ABM Industries Incorporated

Greetings. Welcome to ABM Industries Incorporated First Quarter 2026 Earnings Conference Call. At this time, all participants will be 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. Please note this conference is being recorded. I will now turn the conference over to Paul Goldberg, Senior Vice President, Investor Relations. Thank you. You may begin.

Good morning, everyone, and welcome to ABM's first quarter 2026 earnings call. My name is Paul Goldberg, and I'm the Senior Vice President of Investor Relations at ABM. With me today are Scott Salmiers, our President and Chief Executive Officer, and David Ohr, our Executive Vice President and Chief Financial Officer. Please note that earlier this morning, we issued our press release announcing our first quarter 2026 financial results and outlook. A copy of that release and an accompanying slide presentation can be found on our website, abm.com. After Scott and David's prepared remarks, we will host a Q&A session. But before we begin, 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 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 our 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.

Good morning, everyone, and thank you for joining us to discuss ABM's first quarter fiscal 2026 results. We're off to a solid start of the year. We delivered 5.5% organic revenue growth generated nearly $50 million in free cash flow, and repurchased over $90 million of shares in the quarter. While margin performance in technical solutions was below our expectations, primarily due to project timing and mix, underlying demand and backlog trends are healthy, and the fundamentals across the portfolio remain constructive. As such, our full-year outlook is unchanged. Let me step back and provide some broader context. Across our end markets, demand remains generally healthy. In prime office, recent data from CBRE indicates improving transaction volumes and stabilization in Class A vacancy trends in major gateway markets. While certain regional markets remain slower to recover, the flight to quality dynamic continues to favor the types of assets where ABM is concentrated. Our B&I segment grew 4% in the quarter, the highest it's been since the third quarter of 2022, reflecting strong international growth, stable client retention, and underlying steady demand. In aviation, TSA checkpoint volumes remain resilient, and airport infrastructure investment continues at elevated levels. The FAA's terminal modernization programs and large-scale capital projects across major U.S. airports support a multi-year pipeline of outsourced service opportunities for us. Our aviation segment grew double digits year over year, and our bid pipeline remains healthy. M&D continues to benefit from secular growth tied to major U.S. infrastructure and technology build-outs. Public and private investment in semiconductor manufacturing is accelerating, with a recent PwC forecast indicating that more than $1.5 trillion in fabrication facility investment through 2030 as AI, cloud, and edge computing drive demand for advanced chips. This underscores the scale of the opportunity and the multi-year runway it creates for service providers like ABM. With the completion of our acquisition of WGM Star at the beginning of Q2, we have meaningfully strengthened our presence in semiconductor fabrication environments and enhanced our ability to support the strategic U.S. growth area. In technical solutions, the secular tailwinds remain intact. Wooden McKenzie projects the U.S. microgrid market will more than double by 2030, driven by electrification, grid resiliency needs, and decarbonization priorities. At the same time, investments in data center construction and hyperscale capacity expansion remain robust as enterprises build out next generation infrastructure to support AI and digital transformation. These trends aligned directly with ABM's strength in energy resiliency, engineering services, and mission-critical operations, and we expect ATS to deliver sustainable long-term growth as these markets continue to expand. In education, demand remains steady and resilient, given the essential nature of services provided to K-12 districts and higher education institutions. We continue to see opportunities as schools evaluate outsourcing to improve efficiency and service quality. Our focus on higher education, particularly large universities and multi-campus systems, positions ABM well in a segment where scale, complexity, and compliance requirements favor sophisticated multi-service providers. Now turning back to the quarter. The investments we've made over the last few years in sales resources, technical talent, and strategic contract positioning are clearly contributing to our growth trajectory. Not only do we grow organically in each segment, but our enterprise organic growth rate of 5.5% was the strongest we've delivered since the fourth quarter of 2022 when the business was truly emerging from the pandemic. From a margin perspective, Our first quarter shortfall was predominantly concentrated in technical solutions. As we've discussed, ATS is inherently project driven and can vary from quarter to quarter. Q1 was impacted by project timing and service mix, along with some weather related delays. These factors created approximately five cents of EPS pressure relative to our internal expectations. with the maturity attributable to delayed revenue recognition rather than reduced demand. Importantly, B&I and M&D perform largely in line with what we outlined in our third quarter call last year, reflecting the economics of newer contracts that ramped last year and provided immediate growth opportunities as we work more upward over time. Our ability to improve our margin profile can be seen clearly in education, where we once again delivered strong execution and meaningful expansion in margins. Switching gears briefly to AI, which continues to be a highly topical and source of so much volatility in the market, we believe AI will enhance ABM's capabilities rather than disintermediate our core services. The majority of our janitorial and engineering work takes place in dynamic, non-standard environments, such as offices, airports, schools, stadiums, and industrial facilities, where layouts, traffic patterns, compliance requirements, and client expectations continuously evolve. These conditions require human judgment, dexterity, and real-time adaptability. That said, we're actively researching and testing a wide range of AI-enabled robotics, including emerging humanoid platforms. While robotics can add value in structured applications, such as open area floor care and certain repetitive tasks, today's technology is not positioned to operate at scale across the full breadth of our service environments. As innovation continues, we expect robotics to become an increasingly useful complement to our workforce. At the same time, we've been investing in AI-driven predictive maintenance, intelligent scheduling, optimized routing, and back office automation. These initiatives are already driving incremental improvements in labor efficiency, win rates, and SG&A productivity. And we expect benefits to expand as adoption increases and deepens across the organization. In short, we believe AI strengthens our business, not disintermediates it. In closing, we're encouraged by constructive demand across our markets. At the same time, macro sentiment remains unsettled given evolving policy direction and geopolitical dynamics. Despite that, We are maintaining our full-year outlook and will continue to operate with discipline and focus. With that, let me turn it over to David.