Q4 2023 ABM Industries Inc Earnings Call

Greetings and welcome to the ABM Industries 4th quarter, 2023 earnings conference call. At this time, all participants aren't a listen only both.

Greetings and welcome to the ABM industries fourth quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode.

The 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 your host, Paul Goldberg, Head of Investor Relations for ABM. Thank you. You may begin.

A question and answer session will follow the formal presentation.

And what you require operator assistance during the conference. Please press Star zero on your telephone keypad. Please.

Please note this conference is being recorded.

Speaker Change: I'll now turn the conference over to your host Paul Goldberg head of Investor Relations for a P M.

Speaker Change: You may begin.

Good morning, everyone and welcome to ABM's fourth quarter, 2023 earnings call. My name is Paul Goldberg and I'm the Senior Vice President of Invest Relations at ABM. With me today are Scott Falmier, our President and Chief Executive Officer, and our well-off are Executive Vice President and Chief Financial Officer.

Speaker Change: Good morning, everyone and welcome to Adm's fourth quarter 2023 earnings call.

Paul Goldberg: My name is Paul Goldberg and I'm, the senior Vice President of Investor Relations at ADM with me today are Scott tell me as President and Chief Executive Officer, and aren't allowed us our executive Vice President and Chief Financial Officer.

Please note that earlier this morning we issued our press release announcing our fourth quarter and full year 2020-3 financial result.

Paul Goldberg: Please note that earlier this morning, we issued a press release announcing our fourth quarter and full year 2023 financial result.

a copy of that release. And in a company in slide presentation can be found on our website, www.cvm.com.

A copy of that release and an accompanying slide presentation can be found on our website a b M Dot com.

If it's got an Earl's repair remarks, we will hold the Q&A special.

Paul Goldberg: After Scott and <unk> 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 contains predictions, estimates and other forward looking statement.

Speaker Change: Before we begin I would like to remind you that our call and presentation today contains predictions.

Speaker Change: It makes it and other forward looking statements.

I will 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 risk and uncertainties that could cause our actual result to differ materially. These factors are described in the slide that accompanies our presentation as well as our filings with the SEC.

Speaker Change: Our use of the words estimate.

And similar expressions are intended to identify these statements and they represent our current judgment of what the future holds.

Speaker Change: We believe them to be reasonable. These statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially.

Speaker Change: 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-gap 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'd like to turn the call over to Scott.

Speaker Change: 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.

With that I'd like to turn the call over to Scott.

Thanks, Paul. Good morning and thank you all for joining us today to discuss our fourth quarter results.

Scott Tellme: Thanks, Paul Good morning, and thank you all for joining us today to discuss our fourth quarter results.

Fourth quarter revenue grew 4.1% to 2.1 billion dollars, including 3.8% organic growth.

Scott Tellme: Fourth quarter revenue grew 4.1% to $2 $1 billion, including three 8% organic growth.

All segments grew organically in the quarter led by double-digit growth in our aviation segment driven by healthy airport activity and the addition of new clients. Our technical solutions, education, and manufacturing and distribution segments also posted solid growth reflecting several project closeouts and technical solutions, new education clients, and our strong positioning at M&D.

Scott Tellme: All segments grew organically in the quarter led by double digit growth in our aviation segment, driven by healthy airport activity and the addition of new clients, our technical solutions education manufacturing and distribution segments also posted solid growth, reflecting several tragic Clos.

Scott Tellme: Technical solutions, New education clients, and our strong positioning and M D.

We also recorded modest organic growth in B&I, where robust sports and entertainment and special event activity helped to offset continued softness in the commercial real estate market.

Scott Tellme: We also recorded modest organic growth in DNI, where robust sports and entertainment and special event activity helped to offset continued softness in the commercial real estate market.

Additionally, our team set another sales record in 2023 with new sales bookings of $1.6 billion, which is a great accomplishment.

Scott Tellme: Additionally, our team set another sales record in 'twenty to 'twenty, three with new sales bookings of $1 $6 billion, which is a great accomplishment.

Please, with our progress in resolving certain microgrid project delays and technical solutions, as well as our ability to win new clients, push price increases, and effectively manage our course structure. As a result, ABM generated double digit increases in net income, adjusted net income, and adjusted EBITDA, and achieved an adjusted EBITDA margin of 7.2%.

Scott Tellme: I'm pleased with our progress in resolving certain Microgrid project delays in technical solutions as well as our ability to win new clients push price increases and effectively manage our cost structure.

Scott Tellme: As a result.

Scott Tellme: P M generated double digit increases in net income.

Scott Tellme: Adjusted net income and adjusted EBITDA and achieved an adjusted EBIT margin of seven 2%.

I'll now discuss the demand environment for each of our industry groups.

Scott Tellme: I'll now discuss the demand environment for each of our industry groups.

Let's begin with the N.I. Office density rates remain relatively static in the fourth quarter at around 50 plus percent on a blended basis with the commercial office vacancy rate near 20%.

Scott Tellme: Let's begin with Eni office density rates remain relatively static in the fourth quarter at around 50 plus percent on a blended basis with the commercial office vacancy rate near 20%.

These factors directly impacted the man for our janitorial services in B&I. Although the hybrid work model remains prevalent, we expect to see a continued gradual increase in the time employees spend at the office in the next couple of years.

These factors directly impacted demand for our channel total surfaces and be ni.

Scott Tellme: It was a hybrid work model remains prevalent we expect to see a continued gradual increase in the time employees spend that the office in the next couple of years.

We expect as office leases expire in 2024, many clients will move forward with their plans to downsize their office footprints to match their density, which will put pressure on demand for janitorial services until vacant floors are re-leased and reoccupied.

We expect as office leases expire in 'twenty 'twenty for many clients will move forward with their plans to downsize their office footprints to match their density, which will put pressure on demand for janitorial services until vacant floors are released and reoccupied.

If companies become more proactive and require their employees to return to the office, the impact may be more muted than our current expectations.

Scott Tellme: If companies become more proactive in requiring their employees to return to the office the impact may be more muted than our current expectations.

Given a flexible labor model, ABM remains well positioned to navigate the challenges of commercial real estate.

Scott Tellme: Given our flexible labor model, a b M remains well positioned to navigate the challenges of commercial real estate.

As a reminder, our multi-tenant commercial real estate profile largely consists of Class A and newer buildings, which we believe are far more resilient than lower quality buildings.

As a reminder, our multi tenant commercial real estate profile largely consist of class a and newer buildings, which we believe are far more resilient than lower quality buildings.

In addition to genocidal services, our B&I segment provides engineering services and has clients and submarkets like Sports and Entertainment and Healthcare, all of which are influenced by demand drivers that are far less correlated to office spend city.

Scott Tellme: In addition to janitorial services, albeit ice segment provides engineering services and has clients in Submarkets like sports and entertainment and healthcare.

Scott Tellme: All of which are influenced by demand drivers that are far less correlated to office density.

That's an important reason why B&I's full-year revenue declined less than 1% despite softness in the commercial real estate market.

Scott Tellme: That's an important reason why be in ice full year revenues declined less than 1%.

Scott Tellme: Despite softness in the commercial real estate market.

In summary, while the pressure of commercial real estate is tangible and will impact B&I's performance next year, we plan to mitigate a portion of the impact through our flexible labor model, cost management, and the diversity of our end markets and mix of service lines.

Scott Tellme: In summary.

Scott Tellme: While the pressure in commercial real estate is tangible and will impact be a nice performance next year, we plan to mitigate a portion of the impact through our flexible labor model cost management and the diversity of our end markets and mix of service lines.

Moving to aviation, the leisure and business travel markets, including international travel, remain quite strong and should be solid in 2024. Although we face tougher year-over-year comparisons due to the large 2022 parking project that carried over into Q1 of 2023.

Scott Tellme: Moving to aviation, the leisure and business travel markets, including international travel remain quite strong and should be solid in 2024, although we face tougher year over year comparisons due to the large 2022 parking project that carried over into Q1 of 2023.

Our aviation team has executed extremely well, managing through a historically tight labor market while ramping up service volumes to above pre-pandemic levels.

Scott Tellme: Our aviation team has executed extremely well managing through a historically tight labor market, while ramping up service volumes to above pre pandemic levels.

They also continue in new business, including two large airport janitorial contracts, pending final approval along with two core airline projects, all of which kick in in the first half of the year.

They also continue to win new business, including two large airport janitorial contracts pending final approval along with two core airline projects all of which chicken in the first half of the year.

Demand within our manufacturing and distribution segment has remained strong, benefiting from our core e-commerce and logistics clients and from our diversification efforts, including expanded business with clients in the manufacturing, semi-conductor, and biopharma markets.

Scott Tellme: Demand within our manufacturing and distribution segment has remained strong.

Scott Tellme: Benefiting from our core e-commerce, and logistics clients and from our diversification efforts.

