Q3 2021 ABM Industries Inc Earnings Call
Okay.
Greetings and welcome to the ABM industries incorporated third quarter 2021 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.
My pleasure to introduce David Gold Investor and media relations. Thank you you may begin.
Thank you for joining us this morning with US today are Scott summers, our president and Chief Executive Officer, and Darryl Ellis, Our executive Vice President and Chief Financial Officer.
We issued our press release yesterday afternoon, announcing our third quarter fiscal 'twenty or 'twenty, one financial results.
A copy of this release and accompanying slide presentation can be found on our corporate website.
Before we begin I'd 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.
Statements represent our current judgment of what the future holds while we believe them to be reasonable. These statements are 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 investors tab.
I'd now like to turn the call over to Scott.
Thanks, David Good morning, and thank you all for joining us today to discuss our third quarter results as detailed in yesterday's release, a b M generated strong third quarter results featuring double digit growth in revenue continued solid cash generation and a 20% gain in adjusted earnings per share.
Revenue growth was broad based as each of our five business segments achieved year over year gains in revenue aided by an improving business environment and the gradual reopening of the economy. Our team members once again executed well and continues to provide exceptional service to our clients.
Overall demand for Abiam's higher margin virus protection services remained elevated in the quarter underscoring ongoing client concerns regarding cleaning and disinfection of their facilities.
As anticipated demand for virus protection ease slightly in the third quarter compared to the second quarter of fiscal 'twenty or 'twenty, one, but remain well above pre pandemic levels.
The emergence of the Delta variant and rising COVID-19 cases nationally has getting into heightened interest and the need for disinfection prevention measures, particularly in high traffic areas as we look forward to 2020 two and beyond we believe that virus protection services will remain a contributor to our overall.
Revenue as disinfection becomes a standard service protocol and facility maintenance programs.
During the third quarter, we continued to benefit from efficient management of labor as office occupancy levels remained relatively low nationwide and began to trend downward slightly as the third quarter progressed due to the spread as adult to variant in this evolving environment, our flexible labor model enabled us to cap.
Lives on staffing efficiencies and the associated benefit to our margins.
In light of the current pause in the return to the office trend, we anticipate a more gradual ramp in the office occupancy levels during 2022.
Providing an opportunity for a longer tailwind arising from labor efficiencies at.
At the same time, we're proactively addressing current dynamics in the labor market, which include heightened competition for available talent.
As I noted in last quarters conference call a b M has developed a task force model that leverages, our substantial internal resources and cross functional expertise to identify and implement solutions rapidly and effectively earlier. This year, we established a human resources task force with a specific.
Terrific focus on recruiting and retention and this task force has been instrumental in helping us to manage our staffing needs and ensure our resources are allocated efficiently and cost effectively.
As a reminder, roughly half of our revenue is generated from union labor accounts, which mitigates concerns around labor inflation and availability.
Revenue growth in the third quarter was led by performance of our aviation segment, where revenues increased 51% compared to the prior year period and the segment operated profitably.
Our strong performance in aviation reflected a seasonal improvement in air travel as well as our strategic shift towards securing high margin and more stable service contracts with airports and related facilities well.
While revenue in our aviation segment remains below pre pandemic levels, we expect to see continued growth driven in part by New Airport transportation and janitorial contracts.
Our technical solutions segment continued to perform strongly generating nearly 23% revenue growth in the third quarter as our broad capabilities address key client needs for energy efficiency productivity and mechanical performance throughout their facilities.
Revenue growth benefited from improved access to client sites, enabling us to execute on a large number of projects.
Technical solutions ended the third quarter with a record backlog level and the long term outlook for this segment is particularly favorable given our position as a leading provider of electrical vehicle charging infrastructure.
Although easy charging infrastructure services currently represent a limited portion of technical solutions revenue electrical vehicle adoption continues to rise aided by the current administration's target to make half of all vehicles sold in 2030 zero emissions vehicles as a result, we see a long run.
Way of growth for our E mobility, EV charging infrastructure business as we look out over the next several years.
Turning to Education segment school districts have accelerated the return to in person learning as we estimate that 95% plus of K 12, and higher education institutions will resume in school classes. This fall with.
With the reopening of schools and educational facilities.
Education segment revenue grew solidly from the prior year period, driven by increased demand for our services. We believe the heightened concerns amid the prevalence of the Delta variant may lead to incremental opportunities for disinfecting services in the fourth quarter and into 'twenty 'twenty, two but we do expect our labor savings.
