Divisions Holding Corp.

Overview Key strengths Key risks Asset-light business model with 100% of services outsourced to third-party vendors. Operations in a highly fragmented and price-competitive industry with low switching costs and limited barriers to entry. Nondiscretionary services that provide stable demand patterns despite some seasonality and weather-related uncertainty. Meaningful customer concentration risk with its top 10 customers accounting for about 19% of revenue as of fiscal 2023. Long-tenured relationships with blue-chip customers. Small scale despite rapid growth over the past few years. Elevated sales and technology investment burdening cash flow. In the fiscal year ended March 31, 2024, the company invested $20 million in sales team headcount initiatives to help accelerate revenue growth. This incremental salary expense temporarily decreased EBITDA margin. The

...Contrary to our expectations, Divisions Holding Corp. (DMG) reported free operating cash flow (FOCF) deficits again in fiscal 2023, primarily on incremental costs for expanding the sales force, DMG Pro platform investments, and abnormally low snowfall. In the fiscal year ended March 31, 2024, the company invested $20 million in sales team headcount initiatives to help accelerate revenue growth. This incremental salary expense temporarily decreased EBITDA margin. The company also ramped up investment in its DMG Pro platform to roughly $20 million. The platform is now fully operational with about 60% of customers utilizing it, with the rest expected to transition by the end of fiscal 2024. Divisions also made modest ($5 million)...

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