BrightView Holdings, Inc. (BV) Earnings Call Transcript & Summary

Hi there. Happy to be here today with the CEO, Andrew Masterman, of BrightView. Let me kick things off with an introduction. My name is Aftab Shahsingh. I am the Americas head of industrial tech and services for UBS. We have a longstanding relationship with BrightView. We were one of the lead underwriters for the IPO and have been following the story for a while and gives me a lot of pleasure to be able to introduce Andrew and have him share the story with everyone here.

Great. Thank you, Aftab. Good to be here. Let me just kind of kick it off...

Yes, maybe introduce yourself and then I'd love to sort of set the stage and then ask you some more with where-we-are-today questions.

Yes. For those of you who don't know, both here and on virtual, I appreciate you coming and joining to listen to the story about BrightView and where we're at as a company. BrightView is the largest landscaping company in the world. We do -- we operate in 2 segments, both the Maintenance and Development segment. If you think about that, our Development segment installs and creates iconic landscapes around the country and the Maintenance segment maintains them and makes sure they continue the beauty that we can actually create in the different environments. We operate in almost all different verticals. So wherever there is a landscape to be put in place, whether it's a university, a hotel, a commercial office space, homeowners association or a municipality. We really cover the entire country. We're primarily a self-performance group, and we do multiple service lines within landscaping. Landscaping is not just mowing and blowing. Landscaping, well, mowing is certainly part of it. It's irrigation, it's heavy tree care, horticultural intensity, turf care all the way and, of course, mowing and pruning and mulching and maintaining the overall properties. About 22,000 employees across the country and only a U.S. play. We currently operate ourselves in about 40 states, and we're continuing to look through the different opportunities we see in both an organic manner as well as a significant M&A opportunity in a highly fragmented market. So really that's just the general backdrop.

No, that's perfect. And I think you touched on largely sort of the key tenets of the investment thesis as you think about BrightView. Is there anything you feel like in the description you didn't cover in terms of the core part of the investment thesis?

Well, as far as the investment thesis, one thing I think we want to make sure it's highlighted is the fact that from a business perspective, this is a highly stable, resilient company that operates in down environments, in up environments. Whether the economy is booming or busting, reality is landscapes continue to grow. It's a living asset. And so this company and how we do has a great degree of stability and somewhat predictability when it comes to the underlying base business. And for that reason, it's a great cash flow story. And so the business we've created -- by the way, we've been around 1939. Our parent company or the parent -- the original company was Brickman Enterprises, over 70 years, built it up to about $1 billion business. 2014, we merged with the other large company, ValleyCrest and created another -- so we had also created about $1 billion business. So in 2014, came together roughly $2 billion business. It took those companies about 70 years to each get to $1 billion, and it's taken us about 7 years to grow another $1 billion. So...

And what's striking to me -- completely agree with that part of the thesis. What really struck us is the fact that, let's say, this market has about an $80 billion TAM, you want a fraction of the market today, call it, 5% and you're 5x bigger than the next...

Yes. I'd say right now, I mean, our current forecast is a little shy of $2.8 billion, the nearest competitor at about $450 million, $500 million and then it quickly comes after that. So yes, there's one competitor out there that's about 5th or 5x, but most competitors were 10x plus.

So a lot of M&A and organic runway.

Incredible runway, incredible runway. So TAM is $80 billion. If you figure, we don't do about $77 billion of that $80 billion. So it gives us an extraordinary opportunity as well.

And in terms of the contracting nature, these are all contracted MSAs. What's the typical sort of profile of that MSA that you have with the customer?

Yes. The average size of our customer or the contracts we have, like you said, we're primarily, in the Maintenance segment, have contracted levels of revenue. So if you think about our maintenance group at about $2 billion in revenue, about $1.2 billion of that -- $1.2 billion, roughly, is contracted, okay? And the average size of a contract across the entire enterprise is about $55,000. So 25,000 or so customers with roughly $55,000 per customer.

So pretty well diversified. And your client base is essentially Fortune 1000 companies. Is that the way to think about it, HOAs?

