ABM Industries Q4 Earnings Call Highlights

ABM Industries (NYSE:ABM) reported fourth-quarter fiscal 2025 results marked by record revenue, strong segment execution, and improved cash generation in the back half of the year, while also outlining its fiscal 2026 growth targets and a planned acquisition aimed at expanding its presence in semiconductor fabrication environments.

Fourth-quarter revenue hits a record as organic growth broadens

Management said ABM finished fiscal 2025 “on a strong note,” posting record quarterly revenue supported by 4.8% organic growth. Chief Executive Officer Scott Salmirs said the quarter benefited from strong volume, favorable mix, disciplined cost management, and restructuring actions.

Chief Financial Officer David Orr reported fourth-quarter revenue increased 5.4% year over year to $2.3 billion, driven by organic growth and a modest contribution from a recent acquisition in Ireland. Orr said organic revenue rose across all segments, with the strongest contributions from Technical Solutions, Manufacturing & Distribution, and Aviation.

Self-insurance reserve adjustment weighed on non-GAAP results

Orr spent part of his prepared remarks clarifying the company’s presentation of prior-year self-insurance adjustments following discussions with the SEC. ABM updated the definition of its non-GAAP measures beginning in the second quarter and now includes the positive or negative impact of prior-year self-insurance adjustments in adjusted results. However, management said its forward-looking guidance does not assume any benefit or headwind from these adjustments due to the difficulty in forecasting reserve changes.

In the fourth quarter, prior-year self-insurance adjustments created a $0.26 headwind to adjusted EPS, according to Orr. ABM reported:

• Net income: $34.8 million, or $0.56 per diluted share, versus a loss of $11.7 million, or $0.19 per share, a year earlier.
• Adjusted EPS: $0.88, unchanged from the prior-year quarter, with Orr attributing the flat result primarily to the insurance adjustment and higher interest expense, partly offset by higher segment earnings.
• Adjusted EBITDA: $124.2 million and adjusted EBITDA margin: 5.6%, versus $125.6 million and 6.0% last year. Orr said the self-insurance adjustment had a $22.2 million pre-tax negative impact on EBITDA and about a 100-basis-point impact on margin.

On the call, Orr characterized the reserve change as within normal ranges, noting the company manages a claims reserve pool of about $500 million and that a roughly 4% adjustment is “well within industry standards.” He also said the dynamic is not new, but the reporting treatment has changed.

Segment results: Technical Solutions leads growth; Education margin expands

ABM reported organic growth across all operating segments and highlighted margin improvement in several areas.

• Business & Industry (B&I): Revenue surpassed $1 billion, up 2% year over year. Operating profit was $80.6 million with a 7.7% margin, up from $72.0 million and 7.0%. Orr cited restructuring benefits and the absence of $4–$5 million of discrete costs incurred in the prior year.
• Aviation: Revenue rose 7% to $296.7 million. Operating profit was $16.8 million with a 5.7% margin, with management noting timing of escalations, mix, and frictional costs tied to ramping new wins.
• Manufacturing & Distribution (M&D): Revenue increased 8% to $417.4 million, driven by contract wins and expansions, including in the technology sector. Operating margin declined to 8.6% from 10.4%, which Orr attributed to strategic pricing on select new contracts and investments in technical sales talent and sector capabilities.
• Education: Revenue rose 2% to $233.7 million. Operating profit jumped 44% to $18.8 million, and margin expanded 230 basis points to 8.0%, driven by labor efficiencies, escalations, and a mix shift toward colleges and universities.
• Technical Solutions: Revenue increased 16% to $298.7 million, including 11% organic growth and 5% from acquisitions. Operating profit rose 32% to $37.1 million and margin improved 150 basis points to 12.4%. Management cited robust microgrid demand and solid performance in data center and power services.

Cash flow improves; share repurchases reduce share count

Orr said the company made progress stabilizing its ERP system, which had created working capital friction earlier in the year. ABM reported fourth-quarter cash from operations of $133.4 million and free cash flow of $112.7 million, up from $30.3 million and $15.5 million, respectively, in the prior-year quarter. Orr said the improvement was driven by ERP conversion progress and tighter working capital management, and later noted days sales outstanding ended the year down 11% from a peak in the second quarter.

ABM ended the year with total indebtedness of $1.6 billion and a total debt-to-pro forma adjusted EBITDA ratio of 2.7x. Available liquidity was $681.6 million, including $104.1 million in cash and cash equivalents.

The company also increased capital returns via buybacks. ABM repurchased 1.6 million shares in the fourth quarter for $73 million and 2.6 million shares for $121.3 million in fiscal 2025, reducing its outstanding share count by 4%. Remaining repurchase authorization was $183 million at year-end.

2026 outlook: organic growth of 3%–4%, EPS guidance, and WGNSTAR deal

For fiscal 2026, management guided to organic revenue growth of 3%–4% and adjusted EPS of $3.85–$4.15, both before any future impact from prior-year self-insurance adjustments. Orr said Aviation, M&D, and Technical Solutions are expected to grow above the corporate range, with B&I and Education in low single digits.

ABM also introduced a new guidance metric, segment operating margin (segment operating profit divided by total revenue), which management said removes noise from prior-year self-insurance adjustments. ABM expects segment operating margin of 7.8%–8.0% in fiscal 2026; Orr also disclosed segment operating margin was 7.9% in fiscal 2025.

Additional 2026 guideposts included interest expense of $95–$105 million, a normalized tax rate of 29%–30%, and normalized free cash flow of about $250 million before transformation and integration costs, the RavenVolt earn-out, and any incremental restructuring. In Q&A, Orr broke that cash figure down further, citing roughly $20 million in transformation costs, $10 million in integration costs, about $5 million of restructuring costs (plus or minus), and an estimated $30 million RavenVolt contingent consideration payout, which he said would imply free cash flow of around $185 million after those items.

Strategically, Salmirs highlighted a major new Aviation passenger services contract won after quarter-end, described as one of the largest single Aviation awards in ABM’s history, with ramp-up expected around the first quarter of calendar 2026 and discussed as beginning to ramp in ABM’s fiscal second quarter.

ABM also announced an agreement to acquire WGNSTAR, a provider of managed technical workforce solutions and equipment support services for semiconductor and high-technology manufacturing. Management said the deal is expected to close in the first calendar quarter of 2026 (with funding anticipated early in ABM’s fiscal second quarter) and will add more than 1,300 employees. Salmirs said the acquisition expands ABM’s capabilities “inside the fabrication facility,” where specialized certifications and trust are required.

On the financial profile, Orr said WGNSTAR has mid-teens EBITDA margins and that the transaction is expected to be nominally dilutive in fiscal 2026 due largely to amortization and interest, with a “real path to accretion” in year two. He cited annualized assumptions of roughly $13 million of amortization and $12 million of interest and said ABM expects continued double-digit growth, along with cross-selling opportunities across shared accounts. Salmirs said the transaction would take ABM to around three-times leverage upon close, which he described as within the company’s target range as it evaluates additional M&A opportunities.

About ABM Industries (NYSE:ABM)

ABM Industries Incorporated is a leading provider of integrated facility services, offering a comprehensive suite of solutions designed to support the operation, maintenance and enhancement of commercial properties. The company’s core services include janitorial and custodial maintenance, HVAC and mechanical systems support, electrical and lighting solutions, and energy optimization. Additional offerings span parking management, security services, landscaping, and specialized support such as technical solutions and sustainability consulting.

Serving a diverse range of markets, ABM caters to clients in commercial real estate, aviation, healthcare, manufacturing, education, government entities, and technology campuses.