From hybrid environment will wane quickly with a return to full time in person learning this fall.
Overall, our scale and market diversity and breadth of service keep us well positioned for growth in the fourth quarter and beyond.
Given the strength of our year to date performance and our positive outlook for the fourth quarter, we are increasing our full year adjusted EPS guidance to $3.45 to $58.0 up from $33.0 to $53.0 previously.
On the acquisition front.
A few weeks ago, we announced a definitive agreement to acquire able services in a strategic transaction that we believe will create significant value for all of our stakeholders.
We're excited to join with <unk> talented team and we look forward to working together to better serve our clients with a broader array of services and solutions that address their evolving needs.
The combination of a b M enable expands our core engineering and janitorial capabilities in attractive geographies.
This acquisition is expected to be accretive to adjusted EPS from day, one aided by an estimated 30 million to $40 million and cost saving synergies.
As a larger company with enhanced scale.
We will be better positioned to provide our clients with service offerings that will not only enhance our growth in margins, but will add significant value for our clients.
We also see the potential for revenue synergies over time, as we deepen our client relationships and realized cross selling opportunities.
We are progressing on the close of this acquisition, which we expect will occur by the end of September as a reminder, we have not included any contribution from Abel and our updated guidance forecast.
In closing the past nine months had been exciting productive and successful for a b out we.
We have executed well on our strategic growth objectives, while generating strong financial results and we are very much looking forward to the addition of able services to a b M.
In the next few months, we plan to share with you our strategic plan for the next five years, which I am extremely excited about.
I'll now turn the call over to Earl for a financial review of the third quarter.
Thanks, Scott and good morning, everyone third quarter revenue was 1.54 billion.
An increase of 10, 7% from last year.
This improvement was driven by revenue growth in each of our five business segments.
Reflecting an improving business environment and continued demand for our virus protection services.
On a GAAP basis, the loss from continuing operations was $20.0 million or 20 cents per diluted share compared to $56 million or <unk> 83 cents per diluted share in last year's third quarter.
The GAAP loss from continuing operation in this year's third quarter is attributable to a reserve of $121.0 million equivalent to one dollar and 24.
Sure.
To resolve previously announced outstanding litigation.
You will find additional information related to the legal settlement in our Form 10-Q, which will be filed later today.
Excluding the impact of reserve taken in the third quarter as well.
One of the other onetime factors, including favorable prior year self insurance adjustment of $27.0 million. Our adjusted income from continuing operations was $64.0 million or 90 cents per diluted share in the third quarter fiscal 2021, compared to $51.0 million or 70.
<unk> per diluted share in the third quarter of last year.
The increase in adjusted income from continuing operation was primarily the result of strong operational performance, including growth in our higher margin services.
Additionally, our results benefited from several other factors, including efficient Labor management, one less work day compared to the third quarter of fiscal 2020, and lower bad debt expense.
Corporate expense for the third quarter increased by $32.0 million year over year.
Majority of this increase reflects a more normalized expense level in this year's third quarter.
Furlough and other cost saving measures taken at the beginning of the pandemic.
Corporate expenses in the same period a year ago.
The increase in corporate expense. This quarter also reflects planned investment of approximately $9 million.
We continue to execute on our technology transformation initiative.
On a year to date basis, we have invested $29 million in information technology and other strategic initiatives relative to our previously disclosed target of $40 million for the full fiscal 2021 year.
Now turning to our segment results.
Revenue in our largest segment business and industry grew six 7% year over year, the $814.0 million bench.
Benefiting from increased office occupancy in the quarter as well as continued elevated demand for virus detection service.
In addition, we saw improved demand for sports venue.
Theater attendance level increased significantly from the prior year period.
Operating profit in this segment grew 18, 2% year over year, $91.0 million, reflecting efficient labor management reduce bad debt expense and ongoing client demand for higher margin Buyers' protection services.
Our technology and manufacturing segment generated revenue growth of one 2% year over year to $247.0 million and operating profit margin improved to 10, 4% up from 10, 1% last year.
Most of our clients and the T. N M segment are considered essential service provider. This segment has been the least impacted by COVID-19 disruption.
As a result segment revenue grew modestly on a year over year basis.
However, the segment operating profit margin increased 30 basis points from the prior year period, reflecting lower bad debt expense.