I think there's certainly a lot of -- we talk about the commercial side, the corporate headquarters that we do across the country. And there isn't a city you go to where we don't do corporate headquarters, whether it's the pharmaceutical corridor in New Jersey to the Fidelitys up in Boston to Apples and Googles and Facebooks over in the West Coast really and the Exons in the -- down in Texas, there's certainly that element. But a big part of our business, about 35%, 40% of our business is in the HOA section, right? And so those are customers which are HOA Boards. So those would be definitely a different nature of customer. HOAs, being homeowners associations, yes, managed sometimes by large Fortune 500 companies like FirstService, but we actually work for the Boards and FirstService facilitates some of those.

Yes. But presumably, these are sort of the larger end of the spectrum.

Absolutely. Yes, if you got to figure -- if you go down to Florida, you see Florida is our largest homeowners association market. You see there the very large $1 million-plus landscape in one community. Those are the communities who are involved.

Perfect. Great. And obviously, ESG is all the flavor of the day. It's natural to think about BrightView and think about ESG. How would you describe the ESG narrative as it relates to your company?

Well, number one, we only work outside. So as you think about landscaping, about the environment, it's one -- its hand-in-hand. We maintain the environment. So on the E side of ESG, we plant millions of trees a year, carbon offsets coming from all those trees. We do use -- utilize trucks and trailers and gasoline-powered equipment. We're actually moving from ESG -- we're moving from higher emitting 2-cycle and 2-stroke engines into electric. We're going to be cutting our carbon footprint by over 50% in the next 3 years at very little cost to the company. It's not a huge incremental cost. It's a little bit more in battery technology. We're able to operate all that within the CapEx guidance we've given. So ESG environment, it's a significant impact, 50% carbon emissions reduction, without having any economic negative impact. Likewise, there's not necessarily a huge positive impact either because all we're doing is changing our equipment, right? There is a positive impact long term now that's not going to be realized in the near future is reduction in fuel because we use a lot of fuel in trucks. And we do believe in our commitment to be carbon neutral by 2035 is there's actually -- if you look out 5 years from now, 6 years from now as we're shifting the fleet, once commercial vehicles are available that can control trailers, that's what's not available today, is being...

Technologies you have to catch up...

We have to catch up, but a big e-story. I do want to emphasize on the S side though. 70-plus percent of our employees are diverse when you talk about our overall makeup of our employee base. So we're already there as far as having a fairly diverse workforce. And then you go all the way up to our Board, which has about 3 of our 7 independent directors already there. So again, you span from our general employees up to our Board, it's a fairly diverse S side and G side.

That's fantastic. Walk through -- when you think about landscaping, you think about it being a relatively low technical skill set, but the more you read into BrightView in terms of horticulture, irrigation, other technical aspects of the business, it seems like it's soft skill but a pretty technical skill. How do you describe it?

No, no question. If you think about the technical side, the irrigation systems, think about the complexities you have in large campuses or parks, okay, where there are hundreds of controllers managing water management. And as you look going forward, especially in the Southwest, Nevada, Arizona, places like that and California, where water conservation is front and center, we're the ones who are going out there and the only ones who really can go and manage complex irrigation systems and introduce intensity of irrigation. And that's going to -- again, that's a big topic right now. When you see legislation in California potentially cutting off, significantly limiting water usage. So we're looked to as the water experts by our customers. I think as you see, looking forward, there's [ going to be ] greater impact, especially in those Western states.

Fantastic. And then the horticulture...

