• Revenue: $2.1 billion, increased 2.2% with 1.6% organic growth.
• Adjusted EPS: $0.87, up from $0.86 in the prior year.
• Net Income: $43.6 million or $0.69 per share, compared to $44.7 million or $0.70 per share last year.
• Adjusted Net Income: $55.3 million.
• Adjusted EBITDA: $120.6 million, increased 3% with a margin of 5.9%.
• Technical Solutions Revenue: Grew 22% to $202.3 million.
• Aviation Revenue: Grew 8% to $270.1 million.
• Education Revenue: Grew 2% to $225.3 million.
• Manufacturing & Distribution Revenue: $394.3 million, down from $400.9 million last year.
• Free Cash Flow: Negative $123 million due to ERP system transition.
• Total Indebtedness: $1.6 billion with a debt to pro forma adjusted EBITDA ratio of 2.9 times.
• Share Repurchase: Approximately 415,000 shares purchased at an average price of $51.23 per share.
• Full Year Adjusted EPS Guidance: Raised to $3.65 to $3.80.
• Interest Expense Forecast: $80 million to $84 million.

• Warning! GuruFocus has detected 5 Warning Signs with ABM.

Release Date: March 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ABM Industries Inc (NYSE:ABM) reported a 2% organic revenue growth and adjusted EPS of $0.87, indicating a strong start to the fiscal year.
• The company raised the lower end of its full-year adjusted EPS guidance to between $3.65 and $3.80, reflecting confidence in meeting financial goals.
• ABM Industries Inc (NYSE:ABM) successfully expanded and extended its credit facility to $2.2 billion, showcasing lender confidence in its business model.
• The ERP implementation is expected to drive cost efficiencies, improve synergy capture, and provide real-time analytics for commercial growth opportunities.
• The company secured significant new contracts, including a $30 million annual contract with a major Silicon Valley tech company and a $40 million agreement at a major airport hub.

Negative Points

• The ERP implementation temporarily impacted cash flow, with a negative free cash flow of $123 million in the first quarter.
• Interest expense increased to $22.9 million, reflecting higher debt balances, with expectations for continued pressure in the first half of the year.
• Revenue in the Manufacturing & Distribution segment decreased due to a planned client exit, impacting overall segment performance.
• The company faces potential risks from shifts in immigration policy, which could affect the labor supply for qualified workers.
• The backlog in Technical Solutions decreased from $590 million to $490 million, indicating potential challenges in maintaining project momentum.

Q & A Highlights

Q: How significant is the 24% improvement in commercial office leasing activity for your B&I business compared to previous quarters? A: Scott Salmirs, President and CEO, explained that while there's no real seasonality in leasing activity, the improvement represents a positive trend. The increase in net absorption rates indicates optimism and a return to work, with management pushing for more office attendance. This trend is expected to continue, benefiting ABM's business.

Q: What is ABM's exposure to federal buildings in the B&I segment, and how does it affect potential risks? A: Scott Salmirs stated that ABM has minimal exposure to federal buildings, with no significant risk in cleaning or engineering services. The mission-critical work they do is protected and not subject to cuts, ensuring resilience in this area.

Q: How does ABM plan to manage potential labor cost increases, especially with union labor? A: Scott Salmirs mentioned that half of ABM's revenues come from union labor, with rates set for the next three years at reasonable levels. For non-union labor, ABM passes most labor cost increases to clients. The company has enhanced its talent acquisition team and technology to efficiently manage labor needs.

Q: What steps is ABM taking to catch up on free cash flow following the ERP system transition? A: Earl Ellis, CFO, explained that the ERP transition caused a temporary delay in invoicing and cash collections. ABM expects cash flow to improve in Q2 and normalize by year-end. The company prioritized accurate invoicing to maintain client satisfaction during the transition.

Q: Can you provide insights into ABM's win rates and business development strategies? A: Scott Salmirs highlighted investments in business development and training, leading to improved win rates. ABM leverages AI and a deal desk to efficiently respond to RFPs. The company is selective about clients, focusing on margin profiles and strategic fits, contributing to record bookings and a strong pipeline.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.