Education revenue grew 10, 5% year over year, just wondering $12.0 million driven by the reopening of schools and other educational institution amid a return to in person learning.
Education operating profit totaled $24.0 million down.
Down three 3% from the same period last year.
Although the return to school trend increased demand for bias detection paired with.
The resumption of more normalized staffing levels reduced overall margin compared to the prior year, which benefited from minimal staffing requirements.
Aviation revenue increased 61% in the third quarter to $182.0 million, marking the first period of year over year revenue growth in the aviation segment.
Third quarter fiscal 2019.
Revenue growth was fueled by a rebound in U S passenger level amid significantly busier summer travel season compared to the same period last year as well as our increased focus on securing more business, but airport and the latest facility.
Aviation operating profit improved to $13.0 million compared to an operating loss of $10.0 million last year.
Aviation segment margins continued to improve on a sequential basis rising to five 9% in the third quarter.
Three 9% in the second quarter of fiscal 2021.
The improvement in operating margin is attributable to a favorable shift in business mix as we emphasize higher margin airport facility contracts.
And from stronger client demand for buyers' protection services compared to the prior year period.
Technical solutions revenue increased 22, 7% year over year $147.0 million.
Lighting continued strong market demand for our energy efficiency solutions as well as improved access to clients that.
Segment operating margin was nine 9% in the third quarter compared to 11, 1% in last years third quarter, reflecting a higher personal cost compared to last year's third quarter, which benefited from pandemic related cost saving actions.
I'll now discuss our cash and liquidity.
We ended the third quarter with $509.0 million in cash and cash equivalents.
Parents at $396.0 million at the end of fiscal 2020.
With total debt of $817.0 million as of July 31, 2021, our total debt to pro forma adjusted EBITDA, including standby letters of credit was one four times at the end of the third quarter of fiscal 2021.
In June we announced an expansion of our credit agreement to 195 billion.
The benefit of this revised and expanded credit facility include enhanced financial flexibility as well as increased liquidity to fund strategic growth initiatives.
Additionally, the revised agreement had more favorable credit trends on both the revolving credit facility and the term loan.
As you know, we recently announced the pending acquisition of Abel services for $830 million, which we plan to pay using a mix of cash on hand, and borrowings from our credit facility.
Following the close we expect to have very manageable bank leverage ratio of approximately three times.
Supported by strong cash flow of the combined company, we intend to reduce the leverage ratio in a timely manner.
Third quarter operating cash flow from continuing operations was $93.0 million.
Compared to $139 million in the third quarter of last year.
The decrease in cash flow from continuing operations during the third quarter was primarily due to a deferral in payroll taxes last year under the cares Act.
For the nine months period, ending July 31, 2021, operating cash flow from continuing operations totaled $266.0 million unchanged.
Unchanged from the same period last year.
In the third quarter of fiscal 2020.
The decrease in free cash flow reflected the cares act payroll tax deferral I mentioned.
During the third quarter, we were pleased to pay our 220 <unk> consecutive quarterly dividend of 19 cents per common share returning an additional $20.0 million to our shareholders.
Our board also declared our 222nd consecutive quarterly dividend, which will be payable on November one 2021 to shareholders of record on October seven 2021.
Now I'll discuss our outlook.
I've got mentioned our increased guidance for full year fiscal 2021 adjusted income from continuing operations is now a range of $48.0 to $58.0 per diluted share.
The $33.0 to $3.50 per diluted share accretive.
The increase in our adjusted earnings forecast is due to our strong financial performance over the first nine months of fiscal 2021, as well as a favorable outlook for the fourth quarter of the year.
Please note that this guidance excludes any impact from our pending acquisition of April 30.
At this time, we are not providing guidance for full year 2021, GAAP income from continuing operations. Since we are unable to provide an accurate estimate and timing of the item impacting comparability relating to the able services acquisition.
Acquisition related contingency advisory fees and integration costs.
We continue to expect a 30% tax rate for fiscal 2021, excluding discrete items such as the work opportunity tax credits and the tax impact of stock based compensation Awards.
Operator, we are now ready for questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue you.
You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.
Okay.
Our first question is come from the line of Tim Mulrooney with William Blair. Please proceed with your question.
Good morning, Scott Good morning Earle.
Good morning.
