ABM Industries Incorporated Q1 FY2026 earnings call

• Started the year solid with 5.5% organic revenue growth, nearly $50 million in free cash flow, and over $90 million in share repurchases. - Demand across end markets generally healthy; B&I grew 4%, aviation grew double digits, M&D grew 7%, education grew 2%. - Technical solutions margin below expectations due to project timing and mix, but underlying demand and backlog healthy. - AI is seen as enhancing the business, with investments in AI-driven initiatives driving improvements. - Investments in sales resources, technical talent, and strategic contract positioning contributing to growth trajectory.

B&I: Quarter revenue was $1.1 billion, up 4% year-over-year. Operating profit was $79.7 million and margin was 7.5%. Aviation: Revenue grew 10% to $297.7 million. Operating profit was $12.6 million, with a margin of 4.2%. M&D: Generated $422.3 million in revenue, a 7% increase year-over-year. Operating profit was $36.3 million, with a margin of 8.6%. Education: Rose 2% to $228.7 million. Operating profit increased 54% to $21.6 million and margin expanded to 9.4%. Technical solutions: First quarter revenue was $229.7 million, up 14% year-over-year. Operating profit was $8.4 million with a margin at 3.7%.

Full-year outlook unchanged. Expect 3%-4% four-year organic growth, with aviation, M&D, and technical solutions expected to grow above that range, B&I and education to deliver low single-digit growth. WGN Star acquisition expected to add ~1 point of revenue growth. Segment operating margin expected to be between 7.8% and 8% for fiscal 2026, weighted towards back half. Interest expenses forecast to be $95 to $105 million, normalized tax rate 29%-30%. Free cash flow expected to be approximately $250 million in 2026 before certain costs.

Macro sentiment unsettled given evolving policy direction and geopolitical dynamics.

Q: Tim Mulroney asked about what drove project timing underperformance, including if it was just weather or other factors.

A: Scott said it was primarily weather disruption, with fundamentals good in ATS and projects to work back into numbers in Q2 and back half.

Q: Tim asked about margin trajectory cadence.

A: David said U.S. ATS has two-thirds of operating profit in second half with 350 basis points margin improvement, and B&I and M&D have margin improvement glide path in back half.

Q: Jasper Bibb asked about B&I customer behavior and repurchase balance.

A: B&I has stable customer behavior with a large UK contract rolling off, and repurchases continue as they believe in long-term prospects and shares will rise.

Q: Mark Riddick asked about market share gains and leisure side.

A: Competitive dynamic stable, leisure side has high growth and no reduction in demand.

Q: David Silver asked about new business wins and labor costs.

A: Early in Q1, confident in higher end of growth range, and labor acquisition area upgraded with no deterioration in applicant flow.

Q: Josh Chan asked about education margins and M&D/aviation concerns.

A: Education margin sustainable with some weather benefit, aviation still strong with no downside seen from oil prices.

Q: Rohan Vasudeva asked about new contract ramp headwinds and restructuring.

A: New contract ramp headwinds persist over life of contract, restructuring benefits rolled through quarters and mitigation strategies in place.