ABM Industries Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Timothy Mulrooney - William Blair & Company L.L.C. - Analyst : So starting with your B&I business, the 24% improvement in commercial office leasing activity in the fourth quarter. I'm just curious how that compares to the last several quarters before that. Like was that a significant acceleration in the trend line? And how does that compare to the fourth quarter typically from a seasonality standpoint? In other words, can you just put in context for investors how significant that move is? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 12, 2025 / 12:30PM, ABM.N - Q1 2025 ABM Industries Inc Earnings Call

Question: Timothy Mulrooney - William Blair & Company L.L.C. - Analyst : Yes. That all sounds very encouraging. We're certainly seeing that everywhere as well, Scott. Just one more question about -- just shifting gears a little bit, but I just wanted to ask about your federal exposure, so still on the B&I segment. How much of your B&I segment revenue, I guess, is generated from work being completed in federal buildings? I'm just trying to think about the potential risk here from those as it relates to a footprint reduction. And maybe while you're at it, what's your technical -- how much of your Technical Solutions revenue is related to projects with federal agencies or are being funded with federal dollars? Just any color there would be helpful.

Question: Joshua Chan - UBS Investment Bank - Analyst : So thanks for proactively addressing the labor situation. I guess, could you talk about kind of your playbook if you were to see kind of spot rate labor costs accelerating? Recognizing that you have a decent part of union labor too, where maybe you have more visibility. So maybe can you just talk to how you would react, what your exposure is to the spot rate labor? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 12, 2025 / 12:30PM, ABM.N - Q1 2025 ABM Industries Inc Earnings Call

Question: Joshua Chan - UBS Investment Bank - Analyst : That's good color, Scott. And then on the ERP side of things, I guess what does it take to kind of catch up on the free cash flow just like operationally? And what's your confidence given that's kind of all within the same fiscal year?

Question: Faiza Alwy - Deutsche Bank AG - Analyst : So Scott, just taking a step back. You sound really good about new business, about the pipeline. I'm curious if you can give us some color on what -- maybe what your win rate is like now versus what it was historically. And maybe help us think through like what you're seeing from a retention versus new business versus existing volume perspective. And to the extent you're seeing higher win rates, maybe talk a little bit more about how you're differentiating yourself. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 12, 2025 / 12:30PM, ABM.N - Q1 2025 ABM Industries Inc Earnings Call

Question: Faiza Alwy - Deutsche Bank AG - Analyst : Great. And then just a follow-up on the ATS business, right? Like we've seen some volatility, ups and downs over the last couple of years. Do you think things have stabilized at this point? Like how should we think about revenue growth there? I know you've talked about -- historically, you've talked about sort of backlog in the business. So give us some perspective on how to think about maybe the various pieces within ATS.

Question: Jasper Bibb - Truist Securities, Inc. - Analyst : M&D came in a bit better than we expected in the quarter. I just wanted to ask about the large client rebalancing impact. Curious if you have a little bit more visibility into revenue hit there. Has that moved through to additional phases? And separately, you talked about the new wins in that segment, too. So I'm curious if the run rate in the second half on revenues is a little bit better than the initial guidance assumption.

Question: Jasper Bibb - Truist Securities, Inc. - Analyst : Apologies if I missed it but hoping you could specifically quantify collections that were deferred out of the first quarter into the balance of the year. And then I guess, more broadly, wondering how you're thinking about the opportunity to generate cost savings from ERP as you've now migrated, I think, most of the revenue base out of the new platform.

Question: David Silver - CL King & Associates, Inc. - Analyst : Just a couple of questions, I think, for Earl. But firstly, with ATS growing 22%, I'm just kind of scratching my head. There was not an incremental accrual for contingent consideration or anything on RavenVolt. Is it -- I know you took a larger accrual last year, but are we -- are you fully accrued on that? Or should we be looking for some incremental charges as maybe fiscal 2025 goes on? And then separately, just to comment on the $21 million of share repurchase. Would you characterize that as opportunistic and maybe a permanent reduction in share count? Or is that really designed to offset new issuance this year?

Question: David Silver - CL King & Associates, Inc. - Analyst : Okay. Great. And then one more question, I think, on the M&D side. The previous questions have covered off most of what I was going to ask. But Scott, I was wondering if you could just comment on kind of the success with new business there in terms of your value proposition? I mean, I'm guessing M&D is a category where there's larger spaces, there's probably more automation or digitalization in your product offering apart from growth in the segment in terms of the customer base. But maybe if you could just touch on your go-to-market strategy or your value proposition there and why you're very optimistic about it for the balance of the year and the win rates and whatnot.

Question: Justin Hauke - Robert W. Baird & Co. Incorporated - Analyst : Great. Yes. So I mean, it seems like the story is -- at least going forward, is the improvement in B&I and M&D. The markets that have been really strong for you, have been Aviation and Technical Solutions. And I guess first on Aviation, I guess, I just wanted to ask if you saw the delta preannouncement on kind of demand trends. And just any updated thoughts on what you're seeing there in terms of sustainability? And then in the Technical Solutions, it looks like the backlog, the $490 million, a year ago, it was $590 million. And I guess, is that mostly kind of the bundled solutions and the EV charging stuff that's down? Or just what's been the driver of that backlog decline?

Question: Tate Sullivan - Maxim Group - Analyst : Scott, reviewing some of your comments about large awards, you said you're awarded a large contract for an advanced office building in New York. And I think you also mentioned $30 million in business from a large tech company. Are these two separate contracts? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 12, 2025 / 12:30PM, ABM.N - Q1 2025 ABM Industries Inc Earnings Call

Question: Tate Sullivan - Maxim Group - Analyst : And then the large contract for the office building in New York, is that still a building that employees are moving into, it's not fully in operation?

Question: Tate Sullivan - Maxim Group - Analyst : And then is there -- I've asked before, but is there opportunity for backup power work on this type of advanced building? Or is that already in the engineering specs before when they did the contract?