A couple of margin related questions for me. So EBITDA margins are still very strong given the strong demand for higher margin work and some labor savings I think so so last year.
The margin expansion split.
It was about 50.50 between those two factors I'm curious how that split.
Broke down how that looks for the third quarter and as you can.
It continues to reopen how youre thinking about those two factors.
Based on the implied guidance that you gave for the fourth quarter.
Well thanks for the question, Ken It's Earl.
I'll start by saying that this year in Q3, we're now lapping a full quarter of the pandemic that started last year. So it's now lapping year over year.
Now, having said that you know out of the 50 basis points that we actually lost year over year. Our gross profit margin was actually up about 40 basis points and a lot of that is actually driven by the continued labor efficiencies that we've gained as well as positive business mix really driven by our aviation business and then we've acts.
<unk> been able to maintain the level disinfection margin that we actually had last year. So again, if you think about lapping year over year, we've maintained the margins from disinfection and we're actually still maintaining the labor margins.
Okay, Yeah, the Bart and.
Your second question as far as how that translates to the future.
Look at the return to office, we've now seen a return to in class learning, we anticipate that will actually start to lose some of the labor efficiencies. However in the long term we still.
Plant on maintaining a.
Portion of that.
Okay. Thanks, Joe.
I think maybe a good way to continue this discussion would be to actually dig into one of the segments. So your aviation business.
Not only did it recover and margin, but it actually the EBIT margin expanded beyond what the business had done historically.
Much of that increase do you think is structural due to changes that you.
You guys have made within the segment, whether it's to focus on different areas of the business or or whether it's becoming more efficient in your operation postpaid as.
As you move through the pandemic has the EBIT margin structurally improved in aviation or is it just kind of elevated right now from all the higher margin <unk> work and travel increasing that kind of thing.
Yeah, Hey, Tim This is Scott Yeah, I do think there is a structural improvement here and you know well first you know I think the good performance is volume related there is certainly more airline traffic worried about 74% of where we were pre COVID-19 and you know that may ease off a little bit after the summer travel, but certainly much.
More heightened levels, which we're excited about but there's also been a shift in us moving from from airline to airport. It used to be about 50.50 now we're more like 60.40 airports to airlines and you know.
Kind of like that that shift mix, we think theres going be a lot of investment in airports. We also like the parking segment in that area. So I think there'll be a structural change and and structural stability more importantly, when we gravitate more towards the airport so but I think when you look at the results today, it's a combination.
Of that shift and mix, but also volume related.
That's great very helpful. Thanks for taking my question.
Sure Tim.
Thank you. Our next question is come from the line of Sean Eastman with Keybanc capital markets. Please proceed with your question.
Hi, guys. Thanks for taking my question.
I just wanted to continue on the margin discussion I mean early you did walk through the moving parts. There that was really helpful. But it's just interesting to see P&I revenue essentially back at.
Fiscal 19 run rates, yet margins holding in the double digit territory.
Yeah.
We're all just wondering where these margins are going to settle out.
Just any more color you can provide maybe within the footprint clearly some geographies have seen occupancy trends improve.
Maybe others not so much but maybe you just based on what Youre seeing.
And areas, where occupancy has improved just any kind of thoughts on it.
Where the sustainable P&I.
Margin run rate settles out would be.
Really helpful. As we think about the go forward.
Sure Sean look I think this is still evolving right.
I'll tell you that.
If you look at geographically speaking if you look at kind of the two coasts, you're talking about 20% office occupancy and being give or take and then kind of that middle of the country, it's 40% to 50%.
But it hasn't it hasn't ramped up as fast as we all thought because of the Delta variance. So I think it's still hard for us to pin down a formal long term margin, where we're looking forward to giving you full year guidance and the next three months and then that'll give you the insight for for the next year.
But you know look we were going to say what we've seen.
10, you to say throughout which is you know there the two areas for elevated margins are and disinfecting and labor arbitrage and we believe we will permanently keep portions of that as we re staffed. These buildings. We believe we're going to be able to do it more efficiently and we will capture some savings again.
It's still too early to figure out how much and then you know disinfecting, we see it like you know you know maybe two quarters ago, there was or maybe even a quarter ago. There was no delta variant right. So like I think this is going to continue to evolve and you know we've.
We've all just studied even anecdotally, it's just I don't think facility managers, all landlords or or principals of schools I don't think anyone thinks it's responsible to discontinued disinfection services, especially in high touch area. So that's going to continue to so we believe we will continue to.