Scott Tellme: <unk> expanded business with clients in the manufacturing setting.

Scott Tellme: Doctor and Biopharma markets.

The newer end markets continue to offer exciting growth opportunities as clients increasingly outsource support services in order to focus on their core business operations.

The newer end markets continue to offer exciting growth opportunities as clients increasingly outsource support services in order to focus on their core business operations and.

In addition, we seek growing momentum from the on-shoreing of manufacturing. As we mentioned last quarter, we expect a large and valued M&D client to rebuild and rebalance their work needs in 2024 as part of their normal procurement process.

Scott Tellme: In addition, we see growing momentum from the onshoring of manufacturing.

Scott Tellme: As we mentioned last quarter, we expect a large and valued M D client to rebid and rebalance their work needs in 'twenty 'twenty four as part of their normal procurement process.

Our team has been working to offset the anticipated revenue reduction through expansion with other clients and pursuing new opportunities in other MMOs.

Scott Tellme: Our team has been working to offset the anticipated revenue reduction through expansion with other clients and pursuing new opportunities in other end markets over the midterm, we expect M N D to grow revenue in the high single digits.

Over the midterm, we expect M&D to grow revenue in the high single digits. However, the 2024 growth rate will be impacted by the rebalance.

Scott Tellme: However, the 'twenty 'twenty four growth rate will be impacted by the rebalancing.

Moving to education, we generated mid-single digit or gatic revenue growth, driven by 100% in class learning and by the addition of new clients.

Scott Tellme: Moving to education.

Scott Tellme: We generated mid single digit organic revenue growth driven by 100% in class learning and by the addition of new clients.

We executed well on our sales pipeline and won several new contracts during the year. We expect 2024 to be another year of solid growth and stability.

Scott Tellme: We executed well on all of our sales pipeline and won several new contracts during the year, we expect 'twenty to 'twenty four to be another year of solid growth and stability.

Scott Tellme: Moving to technical solutions.

Figma backlog now exceeds $410 million, even after several completions of projects in the fourth quarter.

Scott Tellme: Segment backlog now exceeds $410 million, even after several completions of projects in the fourth quarter.

with easy and microgrid services representing nearly 60% of the segment total.

Speaker Change: Was easy and Michael Good services, representing nearly 60% of the segment total.

Conversely, we continue to experience soft market conditions in bubble energy solutions, which includes HVAC lighting and electrical system retrofits, primarily due to the impact of higher interest rates on project ROI's and the availability of government funding through legacy COVID legislation.

Speaker Change: Conversely, we continue to experience soft market conditions, and bundled energy solutions, which includes HVA see lighting and electrical system retrofits.

Speaker Change: Merrily due to the impact of higher interest rates on project Rois and the availability of government funding through legacy Covid legislations.

We believe projects will pick up once return expectations get reset and the government funding projects fun set The timing of this is hard to predict which is why we are tempering 2024 expectations for bundled energy solution

We believe projects will pick up once return expectations get reset and the government funding projects Sunset.

Speaker Change: Timing of this is hard to predict which is why we are tempering 'twenty 'twenty four expectations for bundled energy solutions.

Technical solutions as a whole perform better in the fourth quarter as we were able to close out several legacy projects and make progress on certain microgrid projects following supply chain and permitting delays earlier in the year.

Technical solutions as a whole performed better in the fourth quarter as we were able to close out several legacy projects and make progress on certain microgrid projects following supply chain and permitting delays earlier in the year looks.

Looking forward, we expect to advance microgrid projects during the year.

Speaker Change: Looking forward, we expect to advance microgrid projects during the year.

Also, the level of interest in bidding activity for microgrid systems and large EV infrastructure projects, including the opportunity for current revenue remains high.

Speaker Change: Also the level of interest in bidding activity for micro grid systems, and large EV infrastructure projects, including the opportunity for occurring revenue remains high.

We expect 2024 to be a year of solid growth in technical solutions. Now turn.

We expect 'twenty 'twenty for it to be a year of solid growth in technical solutions.

Now turning to our elevated initiatives.

Following the successful financial close on our new cloud-based ERP system to the education segment, we achieved two more small stones in the fourth quarter. First, we launched a new workforce management solution for pilot flights in the education cereal nation.

Speaker Change: Following the successful financial close on our new cloud based ERP system to the education segment, we achieved two more small stones in the fourth quarter.

Speaker Change: First we launched a new workforce management solution for pilot sites in the education segment. This.

This tool allows for a more modern approach to time and attendance and scheduling, providing managers with improved visibility. By pairing this tool with the workforce productivity and optimization tool, we released last year. We are now entering a new phase of efficiency that provides operators with enhanced insights.

This tool allows for more modern approach to time and attendance scheduling providing managed us with improved visibility by.

Speaker Change: By pairing this tool with the workforce productivity and optimization tool. We released last year. We are now entering a new phase of efficiency that pause.

Speaker Change: Operators with enhanced insight.

We expect to complete the rollout of this tool to our education segment in 2024 and further expand deployment thereafter.

Speaker Change: We expect to complete the rollout of this tool to our education segment in 'twenty 'twenty four and further expand deployment thereafter.

The second milestone is the initial release of our new team member mobile app called Team Connect. The app is currently in the hands of more than 500 frontline team members.

Speaker Change: The second milestone is the initial lease up of our new team member mobile App called <unk> connect.

The App is currently in the hands of more than 500 frontline team members.

Over the next year, this app will deliver on-demand training safety moments.

Speaker Change: Over the next year this app will deliver on demand training.

Speaker Change: D moments.

clock-in and clock-out integrations, and task management features, among other capabilities.

Speaker Change: Walk in and clock out integrations and task management features among other capabilities.

These tools will create a digital connection to the frontline, driving a higher level of engagement, and delivering real-time updates to our clients that provide more transparency on services performed.

Speaker Change: These tools will create a digital connection to the frontline driving a higher level of engagement and delivering real time updates to our clients.

Speaker Change: More transparency on services performed.

Over the next couple of years, we plan to scale this ecosystem. The delivery of the outcomes we initially shared during investor day in late 2021.

Speaker Change: Over the next couple of years, we plan to scale. This ecosystem deliver the outcomes. We initially shared during investor day in late 2021.

We've also had a lot of learnings from the successful initial deployment of our cloud-based ERP system in our education industry group earlier this year.

Speaker Change: We've also had a lot of learnings from the successful initial deployment of our cloud based ERP system, and our education industry group earlier this year.

We are applying those learnings to future segment ERP rollouts to ensure we minimize any potential disruptions to our clients and our internal operations.

Speaker Change: We are applying those learnings to future segment ERP rollouts to ensure we minimize any potential disruptions to our clients and our internal operations.

As a result, we expect the full deployment may take about a year along and then first anticipated. And the total program costs will likely be about 200 to $215 million, which is modestly higher than we said in 2021.

As a result, we expect the full deployment may take about a year longer than first anticipated and the total program cost will likely be about $200 million to $215 million, which is modestly higher than we said in 2020 one.

We cannot be more excited about the positive impact that our transformation issues are having on our clients and team members. Our expectation is that these capabilities will be game changing in our industry.

Speaker Change: We could not be more excited about the positive impact that our transformation initiatives are having on our clients and team members. Our expectation is that these capabilities will be game changing in our industry.

Looking back at our performance in 2023, we did a terrific job winning large new contracts in aviation, in education, as well as in M&D, where we continue to expand. Although we experienced some project delays in technical solutions, our performance improved in the fourth quarter, and we expect further progress as the nascent markets mature.

Speaker Change: Looking back at our performance in 'twenty to 'twenty, three we did a terrific job winning large new contracts in the aviation and education as well as an M D.

We continue to expand.

Although we experienced some project delays in technical solutions, our performance improved in the fourth quarter and we expect further progress as the nascent markets mature.

In B&I, we are effectively navigating this challenging market, benefiting from the flexibility in our labor model and our real estate portfolio that remains heavily weighted towards better performing class A properties.

In DNI, we are effectively navigating this challenging market benefiting from the flexibility in our labor model and our real estate portfolio that remains heavily weighted towards better performing class a properties.

In 2024, we expect generally healthy market activities to technical solutions, aviation, education, and M&D.

Speaker Change: 'twenty 'twenty four we expect generally healthy market activities to technical solutions Aviation education and M D.

At the same time, we anticipate that the conditions will remain challenging in the commercial real estate office market, and that we will be impacted by some business rebalancing in M&D. We expect these factors along with projected labor inflation will likely mute our revenue growth and cause our margins to incrementally tick lower when compared to the strong levels we achieved in 2023.

At the same time, we anticipate that the conditions will remain challenging in the commercial real estate office market and that we will be impacted by some business rebalancing an M. D. We expect these factors along with projected labor inflation will likely mute our revenue growth and of course on margins too.