Yes, horticulture is kind of given a landscaping company. But one of the things -- when you look at our properties, as you think about that $80 billion TAM, take that TAM, go into the upper quartile, cut it half, cut it half again, top $20 billion, there's more horticultural intensity there. We're a company that's not the company that's going to be going chopping down the medians in a highway, right, bush hogging out weeds. Well, of course, we'll do that if customer asks. That's not our target. Our target is more horticulturally intense properties that need attention, things that if you're at a high-end resort like the Four Seasons or Ritz-Carlton, you're going into those resorts, you expect a certain level of landscaping. Those are the areas where we perform. And so it needs that level of attention and understanding of the differences between different types of plant life. For example, a royal palm, these beautiful palms that you see on the West Coast or down South, these are $35,000 palm trees. Interestingly, you only can use a single blade on a single palm. You can't use a blade on multiple palms because it will transfer disease. And killing a $35,000 palm when you have 8 of them lining a runway up into a nice resort, if you have an inexperienced horticulturist, you can quickly destroy $100,000 of assets. And then try and replace them and then you don't have the same canopy. So the intensity and the ability to understand some of the nuances of doing the landscape are pretty important. And again, we hold that knowledge and ability to work with more of those -- more horticulturally intensive properties.

And in terms of the value proposition for your client who's either the manager of the property or the owner, as we think about sort of the plethora of soft services and hard services that are delivered on property to a brownfield property, you have the lowest cost per square foot relative to other soft services like security, et cetera, or hard services like mechanical, electrical, HVAC. But it's relatively mission critical, for example, for the Four Seasons. So how do the property managers think about it as? Is it -- it's obviously firmly noncore, given what a small part of the spend it is. How do they think about their sort of buying decisions when it comes to landscaping?

Well, it's a great question because you may not -- we try to educate our customers, for example, in a university. You're right, spending relative to the entire cost of running a property, landscaping is a relatively small portion. That's good in some ways because you don't have to spend a lot of money to have an impact. We've done studies with the universities, for example. Your decision to attend that university is usually made in the first 15 minutes of being on a property, depending on how you feel and emotionally attached with that university. And so when a person -- new student is coming and looking at the university, if the landscaping catches their eye, it really makes them feel like an inviting location, actually it helps to make that decision much quicker and influences that decision totally disproportionately to the spend or anything else going on in that university. And so it's fascinating as we educate people. That's -- whether that's a university. That's a certain example where we've actually done a study on it, whether it's a hotel, whether it's a corporate office, when you come in and if you see the office or even a residential area, when you see the landscaping being tight, it's manicured, it looks good, the impression of the quality of that experience in that building lifts, and it really becomes your confidence level as opposed to just think about if you go to a property and weeds are growing up on the side, it's unkempt, half of the bushes are dying, there's no color, the impression you make on that property has -- your impression of that company or impression of that institution that you're visiting is completely different. And so that's the proposition that when we get in front of the decision-makers and show them what it can do relative to the spend, which is the lowest service spend necessary by a property manager relative to, like you said, HVAC, security, electricity, farming and all, it's the lowest spend you can have and the biggest impact you can make.

That's interesting. But it sounds like it's almost like an iterative process with these clients. It's not their first instinct because it's such a small part of their spend.

And that's part of our education. Again, we operate at the upper quartile. And the engagement we have with our customers, because we have account managers tied to every single property, is helping educate those customers on the impact that it can make. And we -- our sales skills and our internal training, which also helps with scale because we can develop specific training and ways of approaching properties that your average landscaping company, which is a small mom-and-pop type landscaping company, isn't going to really understand how to push and drive the rest of the other services and kind of the positioning you can have as a company.

That's a good segue in a scale because, obviously, it's a people business. Part of the secret sauce is you're self-performing in a very tight market. How do you think about what scale does for you as it relates to all the stakeholders in the ecosystem, whether it's your company, whether it's the client, whether it's employees? And how does scale differentiate you? Why does that matter?

