ABM Industries Incorporated

Greetings and welcome to the ABM Industries third quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Paul Goldberg, Senior Vice President, Investor Relations. Thank you. You may begin.

Good morning, everyone, and welcome to ABM's third quarter 2024 earnings call. My name is Paul Goldberg, and I'm the Senior Vice President of Investor Relations at ABM. With me today are Scott Salmers, our President and Chief Executive Officer, and Earl Ellis, our Executive Vice President and Chief Financial Officer. Please note that earlier this morning, we issued our press release announcing our third quarter 2024 financial results. A copy of that release and an accompanying slide presentation can be found on our website, abm.com. After Scott and Earl's prepared remarks, we will host a Q&A session. But before we get started, I would like 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 intended 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 a 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 like to now turn the call over to Scott.

Thanks, Paul. Good morning, and thank you all for joining us today to discuss our third quarter results. ABM posted another strong quarter driven by double-digit growth in technical solutions and aviation. and supported by the continued resilience of our business and industry segment. Once again, our team did a great job focusing on our clients and executing in still choppy commercial real estate markets, enabling us to generate solid organic revenue growth on the enterprise level and post-resilient margins. We delivered adjusted EPS of 94 cents, which is slightly ahead of our expectations. ABM's business model, which last quarter I described as a consistent cash-generating flywheel, was in full force in Q3 as we leveraged our Capital Light model, scale, and leading market positions to strengthen our enterprise through our internal Elevate initiatives, especially our technology roadmap. During the quarter, we continued to make progress delivering our core janitorial and engineering services through advanced use of data and analytics, such as our Workforce Productivity Optimization Tool, or WPO as we call it. Simply said, WPO, which is being piloted at multiple sites, is an analytics toolset that allows operators to easily identify opportunities for productivity improvements. It benchmarks productivity based on facility profiles to ensure we're operating as efficiently as we should based on the facility archetype. We've already begun to see benefits of this technology in terms of improved efficiency and client outcomes and look forward to more broadly implementing these new tools over the next couple of years. We also acquired quality uptime services, which expands our position in the fast-growing data center vertical by adding new capabilities in uninterrupted power supply systems and battery maintenance. We were able to complement these growth and self-help initiatives with additional capital returns to our shareholders via our longstanding dividend. Continual investments to build and strengthen our core, strategic investments in complementary services and markets that offer secularly high growth rates and steady returns of capital to our shareholders via our longstanding dividend are the key initiatives in our go-forward plan. Our diversification, scalability, and the essential nature of the services we provide all underpin the consistency and resiliency of our results, which in a sense fuels our strong cash flow. Now let me quickly run through what we're seeing in our markets before I turn it over to Earl for the financials. Our B&I segment has remained quite resilient, benefiting from our diverse client and service mix, our leading market position, and our penetration in the higher performing Class A segment of the market. We've also done a nice job diversifying geographically, and we continue to renew business throughout the U.S., such as the janitorial business of the MetLife building, a large marquee property here in New York. Although we're not ready to say commercial real estate market is rebounding, things seem to be firming up and pressure to return to offices is definitely on the rise. This was highlighted by a recent survey conducted by CBRE, whereby 38% of the 225 corporate real estate executives polled that they plan to expand their office space in the next three years. This is up from 20% in last year's poll. Also, 37% of those surveyed anticipate downsizing versus 53% in the prior year. We're also closely monitoring this dynamic situation and talking with our clients about their plans. We believe we need another quarter or two to get a clearer picture of the timing and slope of the potential recovery, but we're optimistic. Our manufacturing distribution markets continue to be healthy, driven by a generally strong industrial economy, secular growth in the U.S. semiconductor and data center markets, and the general trends towards onshoring manufacturing in the U.S. We've continued to win new business in these markets and have invested in important resources to further leverage these trends. These robust markets and our growth initiatives addressing them have helped to partially mitigate the previously discussed rebalancing of work from a large client. I'm also proud of the team as we have proactively let some other business go where we were not receiving appropriate value for the services we were providing. I have confidence that our M&D segment will quickly return to mid-single-digit organic growth once the rebalancing annualizes, if not before. Aviation is having an amazing year, and the markets remain very healthy. We have emerged as a clear leader in the aviation facilities management space, driven by the industry's best team and by our technology leadership. including our award-winning ABM Clean product line. I'm thrilled our aviation segment has grown to be a billion-dollar business, but I'm even more encouraged by the marginal improvements we've made over the last few years. It's a clear indication of the value we provide and our strategy around client segmentation. Although we aren't expecting to continue to deliver double-digit growth quarter after quarter as the sector normalizes, I have no doubt aviation will remain strong going forward. Education remains solid. Although it's not our fastest growing segment, it is typically very stable and provides a foundation of earnings and cash flow that can be utilized across ABM. We also believe there's an opportunity to grow in education, especially with larger school districts, colleges, and universities, which can greatly benefit from our ABM performance solutions offering known as APS. As a reminder, APS is our single source operating model. which delivers integrated end-to-end facility services, generating cost and operating efficiencies through one contract, one invoice, and one source of accountability. Like we've done with Providence School District, Utica University, and others, we remain focused on bringing new APS clients aboard. Lastly, regarding technical solutions, our microgrid business is thriving, driven by a large contract won last year. And while our Ravenbolt team progresses on that contract, we continue pursuing numerous other opportunities with several other prospects seeking traditional microgrids, as well as for battery energy storage systems. We expect the need for energy resiliency and redundancy will only grow over time. Similarly, we know the proliferation of AI will drive significant growth in data center and mission critical infrastructure, and we have a growing position in this market. While our bundle energy solution business is still soft, we believe the anticipated reduction in interest rates late this year and beyond that will improve projected ROIs and hopefully restart the market. In all, we feel good about our markets, though there are still challenges to overcome both macro and specific to our industry. We had a great third quarter and have confidence we will finish the year well. As such, we are raising our full-year guidance for adjusted EPS and now expect it to be in the range of $3.48 to $3.55 versus our prior range of $3.40 to $3.50. With that, let me turn it over to Earl to walk you through the details, and I'll be back shortly with some final comments.