Speaker Change: Incrementally tick lower when compared to the strong levels, we achieved in 2023.

Our overall outlook for 2024, therefore, is essentially unchanged from the comments we shared last quarter. Earl will walk you through the specifics of our 2024 outlook in his comments.

Speaker Change: Our overall outlook for 'twenty 'twenty four therefore is essentially unchanged from the Thomas we shared last quarter.

Speaker Change: I will walk you through the specifics of our 'twenty 'twenty four outlook in his comments.

As we look forward, we expect our teams to set another new sales record in 2024 after record sales in 2023.

Speaker Change: As we look forward.

Speaker Change: We expect our teams to set another new sales record of 'twenty 'twenty four after a record sales in 'twenty to 'twenty three.

Through our Elevate initiative, we are leveraging our scale, depth of service offerings, and technology. In addition, we will continue to carefully manage costs and proactively make changes to our cost base, if necessary, just as we did in 2023. And of course, our anticipated strong free cash flow will enable us to continue to invest for the long term while regularly returning cash to our shareholders.

Speaker Change: Olivia initiative, we are leveraging our scale.

That's the service offerings and technology. In addition, we will continue to carefully manage costs and proactively make changes to our cost base if necessary just as we did in 2023.

Speaker Change: Of course, our anticipated strong free cash flow will enable us to continue to invest for the long term while regularly returning cash to our shareholders.

Speaker Change: Now I'll turn it over to al.

Thank you Scott and good morning everyone. For those of you following along with our earnings presentation, please turn to slide 5.

al: Thank you Scott and good morning, everyone for those of you following along with our earnings presentation. Please turn to slide five.

Fourth quarter revenue of 2.1 billion increased 4.1%. Comprehensive organic revenue growth of 3.8% and a one month contribution from Ravenville.

al: Fourth quarter revenue of $2 1 billion increased one 1% comprised of organic revenue growth of three 8% and a one month contribution from Rainbow.

Moving on to slide six, net income in the fourth quarter was $62.8 million, or 96 cents per diluted share, up 29% and 32% respectively, versus last year. These increases were largely driven by higher segment earnings on higher revenue, the benefits of the prior year self-insurance adjustments, and lower elevate costs partially offset by higher interest expenses and labor costs.

al: Moving on to slide six net income in the fourth quarter was $62 $8 million or 96 cents per diluted share up 29% and 32% respectively versus last year. These increases were largely driven by higher segment earnings on higher revenue the benefits of the prior year self insurance.

And lower elevate costs, partially offset by higher interest expenses and labor costs.

Adjusted that income of $56.2 million increased 11% and adjusted earnings for the alluded share of a dollar one was up 13% over the prior year period. These year over year increases primarily reflect higher segment earnings including the benefits from price increases and our cost management efforts partially offset by higher interest expense and labor cost.

al: Adjusted net income of $56 $2 million increased 11% and adjusted earnings per diluted share of $1. One was up 13% over the prior year period. These year over year increases primarily reflect higher segment earnings, including the benefits from price increases and our cost management efforts.

Partially offset by higher interest expense and labor costs.

Adjusted EBITDA grew 10% over the prior year to $144.2 million, and adjusted EBITDA margin increased 40 basis points to 7.2%. These year-over-year improvements were driven by higher segment earnings, including several project closeouts in technical solutions, and normalized performance and aviation as compared to the prior year, which was impacted by adverse project timing.

al: Adjusted EBITDA grew 10% over the prior year to $144 $2 million and adjusted EBITDA margin increased 40 basis points to seven 2%.

al: These year over year improvements were driven by higher segment earnings, including several project Closeouts and technical solutions and normalized performance in aviation as compared to the prior year, which was impacted by adverse project timing.

Now turning to our segment results beginning on slide seven, B&I revenue increased modestly to $1 billion, partly due to strong sport and special event demand, which helped to offset reduced demand in the commercial real estate market.

Now turning to our segment results beginning on slide seven <unk> revenue increased modestly to $1 billion, partly due to strong sport and special event demand, which helped to offset reduced demand in the commercial real estate market.

Operating profit in V&I decreased to $84.6 million, and operating margin declined to 8.2%. As adverse service mix was partially offset by price increases and cost action.

al: Operating profit in DNI decreased to $84 $6 million and operating margin declined to eight 2% as adverse service mix was partially offset by price increases and cost actions.

Aviation grew 15% to $248.2 million. Once again, driven by strong demand for leisure and business travel and new business.

al: Aviation grew 16% to $248 $2 million once again, driven by strong demand for leisure and business travel and new business wins, we expect demand within our aviation segment to remain robust going forward.

We expect demand within our aviation segment to remain robust going forward.

Aviation's operating profit was $16.4 million versus $1.3 million in the prior year period. An operating margin expanded significantly to 6.6%.

al: Aviation operating profit was $16 $4 million versus $1 $3 million in the prior year period, and operating margin expanded significantly to six 6%.

These increases reflected the absence of the adverse project timing which negatively impacted the prior year period, as well as benefits of higher volume and price increase.

al: These increases reflected the absence of the adverse project timing, which negatively impacted the prior year period, as well as benefits of higher volume and price increases.

Turning to slide 8, manufacturing and distribution revenue grew 5% to $391.2 million, reflecting broad-based demand.

al: Turning to slide eight manufacturing and distribution revenue grew 5% to $391 $2 million, reflecting broad based demand.

Operating profit increased to $42 million while operating margin decline 40 basis points to 10.7%.

Operating profit increased to $42 million, while operating margin declined 40 basis points to 10, 7%.

Profit and margin performance was largely due to customer met.

al: Profit and margin performance was largely due to customer mix.

Education revenue increased 6% to $229.8 million, benefiting from the addition of new clients earlier in the year.

al: Education revenue increased 6% to $229 $8 million benefiting from the addition of new clients earlier in the year.

Education operating profit was $10.2 million, up 23% over the prior year period. While margin increased 60 basis points to 4.4%.

al: Education operating profit was $10 $2 million up 23% over the prior year period, while margin increased 60 basis points to four 4%.

These increases were largely attributable to increased organic revenue growth and a modestly improved labor market.

al: These increases were largely attributable to increased organic revenue growth and a modestly improved labor market.

Technical solutions grew 6% over the prior year period to $190.8 million. Comprised of an even split between organic growth and acquisition contribution.

al: Technical solutions grew 6% over the prior year period to $198 million comprised of an even split between organic growth and acquisition contribution.

This performance largely reflecting the close-out of several legacy projects and progress on battery storage system projects. Of note, Ravenville contributed to organic growth beginning in September .

al: This performance largely reflecting the closeout of several legacy projects and progress on battery storage system projects of note Rainbow contributed to organic growth beginning in September.

After these project closeouts, that's got noted, technical solutions backlog now exceeds $410 million, a large portion of which is scheduled to convert to revenue in 2024.

Speaker Change: After these project close outs as Scott noted technical solutions backlog now exceeds $410 million, a large portion of which is scheduled to convert to revenue in 2024.

Technical Solutions operating profit was $24.4 million and margin was 12.8% compared to operating profit of $20.9 million and margin of 11.7% last year.

Speaker Change: Technical solutions operating profit was $24 $4 million and margin was 12, 8% compared to operating profit of $29 million and margin of 11, 7% last year.

These increases were largely due to higher volume and approximately $2 million of one-time gains related to certain contracts.

Speaker Change: These increases were largely due to higher volume and approximately $2 million at one time gains related to certain contracts.

Moving on to slide 9, we ended the fourth quarter with total indebtedness of $1.4 billion, including $58.2 million of standby letters of credit, resulting in a total debt to pro forma adjusted EBIT ratio of 2.3 times.

Speaker Change: Moving on to slide nine we ended the fourth quarter with total indebtedness at $1.4 billion, including $58 $2 million of standby letters of credit, resulting in a total debt to pro forma adjusted EBITDA ratio of 2.3 times.

At the end of Q4, we had available liquidity of $552.5 million, including cash and cash equivalent of $69.5 million.

At the end of Q4, we had available liquidity of $552 $5 million, including cash and cash equivalents of $69 $5 million.

Precashflow was strong in the fourth quarter at $121 million and was $191 million for the year.

Speaker Change: Free cash flow was strong in the fourth quarter at $121 million and was $191 million for the year.

excluding full year elevate and integration costs of $71 million. Our CARES Act's repayment of $66 million, and employee retention credits received of $24 million. Normalized free cash flow was $303 million in 2023.

Speaker Change: Excluding full year, elevate and integration costs of $71 million or cares act repayment at $56 million and employee retention credits received a $24 million normalized free cash flow was $303 million in 2023.

We repurchase 2.7 million shares of common stock in the fourth quarter at an average price of $40.82 per share for a total cost of $110 million.

Speaker Change: We repurchased two 7 million shares of common stock in the fourth quarter at an average price of $40 82 per share for a total cost of $110 million.

