ABM (ABM) Q2 2025 Earnings Call Transcript

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Adjusted EPS: 86¢, up from 82¢ in the prior year period, reflecting higher segment earnings and lower corporate costs

Non-GAAP Definitions: CFO Ellis announced a change in non-GAAP financial measures to include prior year self-insurance adjustments starting with this quarter and retroactively applied for comparability

ERP Implementation: Management reported continued gress, reducing billing friction and supporting imved cash flow, with further operational benefits expected in the second half

SUMMARYABM Industries (ABM -0. 18%) reported a record $1. 1 billion in new bookings for the first half, driven by major contract wins in microgrids, aviation, nology, and commercial office clients

Management highlighted investments in talent and nical capabilities, supporting expansion into value-added services in Manufacturing & Distribution and cross-segment contract bundling in Education

The company reaffirmed full-year adjusted EPS and adjusted EBITDA margin guidance, citing expected sequential imvements in cash flow and normalization of billing and collections cesses

CEO Salmirs said, "we to believe now we're in positive organic growth territory for B&I from here on out," ing the segment’s return to organic growth

CEO Salmirs described the strategic importance and higher margins of penetrating core service areas within semiconductor and other key M&D client facilities, noting this as expanding beyond traditional janitorial roles

Management reported regional momentum is strongest in New York City, the Midwest, and growth pockets such as San Francisco and the Carolinas, where AI-related investment and data center construction are accelerating demand

CEO Salmirs linked the segment win rate in premium office space to ABM Industries Incorporated’s scale, multi-segment client base, and investment in nology-enabled services

INDUSTRY GLOSSARYERP: Enterprise Resource Planning; integrated software used to manage billing, operations, and cesses across the organization

Microgrid: A localized energy system capable of operating independently or in conjunction with the main power grid, often incorporating renewable resources and energy storage

Full Conference Call TranscriptScott Salmirs: But before we begin, I would to remind you that our call and presentation today contain predictions, estimates, and other forward-looking statements

Our use of the words estimate, expect, and similar expressions are int to identify these statements

And they represent our current judgment of what the future holds

While we believe them to be reasonable, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially

These factors are described in the slide that accompanies our presentation as well as our filings with the SEC

During the course of this call, certain non-GAAP financial information will be presented

A reconciliation of historical non-GAAP numbers to GAAP financial measures is available at the end of the presentation and on the company's website under the investor tab

And with that, I would now to turn the call over to Scott

Good morning, everyone, and thank you for joining us to review our second quarter results

We achieved several important milestones this quarter

We also saw solid performances in our aviation and education segments

While growth in ATS remained strong, it could have been even higher had we not experienced some temporary ject delays and service mix headwinds that impacted fitability

As we've discussed before, this can be a little lumpy quarter to quarter based on construction timing, but the market is extremely healthy overall

We expect ATS to der a very strong year

Earl Ellis: Looking ahead, despite macroeconomic uncertainty, we remain confident in our core, particularly high-quality office perties, manufacturing and distribution facilities, commercial aviation, as well as energy resiliency and microgrids

We expect delayed jects from Q2 to resume in the third quarter and are reaffirming our full-year adjusted EPS guidance

As I noted earlier, we're pleased to see B&I return to organic growth in the second quarter

Market indicators for prime commercial office space have been imving steadily

Demand continues to favor high-quality, amenity-rich buildings and well-connected locations

We've been intentional in focusing our strategy on this premium segment

Geographically, the lowest prime vacancy rates are in the Northeast and Midwest, two of our largest

Given these trends, we expect to see market imvement translate into growth and account expansion, and that's exactly what's happening

In addition to the rebound in US prime office, our UK operations and sports and entertainment and parking es continue to perform well

Turning to M&D, I'm pleased to report that the segment returned to organic growth a quarter earlier than anticipated

Our teams have done an excellent job expanding with existing e-commerce clients and winning new with semiconductor and manufacturers

More broadly in this segment, we're evolving our service offering from traditional cleaning and maintenance to include ancillary support services material handling and testing and balancing services

These offerings help clients focus on their core operations and deepen our strategic relationships with them

We believe the long-term fundamentals of the M&D market remain strong as companies continue to invest in US-based manufacturing, and we're accordingly in nical sales and industry-specific capabilities

This reflects their confidence in our electrical engineering expertise, nology, and client-first apach

Beyond that, ATS secured a large battery energy storage system ject supporting renewable thermal hybrid energy centers, helping communities achieve ambitious sustainability goals

Our team continues to do a great job building on the successes at O'Hare, LaGuardia, and JFK to showcase our differentiated -enabled solutions that drive favorable client outcomes

It's truly resonating in the market

We also secured other high-file wins, including new contracts with two major investment banks in New York City, several top nology firms, including a global autonomous driving company and a memory and storage leader, as well as with well-known semiconductor and aerospace manufacturers

These wins reflect our strong reputation among sophisticated clients with complex needs and rigorous standards

Increasingly, they're turning to ABM Industries Incorporated to leverage our scale, integrated capabilities, and investments

And we're raising our game accordingly in talent and execution

We've made important gress on our ERP implementation this quarter, reducing operational friction and setting the stage for continued imvements in the second half, particularly in cash flow

Our teams are fully aligned and focused on driving this initiative to completion, with strong coordination and a d commitment to dering lasting operational benefits

Let me now give you a brief across our segments

In B&I, according to JLL, US office leasing activity in Q1 2025 grew 15. 3% year over year to 50. 4 million square feet, 89% of pre-pandemic levels

This plays directly to our strength in Class A urban perties

With regard to M&D, we're benefiting from strong industrial activity

This macro data, coupled with our new pipeline and expansion efforts, positions us well for the future

Turning to aviation, domestic air travel remains strong

Our education segment remains a stable contributor of earnings and cash flow

We continue to focus on large school districts and universities, maintaining high retention and cost efficiency while pursuing new opportunities

We're also positioned to benefit from accelerating demand in data centers

These positive market dynamics strongly reinforce the strategic costs we set over the past several years

Our focused investments in talent, nology, and go-to-market execution, combined with targeted M&A, have positioned ABM Industries Incorporated to capture outside opportunities across our portfolio

Whether it's capitalizing on the resurgence of prime office space, supporting the expansion of high-growth sectors semiconductors and e-commerce, or leading the energy transition through our nical solutions platform, we believe our capabilities and our strategies to enhance them are fully aligned with where demand is going

As a result, we remain highly confident in our ability to sustain healthy top-line growth and expand margins over time

With that, I'll turn it over to Earl to walk through the financials

Good morning, everyone

Earl Ellis: Before we review the Q2 financial results, I would to highlight a recent to our financial disclosures

After communications with the staff of the Securities and Exchange Commission, we have revised the definition of our non-GAAP financial measures, including adjusted net income, adjusted earnings per, adjusted EBITDA, and adjusted EBITDA margin, to no longer exclude the positive or negative impacts of prior year self-insurance adjustment

These adjustments reflect net changes to our self-insurance reserve for general liability, workers' compensation, automobile, and health insurance grams, specifically related to claims for prior year incidents

Importantly, there was no impact on our current quarter's results

Now let's review the second quarter results, starting on slide six