Release Date: December 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ABM Industries Inc (ABM, Financial) achieved double-digit revenue growth in its technical solutions and aviation segments in the fourth quarter.
- The company posted 3% organic revenue growth and delivered adjusted EPS of $0.90, both moderately above expectations.
- ABM Industries Inc (ABM) made significant progress in its internal initiatives, including the introduction of a workforce productivity optimization tool, which reduced labor usage.
- The company repurchased $56 million of stock and increased its annual dividend by 18%, reflecting confidence in its long-term earnings trajectory.
- ABM Industries Inc (ABM) has a strong backlog in its microgrid business, exceeding $500 million, and expects continued growth in this area.
Negative Points
- ABM Industries Inc (ABM) recorded a fourth-quarter net loss of $11.7 million, primarily due to a $59.7 million adjustment related to the RavenVolt earnout.
- The company's adjusted EBITDA decreased by 11% to $128 million, with a margin down 110 basis points.
- The B&I segment experienced a decline in operating profit and margin, partly due to unfavorable insurance reserve adjustments and discrete costs.
- Free cash flow in the fourth quarter was significantly lower than the previous year, reflecting a build in working capital.
- The company anticipates $30 million to $40 million in ELEVATE and integration costs impacting free cash flow in 2025.
Q & A Highlights
Q: The M&D segment performed better than expected due to less impact from customer rebalancing. Can you elaborate on the headwinds you initially expected and your current base case scenario?
A: Scott Salmirs, CEO: We did better than expected through the rebalancing, but it's not over yet. There are still two more phases to get through in fiscal year '25. We've picked up new sites as the client has grown, which turned out better than expected. However, we remain cautious as we navigate the remaining phases.
Q: Could you expand on the $4 million remediation charge on the energy performance contract? Is this a common occurrence?
A: Earl Ellis, CFO: This was a rare event due to a technical issue with a portion of an installation from a project that started in 2018. It's not common, and we don't expect similar charges frequently.
Q: In the B&I segment, you mentioned $4 million to $5 million of discrete costs. Are these one-time costs?
A: Earl Ellis, CFO: Yes, these were one-time discrete expenses, including legal settlements and a bad debt reserve. They were included above the line in our SG&A, not added back in adjusted results.
Q: Can you provide more detail on the expected revenue growth rate and cadence for fiscal '25?
A: Scott Salmirs, CEO: We anticipate growth, particularly in the back half of the year. B&I is expected to return to growth, and M&D should see year-over-year growth by Q4. Aviation and ATS are expected to perform strongly, with ATS likely achieving double-digit growth.
Q: What is the outlook for labor cost inflation and recovery rates?
A: Scott Salmirs, CEO: Labor costs have moderated, with a step down from '23 levels. Most of our collective bargaining agreements have been settled, providing high predictability on labor costs through '27, which we believe are recoverable from clients.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