For the full year, we repurchased 3.3 million shares for $137.1 million, excluding excise taxes, and reduced our share price by $1.3 million.

For the full year, we repurchased three 3 million shares for $137 $1 million, excluding excise taxes.

Speaker Change: And reduced our share count by 5%.

Also subsequent to the year end are board approved $150 million expansion of our show repurchase authorization.

Speaker Change: Also subsequent to the year end, our board approved a $150 million expansion of our share repurchase authorization.

The total current authorization is now $210 million.

Speaker Change: The total current authorization is now $210 million.

Interest expense was $20.5 million, up $4.5 million from the prior year period.

Speaker Change: Interest expense was $25 million up $4 5 million from the prior year period.

Now let's move on to the full year fiscal 2024 outlook as shown on slide 10.

Speaker Change: Now, let's move on to the full year fiscal 'twenty 'twenty four outlook as shown on slide 10 I.

As Scott mentioned, our view for 2024 is consistent with the comments we made on the third quarter earnings call.

Speaker Change: As Scott mentioned, our view for 'twenty 'twenty four is consistent with the comments, we made on the third quarter earnings call.

We expect full 2024 adjusted EPS to be in the range of $3.20 and $3.40.

Speaker Change: We expect full 2020 for adjusted EPS to be in the range of $3 20.

Speaker Change: And $3 40.

Adjusted even a margin is expected to be 6.2 to 6.5%. Largely driven by a shift in business.

Speaker Change: Adjusted EBITDA margin is expected to be six two to six 5% largely driven by a shift in business mix.

This includes expected lower B&I janitorial activity, a change in revenue mix in M&D, and continued labor cost pressure, partially offset by elevate and cost initiatives, as well as price increases.

This includes expected lower BMI janitorial activity a change in revenue mix and M. D and continued labor cost pressure, partially offset by elevate and cost initiatives as well as price increases.

Interest expense is estimated to be in the range of 82 million to 86 million dollars. The tax rate before discrete items is expected to be between 29% to 30%.

Speaker Change: Interest expense is estimated to be in the range of 82 million to $86 million.

Speaker Change: The tax rate before discrete items is expected to be between 29% to 30%.

Lastly, full year normalized free cash flow is expected to be in the range of $240 million to $270 million, excluding the estimated $45 million of elevate and integration costs, the majority being elevate investments. With that, let me turn it back to Scott.

Speaker Change: Yeah.

Speaker Change: Lastly, full year normalized free cash flow is expected to be in the range of 240 million to $270 million, excluding the estimated $45 million of elevate and integration costs the majority being elevated investments.

Speaker Change: With that let me turn it back to Scott for closing comments.

Speaker Change: Thanks Al.

I want to thank our teams for their incredible efforts and dedication throughout the year. Despite challenging commercial real estate and labor markets, and through the introduction of new technology and processes, our teams never took their eyes off our clients and delivered solid performance. I wish you and your loved ones a very happy and healthy holiday season and a happy new year. With that, let's take some questions.

Speaker Change: I want to thank our teams for their incredible efforts and dedication throughout the year, despite challenging commercial real estate in the labor markets and through the introduction of new technology and processes. Our teams never took their eyes off our clients and delivered solid performance I wish you and your loved ones are very happy and healthy.

Speaker Change: Today season, and a happy new year with that let's take some questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: Yeah.

Speaker Change: 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.

The confirmation tone will indicate your line is in the question cue. You may press star two if you would like to remove your question from...

Speaker Change: Information tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker, equipment, and maybe necessary to pick up your handset before pressing the start use. One moment please while we pull for your question.

Speaker Change: 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.

Our first questions come from the line of Jasper Bibb with truest. Please proceed with your questions.

Our first questions come from the line of Jasper Bibb with Truest. Please proceed with your questions.

Hey, good morning guys. I wanted to ask what you're seeing from a labor inflation and pricing perspective. And if you could kind of provide the underlying assumptions for 24 guidance with respect to labor cost inflation and recovery right there, that would definitely be helpful. Thanks. Sure. Happy New Year.

Jasper Bibb: Hey, Good morning, guys wanted to ask what Youre seeing from a labor inflation and pricing perspective.

Jasper Bibb: If you could kind of provide the underlying assumptions for 'twenty for guidance with respect to labor cost inflation on the recovery rate there that that would definitely helpful. Thanks.

Speaker Change: Sure. So you know for US we're thinking it's going to be in the 4% to 5% range a lot of the collective bargaining agreements for for the China toil workers across the country or are in process right now and and we feel encouraged that theyre going to end in that range. So.

range. A lot of the collective bargaining agreements for the janitorial workers across the country are in process right now and we feel encouraged that they're going to end in that range. So our guesses on the collective bargaining agreements which are the union-based agreements, they're going to be in that 4% range and it will be a little higher for the non-union, you know, as we look to those markets with the lower labor rate. So again, that's 4% to 5% range and, you know, just as a reminder, we've been successful over the last few years over covering 75 to 80% of that. So kind of that's what we're thinking.

Speaker Change: Our guesses on the collective bargaining agreements, which are the union based agreements, they're going to be in that 4% range and it will be a little higher for the non union as we look to those markets with the lower labor rates. So again that 4% to 5% range and you know just as a reminder, we've been successful over the last few.

Speaker Change: Two years of recovering 75% to 80% of that so I'm kind of that's that's what we're thinking.

Speaker Change: Okay makes sense and then was hoping to get an update on the elevate progress I think on the last call. You mentioned you had already captured about 50% of the cost benefit there.

Any color on where you expect to be from a cost capture perspective by the end of fiscal 'twenty four and are there any kind of key deliverables like yard depute ERP deployments and we should be aware of.

Speaker Change: The next 12 months.

Yes, so we probably, I think we're in the kind of that 30% range, a third of the benefits that we've captured today.

Speaker Change: Yeah. So we've we're probably I think we're in the kind of that 30% range a third of the benefits that we've captured to date.

and uh... you know it's something that escalates over time as we as we actually execute on the different industry group segments then we can put in some of the tools so i think it's just going to be a normal ramping up to that range that we laid out of a hundred ten to a hundred thirty million dollars over time so we're right on track with our cadence on that so everything is going as planned right now

And you know its something that escalates over time.

Speaker Change: As we as we actually execute on the different industry groups segments. Then we can put in some of the tool. So I think it's just going to be a normal ramping up to that range that we laid out of $110 million to $130 million over time. So we're right on track with our cadence on that so everything is growing.

As planned right now.

Yeah, that last question for me, the company really restubbed up the purchase this quarter. I should we think about the pace of capital deployment into 2020.

Speaker Change: Got it.

Speaker Change: Last question for me.

Speaker Change: <unk> really stepped up.

Speaker Change: This quarter, how should we think about the pace of capital deployment into 2024.

Yeah, no, thanks for the question, Jasper. I would say that, you know, we're really pleased that we were able to, you know, return capital back to our shareholders over Q4, especially, you know, in light of the compression in our share price that we saw after our Q3. And as we look to the future, you know, within FY24, at a minimum, you know, we'll buy back shares against the dilutive share based compensation.

Speaker Change: Yeah no. Thanks for the question Jesper I would say that you know, we're really pleased that we were able to.

Speaker Change: Return capital back to our shareholders over Q4, especially in light of the compression in our share price that we saw after our Q3 and as we look to the future you know within FY 'twenty for at a minimum you know, we'll buy back shares against the dilutive share based compensation, Yeah, we have a board authorization now for.

We have board authorization now for about $210 million.

Speaker Change: About $210 million worth of shares and so we'll be opportunistic where it makes sense.

worth of shares and so we'll be opportunistic where it makes sense.

Speaker Change: Makes sense, thanks for taking the questions guys.

Speaker Change: Thanks.

Thank you. Our next questions come from the line of Faiza Alway with Deutsche Bank. Please proceed with your questions.

Speaker Change: Thank you. Our next question is come from the line of Faiza <unk> with Deutsche Bank. Please proceed with your questions.

Speaker Change: Yes, hi, good morning, So I wanted to ask about technical Susan I know you don't guide to RASM yields, but it sounds like you know those names are alternatives the range up.

So I wanted to ask about technical solutions. I know you don't guide to revenue.

But it sounds like the range of alternatives or the range of scenarios on technical solutions is quite wide, just given timing. So give us a bit more color on how do you expect the pacing of these new projects, project revenues to be realized, and how do you expect the underlying that must perform within technical solutions.

Speaker Change: Scenarios on technical solutions is quite wide just given tiny war, so give us a bit more color on you know how do you expect the pacing of these new projects project revenues to be realized and how do you expect sort of the underlying book for them, but didn't talk because solution.

That's great. Thanks for the question. So look, we feel strongly about technical solutions as we ever have. We love kind of the end markets that we're serving here.