It's a question we frequently get, right, because we're the only landscaper really in the country of a significant scale. So why does it matter? Why does it matter to the investor, right? What is the differentiated performance or service that we're going to be able to provide? I'm going to -- there are 4 kind of pillars that I think about. Some of them are pretty self-evident. One of them is purchasing, right? We have a scale. So that's what kind of everyone defaults to. Interestingly, national accounts are not one of the 4. National accounts are certainly an element, but I would not say it's a major element because landscaping is primarily a local decision. It's one where you're engaging with the property with the property managers locally. So we have to organize our company in a local manner. So while national accounts are important and to a certain degree, I wouldn't say they are the pillars of scale differentiation. Number one, though, is -- I mean purchasing [ is not the one ], it's one of the 4. Number one actually is technology, where we invest in technology platforms, which help us engage with our customer in a better way as well as manage our business better. What that does is engage with the customer provides higher general retention in the industry within BrightView because of the digital tools we engage, whether that's HOA Connect, which is our digital platform to allow us to manage landscaping within multisite communities or whether that's BV Connect, which is more of our commercial engagement, putting the entire relationship with landscaping on the portal. May seem this is a simple kind of straightforward thing, but actually in landscaping, 500,000 competitors out there in the marketplace, these tools have not come to the landscaping world. And if you can think about it even in your own personal home and the landscapers that come into your house, do you have a portal that you can go to, to look at your landscaping services? You don't. It just doesn't exist yet in this marketplace. We don't do residential, but in the commercial side, it also doesn't exist. So pushing that relationship, causing higher retention, our retention being in the 83%, 82%, up to 85% range, up to 90% in some markets, is usually a good 5 to 10 percentage points greater than our competition. So that's on the retention side. And then you have the technology that helps you in managing labor. We have electronic time capture, daily capture of labor and understanding how labor is managed. We believe we do have probably the tightest labor management in the industry and actually even in the service industry, which leads to superior margins. And relative to our competition, we believe we have world-class margins when it comes to across the entire enterprise with over 300 branches. So technology being one, purchasing being two, three is some of our leadership engagement that we have, the ability to provide a career path within a horticulturally intensive company. No other company can do that because they don't have the scale. We have 800 account managers. When you join our company as an account manager, you see an ability to rise up to be an account manager and assistant branch manager, a branch manager, a general manager or vice president as your career path. Within landscaping, you don't have that kind of upward mobility because most of the time you join, you join a $5 million landscaping company, the boss is the owner. He's the branch manager. Usually, his wife or her husband is the finance person and another person is the ops guy, the uncle is the ops guy. And you join, you don't know where to go. You're going to be an account manager, you're going to be an account manager the rest of your life if you're in that company. We provide that career path, which makes -- which means we attract. Why that's important is we attract the best people in the industry to come work for us because they see a career path who are not necessarily the family of a small business. So we believe we have and we know we do because we're constantly being headhunted by the competition because we develop and have the best people in the entire industry. So leadership development, technology, purchasing power and the last one being route density. In order to pick out an area, whether it's New York metropolitan area, San Francisco Bay Area, Los Angeles Metro area, Chicago, any of these places where we have a dozen branches. In fact, in San Francisco, we have 25 branches from San Jose up to Nava. Take the Los Angeles Basin from Orange County, all the way up to Santa Barbara, again 25 branches. So what that means from an investment standpoint and a business management standpoint is we don't have to drive more than half an hour to go to any site, whereas a competitor who happens to be here in New York City, perhaps are based out of Long Island and they want to do a piece of business in New Jersey, they've got to drive 1.5 hours, 2 hours through traffic at times...

[indiscernible] stops and route...

[ And stops ]. Yes. And so what that allows us to do is to be close, to be more competitive on the bid. When you have a property manager who has a place in Long Island, a place in Northern New Jersey, right, a place in the suburbs of New York and tries to get to those 3 large commercial properties because they want to have 1 point of contact, we can do that in a much more cost-efficient manner because I've got 3 branches strategically located to handle that property with the customer have a one-point content. There's not many companies to do that.

There are a lot of aspects to scale that...

So those are the 4 [indiscernible].

Perfect. How has the business developed since the IPO? Have there been some key lessons learned?

