Hans Hoffman: This is Hans Hoffman on for Stephanie Moore. Just wanted to touch a bit on sort of M&A. Obviously, I know you guys removed it from the guide. But just given net leverage is in a much healthier position today, I’m just curious when you think that sort of comes back into the picture? And as you sort of evaluate acquisition targets, I know like the strategy has changed a bit versus prior year, so I’m just kind of curious what you guys are looking for in acquisitions.
Dale Asplund: Yes. Look, it’s a good question. Obviously, we’re in a much better financial position and if we wanted to deploy our precious capital that way, we could. But I think, as you can see on Slide 6 of the deck, we’ve had significant operational changes in our organization. I want to make sure we absorb all those changes and get our teams working together cohesively so that when we bring an acquisition in, we can be a better owner of that acquisition. I don’t think that’s long periods away but it’s probably not going to occur over the next 2 quarters. But I firmly believe accretive M&A is a way for us to grow this business. But we have to be a better owner. We have to make sure when we bring an asset in, we can help it grow faster and operate more efficiently than what it does today.
That capital that we choose to deploy through M&A is precious. And we’ve talked about all the investments we’re making with trucks, with mowers, with boots for our employees. Those are all things that are creating a cultural shift in this company. So if we’re going to bring somebody in, they’ve got to match our culture. They’ve got to want to be here and we’ve got to be willing to invest in that business. And then by leveraging all the services we’ve talked about, turf, irrigation, tree, hopefully, when we bring their customers in, we can be a better owner and help them grow faster. So I will tell you, we will be targeting M&A in 2025 just because we said we’d be positive for this year. But we’ve gone through tremendous change. I mentioned to somebody, 70% of our employees have a new boss right now and that’s a change.
And some of the people didn’t know their new boss. So let us absorb that. Let us get our feet under us and we’ll do M&A. I’m a firm believer in M&A. When it’s done right, it can create great value. When it’s done wrong, it’s wasted capital. So we’re going to do it and we’re going to do it right. We have a big pipeline. Where I’m going to focus M&A is I’m going to focus it on our core maintenance contract business. The snow business, as we’ve all seen, it’s very unpredictable. I’m glad when we get snow. I’m glad when our employees can service customers with snow. But where I’m going to put our energy for future M&A is going to be focused on the maintenance contract business across North America. And we have a lot of states today we’re not into.
So if I can find M&A in new states that I can help our teams grow into and then accelerate growth, that’s a great opportunity for us. So yes, like we said, zero M&A in the back half of the year. But in 2025, when we give you guys guide, we’ll give you an update on what we’re thinking about with a high level on M&A.
Hans Hoffman: Got it. That’s helpful. And then just kind of curious on the cross-sell of development into maintenance, was there any particular reason that, that opportunity wasn’t pursued in prior years? And then just sort of any thoughts around your initiatives to get retention back to where you were pre-IPO, if you could just sort of unpack that a bit more.
Dale Asplund: Yes. Let’s start with the development into maintenance. Look, I think like anything, when the compensation system motivates people to do what’s right for themselves and converting development into maintenance, there’s always some warranty work that we have to do. And it’s easier not to worry about who’s going to pay for the warranty if it’s not going from left pocket, right pocket. So I think by putting it under one person that now owns it, they will be able to negotiate who’s going to pay the warranty better than having 2 independent people that were worried about 2 different P&Ls. So this is all upside. You heard me say, it’s untapped opportunity. The developers are different than the people that are going to have the ongoing business but that doesn’t mean we should be getting the level of conversion we have in the past.
We should be able to get 70%-ish of the business that we create every year with our great development team and the new maintenance to be serviced by our teams. So unfortunately, it was the structure that we had that created that. But that’s work that we can do in the future. What was the second part of your question? Retention. Customer retention, yes. So customer retention, look, it’s near and dear to my heart. It pains me when I hear people think that our focus is to not service our customers like we don’t want to have the customers we have today. There is no customer that costs less to acquire than the one we already have today. It is our job to find a way to service those customers and make sure they’re getting the value for what they’re paying for.
Let us do that. We can’t just throw our challenges on our customers all the time. Our retention today is below where it was 5 years ago. I am going to improve that. I am creating a culture where those people that leave our gates in the morning to go out and service the customers, they are the ones that can make the change. Every positive letter I get from a customer, they talk about the crew that’s doing the work at their facility. Those crews are critical in customer retention. And then communicate, communicate, communicate. We can’t let our customers ever be surprised. In fact, you heard me mention we have an AI tool now where last year when we ran the AI tool over our customers that left us, 87% of them were predicted that they were going to leave us.
If I can get that information into my branch managers’ hands, they can go out and sit down and try to prevent those customers from leaving. We have everything we need to solve our own problems on retention. And it is a way that the more we retain, the faster we can grow this business. Our customers are valuable. They pay our bills. They have to be the center of every single thing we do. And that’s our focus. And that’s what we’re going to focus on this year and ’25. And until I get every branch someday at that 95% that I go to my best branches and see, I’ll never be happy. Because when I see a fully engaged branch manager and he has that level of retention, I know the power that this business can have; but great question.
Operator: That concludes the Q&A portion of today’s call. I’ll now hand back over to Dale Asplund for closing remarks.
Dale Asplund: Thank you, operator. As you can tell, we are extremely excited about the opportunities ahead. And I’m thrilled to be leading this great company through this important period. Our objectives are clear; we are committed to becoming One BrightView, growing profitably and creating meaningful shareholder value. With that, I thank everybody for joining our call today. Operator, you may now end the call.
Operator: Thank you. That concludes today’s call. You may now disconnect your lines.