Speaker Change: That's great. Thanks for the question. So look we feel as strongly about technical solutions as we ever have we love kind of end markets that we're serving here and we think it's gonna be it's gonna be a strong year for technical solutions and 24.

and we think it's going to be it's going to be a strong year for technical solutions in twenty four you know the uh... they continually post high single-digit margins we're expecting that again and remember the size of the cadence of technical solutions it starts off a little soft and then progresses through the year from a margin standpoint because it is quite seasonal in the summer you do a lot of the work right so uh...

Speaker Change: They they continually post high single digit margins, we're expecting that again and remember the size of the cadence of technical solutions. It starts off a little source and then progressive through the year from a margin standpoint, because it is quite seasonal in the summer you could do a lot of the work right. So.

We're excited about that. We don't guide to revenue, but we're excited about the potential for growth this year. And we have the strongest backlog that we've ever had. And just as a reminder, backlog are the contracts that are signed and locked. And it's just a question of starting the work. So we're feeling really good about technical solutions this year.

We're excited about that works you know, we don't guide to revenue, but we're excited about the potential for growth. This year and we have the strongest backlog that we've ever had and you know just as a reminder, backlog are the contracts that are signed signed and locked in it's just a question of starting that work. So we're feeling really good about.

Speaker Change: Technical solutions is here.

It is the follow-up on that. Now that you've ended Cisco 23, could you give us a bit of a breakdown? Because I know there's a bunch of different items underneath technical solutions. There's the bundled energy. There's other things. There's the EV charging segment. Can you give us just a breakdown of the revenues and Cisco 23?

Speaker Change: Maybe just a follow up on that now that you have the end of fiscal 'twenty three could you give us a better breakdown because I know, there's a bunch of different items underneath technical solutions.

Speaker Change: The bundled energy there there's other things that you know that.

Speaker Change: E B charging segment.

Speaker Change: Give us just a breakdown of the revenues in fiscal 'twenty three.

Sure. So, yeah, there's really three core areas. There's bundle-dengue solutions, EV and Ravenbolt. And, you know, I guess the best way to describe it is our sentiment on those different industries, you know, both sub industries. And we just feel really strong about EV, you know, gave everything, uh...

Speaker Change: Sure. So yeah, there's really three core areas, just bundled energy solutions, EV and Raven well as you know.

Speaker Change: I guess, the best way to describe it as our sentiment on those different industries.

Speaker Change: Sub industries, and we just feel really strong about easy you know all the all the signs are pointing to two strong growth there because if you remember like there has been some news coverage lately that EV is you know maybe taking a step back or.

all the slides are pointing to strong growth there. Because if you remember, there has been some news coverage lately that EV is maybe taking a step back or is not as exciting as it was. But that's all in context to the crazy growth rates that they've had in the past. And the truth is what a lot of the cordial realizing is the impediment.

Speaker Change: It is not as exciting as it was but that's all in context to the crazy growth rates that they've had in the past and the truth is what a lot of the car dealers are realizing is the impediment to this excitement is they call. It Rick range fear that people feel like they're going to run out of <unk>.

to this excitement is, you know, they call it range fear, that people feel like they're going to run out of power. And that's because there's not a lot of infrastructure.

Speaker Change: Power and that's because there's not a lot of infrastructure. So for us. The catalyst you know the way we see easy the catalyst for for our growth is going to be the fact that infrastructure is so light. So we're really happy about our backlog. So EV is going to be a really strong segment for us and raising them.

For us, the catalyst, you know, the way we see EV, the catalyst for...

for our growth is gonna be the fact that infrastructure is so light. So we're really happy about our backlog. So EV is gonna be a really strong segment for us. And Ravenvolt, you know, we're really excited about. We have a very strong backlog, probably close to half of our backlog in, in.

Speaker Change: Paul You know, we're really excited about we have a very strong backlog probably close to half of our backlog and in technical solutions is around rave in vault and these big projects and you know the frustrating part frankly is the fact that it's really hard to time these quarter by quarter.

technical solutions is around RavenVault and these big projects.

You know, the frustrating part, frankly, is the fact that it's really hard to time these quarter by quarter. Because the way you gotta think about it, it's not, you know, they're basically battery backup projects, right? And it's not like you're going in and installing one battery. These are battery fields, some of them are the size of the football field, right? So it's almost like a construction project.

Speaker Change: Because the way you got to think about a faiza. It's not you know that they're basically battery backup projects right and it's not like you're going in and installing one battery. These are battery feels some of them are the size of a football field right. So it's almost like a construction project and timing of construction projects getting the permits getting.

and timing of construction project getting the permits, getting the equipment.

Speaker Change: <unk> getting the equipment. So when you look across a year, we feel really confident that Raven volt is going to perform but you now can I tell you whether or not you know Q2 is going to be stronger than Q1, it's hard to get that insight, but we're getting better at it frankly, we think the back half.

So when you look across a year,

But can I tell you whether or not Q2 is going to be stronger than Q1? It's hard to get that insight, but we're getting better at it, frankly. We think the back half of the year is going to be stronger than the first half of the year right now, but Ravenvolt's going to be another big strong performer for ATS. And then the last piece is bundle energy solutions. And that's the one that's going to be most pressured. And the way I want you to think about it, think about these big projects where you go in and retrofit a school, and it's a $15 million project changing out the lighting, the air conditioning equipment, the heating equipment. And what ends up happening there is

Speaker Change: Half of the year is going to be stronger than the first half of the year right now, but reasonable it's going to be another big strong performer for a T. S. And then the last piece is bundled energy solutions.

Speaker Change: And that's the one that's going to be most pressured and the way I. The way I want you to think about it think about these big projects, where you go in and retrofit a school and its a 15 million dollar project changing out the lighting the air conditioning equipment, the heating equipment and what ends up happening there is it's it's high.

And what ends up happening there is it's high capital for these schools. And the IRRs were typically really strong and interest rates below. But now that interest rates are higher, it's causing them to push and to see what interest rates come down, what's going to happen. And that's why you're seeing a little bit of a setback in bundled energy solutions. And plus, there's been a lot of government funding through the CARES Act.

Speaker Change: Capital for the schools.

Speaker Change: The IRR is where typically really strong and interest rates are low, but now that interest rates are higher it's causing them to push and to see what will interest rates come down what's going to happen and that's why you're seeing a little bit of a setback in bundled energy solutions and plus there's been a lot of government funding.

And so there's been a lot of free money out there for schools. So we think that's going to be sunsetting towards the end of this year. So.

Speaker Change: The cares Act.

Speaker Change: And so there's been a lot of free money out there for school. So we think that's going to be sunsetting towards the end of this year. So I would suggest that bundled energy solutions will be soft in 'twenty four more excited about 25, but that being said it'll full performed just not if they're kind of run rate that they.

I would suggest that bundled energy solutions will be soft in 24 more excited about 25, but that being said, they'll still perform just not at their kind of run rate that they used to be at where it was over $200 million in projects. It'll probably be around half that this year, which is still fairly strong, but not what we're used to. So hopefully that gives you more color.

Used to be at where it was over $200 million in projects. It will probably be around half that this year, which is still fairly strong but not what we're used to so hopefully that gives you more color.

Yes, thanks, thanks, thanks, thanks to all for that. And then just a quick one for all your interest expense guide, are you assuming any debt paydown and just talk a little bit more about your capital allocation? I know you've talked about the share buyback, but is any sort of debt paydown? Are you thinking?

Yeah.

Speaker Change: Talks a lot and then just a quick one for R&R on your interest expense guide are you assuming any debt pay down and you know just talk a little bit more about your capital allocation I know you've talked about the share buyback, but it.

Speaker Change: Is any sort of debt paydown.

Speaker Change: Or are you thinking about that at all.

Yeah, it anticipates marginal paydown in debt. And so if you think about we have a term loan that, you know, amortizes, you know, probably about $30 million a year, and then we'll use some of the, you know, excess cash to pay down a bit of the revolver. But nothing material in that when you look at our leverage of 2.3 times, we feel very comfortable there, and we're looking to maintain that level of leverage into next year.

Yeah, It anticipates marginal paydown in debt and so if you think about we have a term loan that advertisers.

Advertisers, you know probably about $30 million a year and then we'll use some of the.

Speaker Change: Our excess cash to pay down a bit on the revolver, but nothing material in that when you look at our leverage of two three times, we feel very comfortable there and we're looking to maintain that level of leverage into next year. You know when it comes to capital allocation. You know our plan is still consistent we will continue to invest in it.

You know, when it comes to, you know, capital allocation, you know, our plan is still consistent. We'll continue to invest in, you know, our organic growth through the elevate program, investing in talent, et cetera.

Speaker Change: You know our organic growth through the elevate program investing in talent et cetera.

And again, based on our strong projected cash flows, relatively low leverage, it continues to provide us with the flexibility to allocate capital, whether it's to M&A opportunities or returning back to shareholders.