Elevated but.
Give us till next quarter, when we do full year guidance to kind of give you that your outlook.
Okay fair enough, thanks for that and.
Maybe shifting over to Ats could you just speak to kind of the velocity and new business wins, there I mean, clearly some of this energy efficiency.
ESG related work is a big play with Abel so.
Just some color on client decision, making there.
Wins backlog trends.
As we think about the growth potential.
And that business lines.
So like it's.
Its thumbs up across the board when we look at new sales were at record new sales our backlog I think the number is 250 million plus in backlog, which is a record for us too and our churn rate is going up so not only is our backlog higher but were turning out the work faster because we have more access to sites. We love you know I've made some opening.
Comments about EV charging.
It's amazing.
We've installed nearly half of the EV charging stations in the country to date like I don't think people realize that right and so you know.
Kind of the bandwidth we have there as the world moves to E mobility is going to be fabulous for us. So we continue to be excited about that segment and then.
Take you take able and you take all the engineering assignments and the ability to cross sell into that we think theres just going to be phenomenal abilities. There. We think there's going to be phenomenal ability to create a ISS integrated facilities platform and as we talked about payable with you all we didn't put any revenue synergies.
And so that's all on the upside thats not factored in so couldn't be more enthusiastic about where ats is going from our core business to our ability to cross sell to where society is heading we think it's just again thumbs up across the board.
Okay terrific. Thanks, Scott I'll turn it over.
Thanks, Sean.
Thank you. Our next question is come from the line of Andy Wittmann with Baird. Please proceed with your questions.
Yeah, great. Thanks for taking my questions guys, maybe Scott I wanted to broaden out that last question that was focused on sales for the technical solutions segment, and just talk about based contractual revenue and basically if you could talk a little bit about net new business in the quarter you know over the last year or so certainly early independent.
It was just all about kind of hunkering down and your retention was up because nobody wanted to change.
Time has progressed things are reopening.
I wanted to get a sense from you about the level of customer discussions.
For changing providers to you or even from you I suppose on the contractual side of your business. If you could talk about that please yeah.
Yes, I think you said Ats did you mean more BMI.
Yes. The prior question was focused on.
Technical solutions. My question is focused on all of the other annuity businesses for P&I are PNM that kind of stuff got you. Yeah. So look there has not been a lot of activity yet I think.
My my remarks would stay consistent with the last couple of quarters, which is facility managers and landlords is still trying to get level set for what the new reality looks like and now Andy with you and you know this poly as well as I do with with <unk>.
Companies pushing back their opening dates for getting people back you're still in this mode, where you don't want to kind of commit to like bidding out work and figuring out what the new normal looks like because you just don't know what the occupancy patterns are going to look like and so we haven't we haven't seen a lot of activity on that side and even with schools.
This is this is the first time that we would say like probably 95% of the schools K through 12, and higher Ed or back in person. So they're just first level setting on that right now and hoping to get through the semester with in person. So I think that there hasnt been that active.
So it's still it's still a little early for that.
Okay. Good.
Wanted to check on that and then.
Hum.
I guess.
There was there is fundamentally in your comments there are two things that kind of stuck out as slight changes in terms of the demand.
For your services one was that you actually saw occupancy trend down obviously delta does have an effect.
We had to point to something that would be so occupancy kind of trending down in the quarter and then the other thing you kind of mentioned was slightly softer deep cleaning demand.
But just given that there was a slight change in both of those so maybe you can elaborate on on those.
Yes, I think I think that's a good call out Andy and I think those will all probably temporary so occupancy trending down is really one delta hit and it goes to what I said, a couple of minutes ago, which is people. If you remember right. It was going to be like Oh first that people were talking about July 4th and they were talking about labor.
A day now Theres a lot of people, saying November 1st in January. So it's the tail is just getting longer and longer on occupancy, which you know as you know in north to our benefit right because we keep that labor arbitrage, so, but that's a that's a good tailwind for us and then the softening on kind of disinfect.
<unk>.
So I would say two things one.
Clearly expected I think we've had that narrative at least a year if not longer that it.
It's never going to stay at these levels and if you think about it. So so if you think about work orders kind of pre pandemic. We were in that 5% range right that was our tag work order revenue and we've got as high as like 10 plus percent. So now we're like I think it was nine three for the quarter. So youll see.