Yes. I mean we went public in 2018 summer, so about 4 years ago. In that time since we went public, you can say that it's been a fairly interesting path with the -- we came off of a big hurricane here, and hurricanes can, in a short term, give us a revenue surge. It creates a very difficult comp year-over-year when you have $30 million, $40 million of additional revenue coming in from hurricane cleanup. So what we have learned, I think, is that there is a bit of a variation we have in revenue because of those events that come in. But what we have also learned is that the market has given us a great deal of validation of our stability we have going through COVID, the dip we had and the quick rebound back up. We feel that our recovery was pretty much [ immediate ] since going public. So -- but 2 of our 4 years of going public, we were in the midst of a pandemic. So it's been clearly a challenging time and uncertain time for people who look at our company. We have an extraordinary amount of confidence in where we're at today. We're right now forecasting to be the highest revenue numbers we've had as a company based on high single-digit organic growth this year, combined with a continued execution on our M&A pipeline, which over the last -- since 2017, 5 years, we've bought 36 companies and added over $0.5 billion of revenue. So we believe since the IPO, since '18, again, if you think about where we went public, we're about $350 million growth in landscaping services and development over the course of that time in the last 4 years since 2018, and that's in the middle of 2 years of an incredible dip in the economy, not in our company necessarily.

Yes. touch on that because you've recovered from pre-COVID levels and then some -- a lot of your peers that are out based on facility services, even sort of the best-in-class guys haven't really been able to get there yet as people continue to reopen and folks start coming back in. You presumably see some of that normalization. How are you able to do that versus others? And what does it look like from here?

Well, I think number one has been the deliberate focus we've got on our sales growth. So if you look back in 2018, we had a sales team, which was engineered to pretty much replace the losses that I mentioned before retention. Our sales team was engineered to cover the losses that we have and to rebuild the company, which gave us a stability position as far as top line revenue but wasn't really engineered for growth. So in '18 and '19, we started a deliberate focus on adding and building up deliberately our sales force. And so -- and we kept that through the downturn. That's one thing we did not stop spending on. We continued to hire and build our sales force through the downturn. What that has resulted in is a sales force that is absolutely delivering and fueling the ability to have organic growth. And so now the company is engineered, we have the sales force, and it becomes actually -- at a large scale, it becomes somewhat of a basic exercise where if you have 85% retention and your sales force is engineered to grow -- to fill it back up and to grow at 3% just by looking at your average sales per sales person, it's really a math equation when you put how many sales [ PP ] you need.

Just describe that because you have made a significant investment in business development. What -- can you describe where you were, let's say, at IPO versus now in terms of scale, in terms of business development, headcount?

Yes. We've grown -- since the IPO, we've added 50% to our sales force or sales [ PP ], which is significant, and retained them. By the way, our retention, employee retention, even in the midst of the great resignation that we're in right now, supposedly, we've been able to retain our folks at a higher-than-average rate in the industry. So we're pleased with the new people coming in. And we believe that sales tools, it's the dynamic of the industry and the fact that there's a lot of excitement within the company because of the growth we're seeing, and we see it coming. So that's what we refer to as our net new, right, our sales minus our losses. And we've had consistently, quarter-over-quarter, net new increases, which I've told publicly in our earning calls how confident I am with the net new that I see coming and lowball manifests itself in real, tangible organic growth.

So parse through that because you, obviously, have some recovery in ancillary. You had a small part of your market was hotels and hospitality and -- there was a bit of a recovery there, but that was, call it, 10% of your market that fell that impingement during COVID. How much of this growth that we're seeing, which is pretty outsized in terms of organic growth, is the business development effort, which is more of a permanent effect and -- versus the normalization of ancillary in other part of your revenue.

If you look at -- yes, it's a great question. If you look at our 8% organic growth or so that we probably posted in the last 4 quarters, I would say half of that has come from contract growth, true underlying contracts growing, and the rest of that's come from ancillary rebound.

So it's 50%.

Yes, which is, I think, pretty strong. It shows you the stability that we have.

And how does that normalize because presumably 8% is -- would be far north of where the industry is growing. So how do you think about that over the next, call it, 2 years and then beyond in a more normalized fashion.