Speaker Change: And again based on our strong projected cash flows relatively low leverage continues to provide us with the flexibility to allocate capital, whether it's to M&A opportunities or returning back to shareholders.

Speaker Change: Great. Thank you so much.

Speaker Change: Thanks Faiza.

Thank you. Our next question comes from the line of Andy Whitman with Ferret. Please proceed with your question.

Speaker Change: Thank you. Our next question is come from the line of Andy Wittmann with Baird. Please proceed with your questions.

Oh, great. Thanks for taking my questions, guys, and good morning. I guess I just want to understand the quarter a little bit better, particularly in the technical solutions segment, and so for Earl. So you talked about how there were several closeouts in the quarter.

Andy Wittmann: Oh, great. Thanks for taking my question guys and good morning.

Andy Wittmann: Yes, I just wanted understand the quarter, a little bit better, particularly in the technical solutions.

Andy Wittmann: Segment, so for Earle.

Andy Wittmann: So you talked about how there were some closeouts in the quarter.

Oftentimes, but not always, closeouts are basically accounting adjustments when projects that you've been working on come in better than expected after you finish them, and then you recognize a whole bunch of revenue and basically almost 100% profit against that revenue in the quarter. Is that what you mean by attributing the revenue growth year over year?

Andy Wittmann: Oftentimes, but not always closeouts are basically accounting adjustments when projects that you've been working on come in better than expected. After you finish them and then you recognize a whole bunch of revenue and basically almost 100% profit against that revenue in the quarter is that what you mean by saying by attributing the revenue growth.

Andy Wittmann: Year over year.

significantly to that kind of performance or were you saying something different? I just want to make sure we're clear about what you're saying and the project closed out on how that contributed to revenue and profit.

Significantly to that kind of performance are or were you, saying something different I just wanted to make sure. We're clear about what you're saying on the project Closeouts and how that contributed to revenue and profits.

Yeah, no, I think you got it spot on, Andy. You know, there were a number of projects that, you know, closed out. And as a result of that, you're actually able to, you know, do your final billings, you know, any holdouts that you actually had. You're now able to capture that. And in the quarter that amounted to about, you know, two million dollars.

Andy Wittmann: No I think you got it spot on and you know there were a number of projects that closed out and as a result of that you're actually able to do your final billings any holdouts that you actually had you are now able to capture that and in the quarter that amounted to about.

Andy Wittmann: $2 million when.

When we talk about the profitability in Q4, remember Q4 is a seasonal business and typically back half with Q4 being our largest quarter, so keep that in mind. By no means would be a run rate into Q1, which we know typically would be a lower quarter than Q4.

Andy Wittmann: When we talk about you.

Andy Wittmann: Yeah, you know the profitability in Q4 remember Q4 is you know this is a seasonal business and typically back half with Q4 being our largest quarter.

Andy Wittmann: So keep that in mind that we're by no means would be a run rate into it into Q1, which we know you know typically would be a lower quarter than others.

Okay, but your revenue growth was like $11 million, $12 million in the quarter for technical solutions. The gain was only two. I guess it sounded like the other, whatever, nine-ish million dollars of revenue might also be attributable to the closeouts. Is that true or not? I'm trying to understand that. No.

Speaker Change: Okay, but your revenue growth was like $11 million $12 million in the quarter for technical solutions. The gain was only two I guess it sounded like the other whatever nine ish million dollars of revenue might also be attributable to the closeouts is that true or not trying to starting to kind of understand that no.

No, that would be the regular, if you think about on Ravenbolt, where, you know, throughout the first half of the year, you know, we actually had delays on certain battery storage projects as we're, you know, waiting for not only inventory supplies, but getting a lot of the authorizations finalized. So we actually were able to close out on a number of those deals in Q4. And as a result, you're seeing the revenue and the associated.

Speaker Change: That would be the regulatory if you think about Raven vote, where you you know throughout the first half of the year, we actually had delays on certain battery storage.

Speaker Change: Projects as we were you.

Speaker Change: You know waiting for not only inventory supplies, but getting a lot of the authorizations finalized.

Speaker Change: So we actually were able to close off on a number of those deals in Q4 and as a result, youre seeing the the revenue.

Speaker Change: The associated profit.

Okay, that's helpful. And then, Scott, just on the B&I segment, I guess you mentioned in your press release or your report here, your slide deck, you talked about kind of diversification. I just want to make sure I'm understanding what you're saying there as well. Is that meaning you had the good entertainment and sports and diversified in that way from, I don't know, I call it the traditional janitorial services? Or is there some other dynamic there that we should be aware of that you're referring to?

Speaker Change: Okay. That's helpful. And then Scott just on the P&I segment I guess, you mentioned in your press or in your press release or Yours, you report here your slide deck.

Speaker Change: You talked about kind of diversification.

Speaker Change: To make sure I'm understanding what you're saying there as well.

Speaker Change: That meaning you had the good entertainment and sports and diversified in that way from I don't know, let's call. It the traditional janitorial services or is there. Some other dynamic there that we should be aware of.

Yeah.

Speaker Change: That you're referring to and diversification.

Yeah, no, no, that's a great question. Yeah, it's partly it's partly that it's partly we have a little health care in there, but it's more importantly engineering segment. So if you think about, especially with with the able acquisition where.

Speaker Change: No. That's a great question, yeah, it's partly it's partly that it's partly we have a little health care in there, but it's more importantly engineering segment. So if you think about especially with the able acquisition where between April and the legacy ABM, we had a lot of stationary or engineers and that's about 25.

between Able and the legacy ABM. We had a lot of stationary engineers and that's about 25% of our business is just.

Speaker Change: 5% of our business is just engineering and that doesn't change with office occupancy of density.

engineering, and that doesn't change with office occupancy or density. You know, if you have eight engineers in an engine room, whether you're 80% occupied or 95%, that's really not going to change. And we have parking in that segment as well. And that's been relatively stable since we've come out of the pandemic. So that moderates the janitorial, which is the piece of it that becomes more variable. So, you know, when, you know, I guess, Andy, I'm so glad you brought up this question, because like, when we look at

Speaker Change: You have eight engineers and an engine room, whether you're 80% occupied or 95%, that's really not going to change and we have parking in that segment as well and that's been relatively stable since we've come out of the pandemic. So that moderates the China tour, which is which is the piece of it.

Speaker Change: That becomes more variable. So you know when you know I guess anything I'm. So glad you brought up this question because like when we look at B and I wouldn't want you to look at that is just purely janitorial and having all of that kind of variability so to speak based on density because the truth of it is it's so mitigate.

be and i we want you to look at that it's just purely janitorial and having all that kind of variability so to speak based on density because the truth of it is it's so mitigated by again the engineering specifically

Speaker Change: By again, the engineering specifically.

Yeah, OK, just wanted to make sure I understood that and now we do and then just.

Speaker Change: Yeah, Okay, just wanted to make sure I understood that and I would do and then just.

Just on the, I guess the Elevate program here, so you said it's taking about a year longer. The new number is what, 215 I think I heard, 200 to 215. I think previously the high end of the total Elevate spend was 175.

Speaker Change: Just on the I guess, the the elevate program here. So you said, it's taken about a year longer are the new number is what to $2 15, and I think I heard a 200 to 215 I think previously the high end of the total elevate spend was $1 75.

So that's the Delta. Looks like I guess you were always planning for around I think $15 million of spend in 24. So am I doing the math here? Like the extra 30 million bucks with the extra year is the Delta that takes you from that 175 number into the low tooth. Are all of that, am I thinking about that correctly? Is that what you're saying here today?

Speaker Change: So that's that's the delta it looks like I guess, you were always planning for like around I think $15 million of spend in 'twenty four.

Speaker Change: Yeah am I doing the math here like the extra 30 million Bucks with the with the extra year.

Speaker Change: Is the Delta that takes you from the 175 number into the into the low twos Earl is that am I thinking about that correctly is that is that what you're saying here today.

Yeah, you are. So it's a spillover. We'll have an extra year. You remember for FY 24, we were actually planning on that being a bit higher as it cails down throughout the, so you could almost think of, you know, rough numbers, you know, probably about $35 million in, in, in 24, followed by, you know, 25 for the next two years.

Speaker Change: Yes, you are so it just spillover will have an extra year you remember for FY 'twenty four we're actually planning on that being a bit higher as it tails down throughout the so you could almost think of rough numbers.

Probably about $35 million and 24, followed by 25 for the next two years.

Speaker Change: Okay.

And then Scott, can you just talk a little bit about kind of what you've learned along the way that's causing the extra year and the extra cost here? What are some of the technical challenges or maybe operational challenges that go along with the extension of the program?

And then Scott can you just talk a little bit about kind of what you've learned along the way that's causing the extra year in the extra cost here what are some of the technical challenges or maybe operational challenges that go along with the the extension of the program.