See that start kind of tailing down, but we've always projected that and I think also remember this was we had June and July in this corner court quarter, which was summer months, so even less occupancy and probably a more extreme ramping down of.
Of the disinfecting work, so I think some of it's temporary but again I think the stuff really the elongation of occupancy is good for us. That's a very helpful answer My last question Earl I guess is for you and I just wanted to understand and interpret the guidance a little bit.
I look at the quarter you beat by <unk>.
11 cents on consensus the midpoint goes up by by 10.
Feels like the guidance change is mostly due to the third quarter's outperformance.
Rather than some change on your view for the fourth quarter, specifically is that the right way of thinking about the guidance range was it's really more about year to date performance than a change in your outlook for the fourth quarter.
Yeah, I think that's correct.
When we do the guidance, we look at obviously, what's happened year to date and how we think that's going to continue to trend into Q4 and as such based on our performance in Q3, we felt comfortable raising both the top and as well as the body an amended the guidance.
Okay that makes sense. Thanks, guys have a great day. Thanks, Andy.
Yep.
Okay.
Thank you. Our next question is coming from the line of David Silver with C. L. King. Please proceed with your questions.
Okay. Thank you very much.
I'll just apologize in advance I have had to step away.
A couple of points here.
My first question, Scott would be kind of to try to get your perspective on something a couple of things you talked about maybe a couple of quarters ago and it would be related to the demand for office space.
You see it.
And then secondarily.
The appetite for prop.
Property managers too.
Embed or include elements of your enhanced disinfection routines and the basic.
Service contracts. So I think it was a couple of quarters ago, but you had mentioned that there was an active discussion between yourselves and the property managers.
And I.
I think you characterized it is quote unquote like too early for many of the property managers to really decisively kind of.
Reached conclusions about that.
The demand for office space and B, what what types of facility services.
Would be.
Used in a post pandemic environment, Yes, that's right I'm just wondering if you could just update us on your thinking in those two areas. Thank you.
Yes, sure David So look in terms of demand for office space and how that's going to work out.
You remember it was probably like a year ago, everyone was predicting this massive flood of sub leasing and people rationalizing their space and we said we werent seeing it we said it was too early and I think we also said that we believe based on our kind of our knowledge of the space that people are going to wait till until till <unk>.
Tenants got back into the space saw how they were using it before they were going to make these longer term decisions about the demand for office space.
I think thats still in play that still hasn't happened yet because you know as I said you know a couple of minutes ago, we haven't seen that return to office yet so.
Nothing new to report on the demand side, and then in terms of enhanced cleaning and embedding in the contracts I think it's the same thing where people haven't gotten back yet they haven't figured out how to rationalize their cleaning specs, how it's going to work and that's something that we suspect is going to be more.
Of a 2022 event frankly than a 'twenty one event.
Okay, great and I'd like to follow up with maybe a question related to April services and in particular their technical solutions capabilities.
One this is a question about how that group will look following the completion of the acquisition. So so your existing technical solutions unit certainly has a number of strengths energy efficiency and I think a very strong positioning in the education segment and I'm just.
Wondering if you could maybe comparing contrast, what.
<unk>.
The Abel services technical solutions unit brings either in terms of breadth of capabilities.
Scale in certain areas in other words.
You've talked about cross selling but is the cross selling opportunities more of the traditional opportunities that you've been working on with your legacy technical solutions unit or how.
How will it broaden and extend your.
Ability to cross sell thank you yeah. So so.
Cable services doesn't have a technical solutions unit the way, we have which is remember our technical solutions is mostly project work right. So we're where we're.
We're retrofitting electrical and mechanical systems their engineering capabilities are on the stationary engineering, which are the engineers that are located on site and are building operating the equipment.
And we have a segment as large as there is on that so.
If you look at that the opportunity is for our technical solutions group to cross sell into those engineering assignments and for us to bring a broader set of capabilities because they also have.
Somewhere in the neighborhood of $400 million in janitorial assignments that we'll be able to cross sell as well. So we look at our as our technical solutions as a catalyst for that but again.
I'll repeat what I said earlier, which is we have not factored that in to any of the economics, that's all upside for us, but all of those revenue synergies which should be.
Well received by someone like you.
Okay, great. Thank you very much.
Thanks, David.
Thank you. Our next question is come from the line of Marc Riddick with Sidoti. Please proceed with your questions.
