March 31, 2024 decreased by $28.3 million, or 2.9%, from the 2023 period. The decrease was principally driven by a $40.4 million, or 5.2%, decrease in underlying commercial landscape services, largely underpinned by a decline in our Ancillary services business. This was partially offset by a $12.1 million increase in snow removal services revenue, primarily due to higher snowfall than in the prior period 1.

Previous wording

Segment Adjusted EBITDA for the three months ended December 31, 2023 increased $3.1 million, to $19.6 million, compared to the 2022 period. Segment Adjusted EBITDA Margin increased 110 basis points, to 10.6% for the quarter from 9.5% in the 2022 period. The increases in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were primarily driven by the increase in net service revenues described above, coupled with savings primarily from cost management initiatives.

Current wording

Segment Adjusted EBITDA for the six months ended March 31, 2024 increased $4.4 million, to $34.0 million, compared to the 2023 period. Segment Adjusted EBITDA Margin increased 70 basis points, to 9.7% for the period from 9.0% in the 2023 period. The increases in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were primarily driven by the increase in revenues described above coupled with savings primarily from the Company's cost management initiatives.

Previous wording

Dividends on Series A Convertible Preferred Shares

Current wording

The Company is party to the Investment Agreement dated August 28, 2023, pursuant to which the Company issued and sold, in a private placement, an aggregate of 500,000 shares of the Company’s Series A Convertible Preferred Stock, for an aggregate purchase price of $500.0 million. The Series A Convertible Preferred Stock is entitled to dividends at a rate of 7.0% per annum, compounding quarterly, paid in kind or paid in cash, at the Company’s election.

Previous wording

Net cash provided by (used in) operating activities for the three months ended December 31, 2023 increased $55.8 million, to $26.2 million, from a cash use of $29.6 million in the 2022 period. This increase was due to increases in cash provided by accounts receivable, and unbilled and deferred revenue. This was partially offset by an increase in cash used by accounts payable and other operating liabilities, and other operating assets.

Current wording

Net cash provided by operating activities for the six months ended March 31, 2024 increased $54.5 million, to $109.5 million, from $55.0 million in the 2023 period. This increase was due to increases in cash provided by accounts receivable and unbilled and deferred revenue and an increase in net income. This was partially offset by a decrease in cash provided by other operating assets and an increase in cash used by accounts payable and other operating liabilities.

Previous wording

Net cash used in investing activities decreased $26.4 million to $8.6 million for the three months ended December 31, 2023 from $35.0 million in the 2022 period. The decrease was principally driven by a decrease of $17.1 million in capital expenditures and a decrease of $10.0 million in cash used for acquisitions in comparison to the prior period.

Current wording

Net cash used in investing activities increased $84.1 million to an inflow $32.3 million for the six months ended March 31, 2024 from an outflow of $51.8 million in the 2023 period. The increase was driven by proceeds of $51.6 million from the divestiture of U.S. Lawns, combined with a $20.0 million decrease in capital expenditures and a $13.8 million decrease in cash used for acquisitions in comparison to the prior period.

Previous wording

Net cash flows used in financing activities of $20.1 million for the three months ended December 31, 2023 included repayments of our Receivables Financing Agreement of $9.5 million, repayments of finance lease obligations of $7.5 million and repurchases of common stock and distributions of $2.5 million.

Current wording

Net cash flows used in financing activities of $31.5 million for the six months ended March 31, 2024 included repayments of finance lease obligations of $15.5 million, repayments of our Receivables Financing Agreement of $9.5 million, and contingent business acquisition payments of $4.7 million.

Previous wording

Free Cash Flow increased $72.7 million to an inflow of $17.3 million for the three months ended December 31, 2023 from an outflow of $55.4 million in the 2022 period. The increase in Free Cash Flow was due to an increase in net cash provided by operating activities coupled with a decrease in cash used for capital expenditures, each as described above.

Current wording

Free Cash Flow increased $73.5 million to $89.4 million for the six months ended March 31, 2024 from $15.9 million in the 2023 period. The increase in Free Cash Flow was due to an increase in net cash provided by operating activities coupled with a decrease in cash used for capital expenditures, each as described above.

Previous wording

Net working capital is defined as current assets less current liabilities. Net working capital decreased $5.7 million to $269.7 million at December 31, 2023, from $275.4 million at September 30, 2023, primarily driven by a decrease in unbilled revenue of $35.7 million coupled with a decrease in accounts receivable of $23.4 million and an increase in deferred revenue of $22.7 million. This was partially offset by a decrease in accrued expense and other current assets of $50.7 million coupled with an increase in other current assets of $10.4 million.

Current wording

Net working capital is defined as current assets less current liabilities. Net working capital increased $46.0 million to $321.4 million at March 31, 2024, from $275.4 million at September 30, 2023, primarily driven by an increase in cash and cash equivalents of $110.3 million coupled with a decrease in accrued expenses and other current liabilities of $15.8 million. This was partially offset by an increase in deferred revenue of $35.3 million, combined with a decrease in unbilled revenue of $31.3 million and a decrease in accounts receivable of $21.5 million.