Sure, and you know, these things are so complex, right? And the way I would think about it, the way I would think about it is, when you think about deploying an ERP, like the easiest part of it is putting a financial system in, it's all the other systems that talk to it, right? Whether it's your payroll system, your T&E system, your procurement system, and the data has to flow in and out through a pipe. It's almost like I look at it like a Lego where you got the middle of the Lego is the...

Scott Tellme: Sure Andy and you know these things are so complex right and.

Scott Tellme: The way I would think about it the way I would think about it is.

When you think about deploying an ERP like the easiest part of it is putting a financial system and it's all the other systems that talk to it right whether it's your payroll system <unk> system. Your procurement system and the data has to flow in and out through a pipe. It's almost like I look at it like a Lego where you got the middle of the leg.

Scott Tellme: Is the is.

is the um

Scott Tellme: Is the.

is the ERP and then you have all these systems coming around it creating a wheel and as part of that, what we learned with education is it's just going to take longer to get that data flow right and clean and to set up all the processes to go in and out of the ERP. And then once you launch the system...

The ERP and then you have all these systems coming around that creating a wheel.

Scott Tellme: And as part of that you know what we've learned with education is it's just going to take longer to get that data flow right and clean and to set up all the processes to go in and out of the ERP and then once you launch the system all of that we call. It hyper care internally, which is basically.

we call it hypercare internally, which is basically all the training, all the answering of questions of the field as they start using the new system.

Scott Tellme: All the training all the answering of questions of the field as they start using the new system.

Scott Tellme: It's just it's taking longer than we originally expected because we had no frame of reference right. So I think just the strong point here Andy more than anything is this is a it's not a system that's off the rail. So it's not like Hey, we were going with Oracle and we pitch that and now we're going to S. P.

It's not a system that's off the rails. It's not like, hey, we were going with Oracle and we ditched that and now we're going to SAP. It's not like we had a specific consulting group that was helping us through some process work and we had to change them and scrap it and start over again. So none of this is about really missteps. It's really about the fact that risk mitigation is the most important thing to us internally and to our shareholders, right? So we just have to make sure we do everything.

Scott Tellme: It's not like we had a specific consulting group that was helping us some process work and we had to change them and scrap and start over again. So none of this is about really Miss steps. It's really about the fact that risk mitigation is the most important thing to us internally and to our shareholders.

It's really about the fact that

Risk mitigation is the most important thing to us internally and to our shareholders, right? So we just have to make sure we do everything we can.

Scott Tellme: Right. So we just have to make sure we do everything we can so that our invoices are right. Our payables are right and our payroll is right and it's just going to take a year or longer but its offer like good reason.

so that our invoices are right, our payables are right, and our payroll is right, and it's just gonna take a year longer. But it's all for good reason.

Speaker Change: Okay, great. Thank you for that context have a good day guys.

Scott Tellme: Thank you everybody.

Thank you. Our next questions come from the line of Josh Chan with UBS. Please proceed with your questions. Hi, good morning.

Scott Tellme: Thank you our next questions come from the line of Josh Chan with UBS. Please proceed with your questions.

Speaker Change: Hi, Good morning, Scott our own Paul.

Scott Tellme: I'm wondering.

Good morning, so you mentioned the margin guidance for 24. I appreciate the drive behind that. So I guess as you think about going beyond 2024, how should we think about the trajectory of margins and what are some of the factors that will drive it up or down beyond this year?

Scott Tellme: Good morning, So you mentioned the margin guidance for 'twenty four I appreciate the drivers behind that.

Scott Tellme: As you think about going beyond 2024.

Scott Tellme: How should we think about the trajectory of margins and what are some of the factors that will drive it up or down beyond beyond this year.

Sure, thanks. Look, we think there's gonna be a cadence up to our 7.2%. I think 25 will be one of the more challenging years for us to predict, right? Because.

Scott Tellme: Sure. Thanks.

Scott Tellme: Look we think there's going to be there's going to be a a cadence up to our seven 2% I think 25 will be one of the more challenging years for us to predict right because so much of of kind of the I don't I don't Wanna say setback, but the stall anr trajectories because of <unk>.

So much of kind of the, I don't want to say setback, but the stall in our trajectories because of commercial real estate. And we kind of think that's a two year overhang, 24 and 25. So I think, well, once we get out of that trough, it'll be a normal cadence up. But you know, at the same time, when we're not sitting around,

Scott Tellme: Real estate and we kind of think that's a two year overhang 24, and 25. So I think once we get out of that trough it'll be a normal cadence up but at the same time, when we're not sitting around and just admiring the problem right. We've made some changes to our cost structure and then.

and just admiring the problem, right? We've made some changes to our cost structure, and then the elevate benefits start kicking in, as we start lighting up these industry segments and put our new financial system in and overlay the tools that I talked about and my prepared remarks like Workforce Management and this app that's gonna be game changer because we're gonna be able to communicate with all of our frontline employees and ultimately help them manage labor during the day and night. It's just gonna be phenomenal. So I think, again, it won't be a straight line up, but the key thing will be when do we think we're gonna get passed?

Scott Tellme: The elevated benefit start kicking in as we start lighting up these industry segments and put our new financial system in and overlay the tools that I talked about in my prepared remarks like workforce management and this app, that's going to be a game changer, because we're going to be able to communicate with all of them.

Scott Tellme: Our frontline employees and ultimately help them manage labor during the day and night, it's just going to be phenomenal. So I think again it won't be a straight line up but the key thing will be when do we think we're going to get past the commercial real estate, you know trough and where some.

the commercial real estate you know trough and we're suggesting that uh... it's probably just another year or two

Scott Tellme: Adjusting that it's probably just another year or two.

Okay, thank you for the color there Scott. And then I want to follow up on the repurchase. I guess, could you just talk to the amount of repurchase and it's obviously a lot higher than what you normally do and so I just wonder if there's any change in philosophy in terms of how you think about the stock versus other means of deployment, mainly M&A as a whole.

Andy Wittmann: Okay. Thank you for the color there Scott and then I wanted to follow up on the on the repurchase.

Andy Wittmann: I guess could you just talk to the amount of repurchase and and you know it is obviously a lot higher than what you normally do and so I just wonder if there's any change in philosophy in terms of how you think about it.

Andy Wittmann: The stock versus other other means of deployment, mainly M&A I suppose.

Yeah, no change in philosophy, you know, as we mentioned, you know, you know, we look at capital allocation, first and foremost, we want to ensure that we're actually investing in our organic growth. And we feel that we actually have sufficient investments there with elevate and other key investments.

Andy Wittmann: Yeah, No no change in philosophy.

Andy Wittmann: As we mentioned you never you know when we look at capital allocation first and foremost we want to ensure that we're actually investing in our organic growth and we feel that we actually have sufficient investments there with elevate and other key investments you know when you look at the fact that you know after looking at you know organic growth M&A opportunities you know when we actually have excess cash we look at.

You know, when you look at the fact that, you know, after looking at, you know, organic growth, M&A opportunities, you know, when we actually have excess cash, we look at how's the best way to deploy that back to shareholders. And after Q3, with the compression that we saw in the share price, we thought that it was prudent to actually take action.

Andy Wittmann: How's the best way to deploy that back to shareholders.

Q3, with the compression that we saw in the share price we thought that.

Andy Wittmann: It was it was prudent to actually take actions.

But going forward, we'll actually take a balanced approach. We manage our leverage currently right now. It's 2.3 times and we anticipate that's going to be consistent going to the next year. So we'll continue to look at opportunities and allocate accordingly. Great. Thank you, Earl.

Andy Wittmann: But going forward, we will actually take a balanced approach.

Andy Wittmann: We manage our leverage currently right now is two three times and we anticipate that that's going to be consistent going through the next year or so we will continue to look at opportunities.

Andy Wittmann: And allocate accordingly.

Andy Wittmann: Great. Thank you Rocco and thank you both for your time.

Andy Wittmann: Thank you.

Thank you. Our next questions come from the line of Sam Cussman with William Blair. Please proceed with your questions.

Andy Wittmann: Thank you our next questions come from the line of Sam customer with William Blair. Please proceed with your questions.

Sam Customer: Thanks, Scott or I hope you both are doing well.

I guess to start here, you mentioned last quarter that B&I could be down 2 to 3% in 2024. And today's outlook commentary calls for a challenging B&I market. I guess I want to see first if down 2 to 3% is the right way to think about this business for next year still. And then I'd also like to get your thoughts on how long this type of challenging environment could last.

Mark here, Yeah, I guess I'd start here, you mentioned last quarter that DNI it could be down two 3% in 2024.

Sam Customer: And today's outlook commentary calls for a challenging would be in any market.

Sam Customer: Yes, I want to see first.

Sam Customer: It is down 2% to 3% is the right way to think about this business for next year or so.