Hey, good morning.
Morning.
So I was wondering if we could start with the education segment for a moment I was wondering if you could spend a little time delving into maybe what you've seen so far and particularly I was somewhat curious as to.
The ramp up going into a school.
School reopening have you seen any meaningful difference in an ordering or ore preparation.
For for the younger.
Grades as opposed to college age, particularly.
They're too young to be vaccinated, and just wondering if theres any difference in what clients were asking you to do or is it somewhat similar across the board.
It's generally speaking it's somewhat across the board I think.
Four four.
For a president of a college or if you are a principal of the school you're just trying to protect the kids as best you can right and so we don't see a real distinction between maybe doing more disinfection in case through 12 and higher Ed it's similar across the board.
Okay, and then I was thinking about the.
Sort of some of the commentary that you had in the press release around some of the return to normalcy.
You've talked about travels.
Aviation to the side for a moment that certainly was clear you did talk a little bit about things like sporting events and the like and then I was wondering if could talk a little bit about those kind of.
Other leisure.
Activities that are not necessarily travel because it does seem as though.
Being full stadiums again.
Football in some level of concert activity, though that's been a little bit spotty. So that's why if you could touch a little bit about what you're seeing there.
Sure Andy.
Just as a reminder.
Sports and entertainment, we love that segment. Its just you know it's great to be in but it's a very small piece of our revenue, but you know.
It's been encouraging right because it's been almost like a binary event, whereas last quarter. It was like no activity and now we're having activity again, where people are getting back to events in stadiums are becoming full or hybrid fall if you will and so.
So it's a path to normalcy, which we which we really like and that's been one of our fastest growing segments, albeit it's a smaller one but it's a fast growing one. So we're just we're just pleased that it's getting back to normal.
Okay, and then I wanted to also switch gears a bit and go into the.
Sort of where you are on the branding.
Efforts in the exercise is there I mean, it's been a little bit of time now since you started with the with the commercials, but also sort of just sort of putting the avian Brandon.
Wonder if you can sort of give some thoughts as to maybe what youre seeing there and then what type of you know commit.
Commitment, we should be thinking about as far as sort of keeping the avian brand in front of people and making that part of the structure of your go to market strategy.
Yeah. So look it's been important to us through 2021, and we renewed our.
Our engagements with folks like CNBC, probably seen our ads continue to run and we have those engagements throughout the rest of the fiscal year. It remains to be seen what we're going to do in 2022, but we will certainly address that with you when we do our guidance, but we've enjoyed the the up branding and it's just going to.
Our cost benefit analysis that we continue to iterate on but definitely more color on that when we give guidance.
Okay, Great and then one last thing for me I was wondering going switching back to the hiring and what Youre seeing there is there any any difference as to any.
Regional differences.
Labor availability hiring and the like.
I was sort of thinking about the you know what we've seen in certain areas in certain states.
Ended the.
Unemployment.
Support earlier in the summer I wasn't sure. If there was much in the way the difference that you're seeing there, but I was wondering if you had any any commentary there as to how.
Maybe what youre seeing there and what benefits you may begin.
Yeah, I think I think the way the way we think about it Mark is really more union territories versus non union. So so.
So in our kind of union markets, we see less pressure right because wages are higher there is full benefits.
And that mitigates a lot of the concern we have around labor, it's more on the non union markets, which tends to be at the bottom half of the country and you know we're seeing some pressure there, but that's why we put our task force in place, but it's also been muted because it hasnt been the return to work and we're only beginning with return to school. So we're feeling pretty good about it.
We'll see what happens as as the benefits roll off now on on unemployment and we'll see what happens with the.
The child care tax credit.
<unk> because it was elevated this year you know it used to be about $2000 per child and now it's between 3030.600. So we'll see if that gets renewed and you know that's not taxable so.
That's another incentive to not get into the workforce. So.
I think more to come on that story.
Much appreciate it thank you.
Thank you.
Okay.
Thank you there are no further questions at this time I'd like to hand, the call back over to management for any closing comments.
I just want to tell everyone to make sure you continue to stay safe and healthy and do all the proper guidelines you know that's our moment of safety for this quarter and we look forward to giving you an update next quarter. When we will have much more to say about the April acquisition, and then our our full year guidance. So.
Thanks, everyone for your support and look forward to chatting soon.
Thanks, Eddie Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time.
Great day.