Industry growth is between 1% to 2% a year, okay? It does not follow one of the things that -- it does not necessarily follow inflationary trends, okay? It is really all dependent on new properties coming online. That's how this industry grows. And it tends to be -- actually the industry itself is more of a deflationary descoping dynamic because as landscapes mature, they need less maintenance, right? Initially, you put landscape in, it needs a lot of attention, you need to establish root structure, you need to establish turf layout, prune -- bushes need to grow to the mature stage, and it takes a lot more attention to get them in pruning, again, irrigation, fertilization. Once they're established, you can kind of pull back a little bit. So by nature, the industry kind of goes down and then you can also look at -- you then improve properties, expand properties. That's where the scope increases. So the dynamic of the industry is relatively flat. That's why it only has 1% to 2% growth. And we believe long term, we see ourselves at 2% to 3%, 3% plus organic growth on an ongoing continuing basis with share capture through the entire industry that we believe we'll be able to achieve.

Yes. That was a lot, and we'll try to sort of unpack the pricing side and the discipline you've had versus labor inflation, which was the topic du jour. But before we get into that, when we talk about normalized levels of growth, development services is also sort of experiencing pretty dramatic recovery. So is that -- you're talking about just the maintenance side. This is normally -- and then how do you think about development?

Development, I'm just bullish. And in fact, we -- it's underpinned by -- if you look at the Architectural Billings Index, the ABI, which in construction is a leading indicator of activity, that's at a high -- highest level it's been in the last several years. So 57 right now, which -- anything above 50 indicates growth in the construction sector. So when we look at our development business, our pipeline is larger than it's ever been. We're bullish about what we see coming. And that's both in just general landscaping development for corporate offices and also infrastructure. We're heavily related to the infrastructure spend. 40% of our development business is in the municipal segment. And so as you look at infrastructure spending bill, you've seen new activity coming in there. We actually believe that there's going to be significant growth, 3% plus, perhaps as much as 5% in the development segment because of those inquiries, not only just general activity in architects and what they're designing, but also the upcoming for the next 5, 7 years from the infrastructure spending bill. Every bridge, every piece of new highway, all of it takes landscaping. So you think about, yes, you're spending on roads, you're spending on bridges, you also have to landscape the sides of those. So you're taking Phoenix where they just expanded, I think it's 202, that goes to Bell Group around Phoenix. They've just expanded 22 miles of that highway. We're landscaping all 22 miles. It's one of the largest projects going on in Phoenix right now, and it's a significant project for us. The 405 Freeway, which is in Southern California, that's another multi-tens of millions of dollars for us on landscaping because as they redo some of the off ramps and on ramps and improvement of those highways, we're doing all the landscaping. So as you see more and more of that coming in development on the municipal side, that's going to give us strong runway as we go over the next 5 years, and we're seeing, okay, on top of just overall general commercial activity, whether that's Disney World or Universal Studios, where we do all the landscaping development, or whether it's the establishment of new hotels, like the Four Seasons in Napa or other places where we also did all the landscaping development on.

Yes. One thing that's striking about your businesses, the margin profile, especially relative to even best-in-class property managers, facility service fulfillment or even, in some cases, route-based services, your pricing strategy has evolved over the years. Walk us through how it's evolved and where you are today and how clients are reacting to it.

Yes. Pricing, obviously, in an inflationary environment, is an important element because we're not immune. We are seeing inflation. Our biggest cost of providing the service is our labor, and labor is going up, and we're having to counter that. I would say the difference in pricing and let's take a property and just use the number 100. That was the price of service. In the past, we would get about 2% price increases, but those will be offset by scope reductions. And so you make that 100. You might get a 102 from a price increase, but the reality is you'd also have other properties that would go from 100 down to 98 from the scope. So in essence in the marketplace, you would have 0 impact on the revenue line, but we would be able to offset the cost inflation. Now with inflation coming at a little higher rate and also our labor, which typically had 4% to 5% or so increases, now 7% to 8% is what we're seeing on our labor inflation. What we're able to do is rather than that 100, we'll now get about 104. We're actually getting more price.

Price than you are getting.

Okay. However, the scope also is coming down and bringing it down probably like 3, okay? So let's say, the offset is 97. But the net is we're actually seeing about 1 point -- 0.5 point to 1 point of actual market growth due to pricing.

That's fantastic because if I think about the mom-and-pops, they're going through that same experience you are in terms of the labor market. And they probably have worse purchasing power than you do by a fraction, and that's a meaningful part of your spend. About 1/3 of your spend is actual operational procurement. And so as you think about it, how is the mom-and-pop feeling now? And what does that mean for you in terms of organic growth? Because clearly, it's showing up despite some of these scope reductions. And how does that look like in terms of the M&A pipeline as a result of it.

Yes. Mom and pops right now are certainly under pressure. I mean -- and what -- interestingly, we manage our business very tightly. We understand the dynamics of what's going on in the business daily, okay? The smaller organizations are going to be on top of it daily necessarily. They're going to look at it a month, 2 months, perhaps in arrears. So a bit of a residual lag. And so they're realizing and over the course of COVID and over the course of the inflationary period we're in, especially right now in the last year, I think they're really realizing, oh boy, these costs are being -- yet again, here is another challenge. And what we're seeing in the M&A environment is increasingly -- people coming out and talking to us about, okay, we understand that this is a pretty complex environment we're living in. We'd like to talk with you about having a little more professional management coming in and being able to manage what is a very successful enterprise that they've built over time. So M&A pipeline, $600 million of deals we have right now. We look at -- we target and we only model in about $60 million to $80 million in our guidance forecast that we tend to give. We've executed over $100 million of top line revenue every year at very attractive multiples, 5 to 7x. We stick to our knitting. We don't deviate from that. And actually, we're trending, I'd say, down towards lower than the midpoint of that range on the deals that we're executing on.

That's fantastic. So the approach has widened, and it's obviously creating a bit of a mix shift towards larger scale providers that are naturally advantaged in.

Correct. We're seeing that. We're seeing the inquiries, again, only increasing. I think when we first talked after IPO, our pipeline was maybe $200 million or $300 million. Again, it's doubled. We're at about $600 million of pipeline right now.

That's fantastic. And as you think about that and as you think about leverage, which has crept up a bit year-over-year, how do you think about prosecuting that M&A strategy that's clearly very attractive as well as other capital allocation you talked -- there's, obviously, been some explicit guidance around share repurchase. How do you sort of manage that capital allocation strategy?

Again, company has great free cash flow yield. So we've got cash every year, we need to deploy doing things. First, in area we're looking, unquestionably, M&A. That's the priority of our cash spend, okay? Second is going to be debt pay down and opportunistically would be share buyback. Share buyback we executed was basically where we repurchased shares from one of our 2 original private equity sponsors, MSD Capital. We were able to work with them and take them out of their position, which, in essence, did not affect the free float because it was...

In fact, it reduces the overhang.

It reduces the overhang. And so we successfully leveraged ourselves off, but we successfully took out one of the significant elements of overhang. We're really pleased with the way that worked out at very attractive prices, which is why we executed that deal.

And you touched on your free cash flow yield or, frankly, even ROE. It's actually materially better than the peers. I guess we have -- we're out of time. What is the market not getting here?

I think the market doesn't really understand the strength of our free cash flow yield. It doesn't miss the credit resiliency for what we actually performed in a down market and the bounce back -- the speed of our bounce back. And the reality is the short-term pressures we're facing today, whether that's the development material lag from the COVID impact, which is unwinding, whether it's the fuel expenses that we're hitting now, which again will -- which will recede eventually, [indiscernible] new area, which we'll be able to price on. The relative short-term natures of the current pressure are things which will be overcome and relatively quickly. This is not a long-term play to necessarily get out of our current -- similar current margin performance. I think that -- I think the market isn't getting there. Lastly, when you look at our return on invested capital and some of those measurements, look at our goodwill and -- take out the goodwill as the factor on that and you look at our ROIC or other elements, measurements like that would be significantly better once you take some of those intangible levels out of the calculation.

Fantastic. Well, this is really enlightening. Thank you for your time today, Andrew, and look forward to the next session.

Thanks so much, Aftab. Take care.