Speaker Change: And then I would also like to get your thoughts on how long those type of challenging environment glass. I think you just mentioned that maybe into 2025, where it goes to but is there a chance that it goes beyond just trying to get your broad kind of commentary there.

I think you just mentioned that maybe in the 2025 is where it goes to, but is there a chance that it goes beyond that? Just trying to get your broad kind of commentary there.

Sure, so I think you're kind of spot on on how you're thinking about 24 from

Speaker Change: Sure. So I think youre kind of thought on how you're thinking about 'twenty four from from.

from that revenue perspective on the growth side. So I think you hit that. And yeah, we do think it's going to go into 25. And the reason we're more optimistic about 26.

Speaker Change: From that revenue perspective on the growth side. So I think you hit that and yeah. We do think it's going to go into 'twenty five and the reason, we're more optimistic about 26 and beyond.

and beyond. So just from a pure statistics standpoint, I think they're saying that 50% of all leases are coming due in 2024 and 2025. So you're going to see that volatility with some of the compression, because opportunistically, when your lease comes up, you have a chance to narrow your density a bit. So that's why we think it's going to be more of a two-year problem than extended. But more importantly than that,

Speaker Change: Just from a pure statistics standpoint, I think they're saying that 50% of all leases are coming due in 'twenty four 'twenty five so youre going to see that volatility with some of the compression because opportunistically. When you lease comes up you have a chance to kind of narrow.

Speaker Change: Narrow your density a bit so so that's why we think it's going to be more of a two year problem, then extended but but more importantly than that I have to tell you and I think you're probably seeing it and everybody on the call is seeing it to like say the sentiment out there is really becoming stronger and stronger on returned to <unk>.

I have to tell you, and I think you're probably seeing it and everybody on the call is seeing it too, like the sentiment out there is really becoming stronger and stronger on return to work.

I could tell you in my CEO peer networks, all we're talking about is getting people back to the office for collaboration. There's all these studies now that are being released.

Speaker Change: Work, yes, I can.

Speaker Change: Tell you in my C O peer networks, all we're talking about is getting people back to the office for collaboration there's all these studies now that are being released on effectiveness of organizations by having people.

on effectiveness of organizations by having people

you know, on-site and collaborating and the macroeconomic environment, you know, frankly are giving employers more power over saying you have to come into the office. Versus where we were a year or two ago when the labor situation was different, right? So there's a bit of a power shift going on right now in favor of employers who want to bring people back.

Speaker Change: You know onsite and collaborating and and the macroeconomic environment. You know frankly are giving employers more power over saying you have to come into the office versus where we were a year or two ago. When the labor situation was different right. So there's a bit of a power shift going on right now in favor of.

Speaker Change: Lawyers, who want to bring people back so.

I think it's episodic. I think it's 24 and 25. I suspect 25 won't even be as difficult as 24. And that's our feeling. And it seems to be the general sentiment.

Speaker Change: I think its episodic I think it's 24 and 25 I suspect twenty-five won't even be as as difficult as 24, and that's all feeling in that it seems to be the general sentiment.

Awesome, very, very helpful color. Maybe sticking with the NIDON. You know, maybe you could break out the growth rates between commercial planning and engineering services. I guess I just be curious how each of those are doing within the Brown report, so we know.

Speaker Change: Awesome very very helpful color, maybe sticking with DNI then you.

Speaker Change: You know, maybe you could break out the growth rates between commercial cleaning and engineering services.

Speaker Change: I guess I'd just be curious how each of those are doing within the broader portfolio.

Yeah, we don't really guide to revenue or anything like that, but I will tell you I could give you some some high-level color, right? Engineering is just a lot more stable, right? You do not see variability in

Speaker Change: Yeah, We don't we don't really guide to revenue or anything like that but I will tell you I could give you some some high level color right.

Speaker Change: Engineering is just a lot more stable right you do not see variability in on the downside because again if you. If you had an office building and it requires 12 engineers to take care of the equipment between the day shift in.

on the downside because, again, if you have an office building and it requires 12 engineers to take care of the equipment between the day shift, the night shift, and the weekend shift...

Speaker Change: This shift in the weekend shifts.

you know, that equipment has to be taken care of. And it doesn't matter what the occupancy is.

Equipment has to be taken care of and it doesn't matter what the occupancy is right because you have to run that equipment.

right because you have to run that equipment. You're still delivering air conditioning to the building. You're still doing electrical and mechanical work. You know, pumps are still breaking. That have to be fixed. So this stuff all happens.

Speaker Change: Still delivering an air conditioning to the building you're still doing electrical and mechanical work.

Speaker Change: So still breaking that has to be fixed so this stuff all happens and and that's why when you look at it as being like 25% of being high you have that stability. It's the janitorial size that ends up being more I guess flexible if you will having more variability.

And that's why, when you look at it being like 25% of BNI, you have that stability. It's the janitorial side that ends up being more, I guess, flexible, if you will, having more variability.

Gotcha, makes sense. Maybe a final one related more to M&D. Maybe you can characterize the growth across the end markets, you know, parsing out the commerce logistics, the biopharma and semiconductor, and not asking for any actual numbers here, just more curious how you'd rank these in terms of performance or maybe growth opportunities as you head into 2024.

Speaker Change: Got you that makes sense, maybe final one related more to the M D.

Speaker Change: If you could characterize the growth across the end markets.

Speaker Change: Parsing out the E Commerce logistics.

Speaker Change: <unk> pharma and semiconductor and <unk>.

Speaker Change: Not asking for any actual numbers here just more curious how you'd rank. These in terms of performance, where maybe growth opportunities.

Speaker Change: Heading into 'twenty 'twenty four.

Speaker Change: Yeah, So look at it.

We've done a really good job on the e-commerce side and we'll see some good growth there, but probably more normalized.

Speaker Change: We've done a really good job on the ecommerce side and we'll see some some good growth there, but probably more normalized.

Speaker Change: But it's really where we're focusing now like semiconductors biopharma some of the manufacturing stuff that we're doing we think those will be higher growth areas.

Speaker Change: Listen I have to tell you like we will have this little impediment in 24 because of the rebalancing of one big client, but you know we have every confidence in the outer years. After that that this is going to be a high single digit grower you know one of our fastest growing and all of a b M. So really enthusiastic about the.

Speaker Change: Actually in distribution industry segment.

Awesome, thank you guys, appreciate it.

Speaker Change: Awesome, Thanks, guys I appreciate it.

Speaker Change: Thank you.

Thank you. Our next questions come from the line of David Silver with the LK. Please proceed with your questions.

Speaker Change: Thank you our next questions come from the line of David Silver with C. L. King. Please proceed with your questions.

Speaker Change: Yes.

Yeah, hi, thank you. I'd like to ask a question, firstly, on your aviation segment. So, clearly not your biggest segment in terms of revenues or absolute profit, but it was the best performer by a wide margin this year, both in revenue growth and in, well, operating income growth in a special.

Yeah, Hi, thank you.

Speaker Change: I'd like to ask a question firstly on your aviation segment. So clearly not your biggest segment in terms of revenues or absolute.

Speaker Change: Profit, but it was the best performer by a wide margin this year, both in revenue growth and in.

Speaker Change: Well operating income growth and especially margin improvement.

So I know there's a number of initiatives that you've undertaken over the last couple years, which I would say are starting to bear fruit, but

Speaker Change: I know, there's a number of initiatives that you've undertaken over the last couple of years, which I would say are starting to bear fruit, but.

You know, on a scale of 1 to 10 or 0 to 100 or whatever, where do you think ABM is in terms of fully, you know, exploiting the opportunities from your evolving strategies there? In other words, should we expect another, you know, meaningful improvement next year, you know, assuming that.

Speaker Change: You know on a scale of one to 10 or zero to 100, or whatever where do you think a b M is in time in terms of fully exploiting the opportunities from your evolving strategies there or in other words should we expect another.

Speaker Change: You know meaningful improvement next year.

Speaker Change: I'm assuming that.

I don't know, air flight or air travel trends continue as positively as they've been. Thanks.

Speaker Change: I don't know air Air Air Airfare.

Speaker Change: We are flooded or air travel trends continue as positively as they had been thank you.

Sure, it's a good question. So there's so much going on in aviation that we're excited about. Firstly, we've had a new management team in place for the last couple of years that have been phenomenal both.

Speaker Change: Sure.

Speaker Change: Sure.

Speaker Change: It's a good question so.

Speaker Change: There's so much going on in aviation that we're excited about firstly this had a new management team in place for the last couple of years the phenomenal both on.

on the ability to operate the business and then on business development we've been really excited about. And you know, you may remember, David, that we started a few years back shifting our focus to airports and less on airlines because we saw all the modernizations.

Speaker Change: The ability to operate the business and then on business development, we've been really excited about.

Speaker Change: You know you May remember David that we started a few years back shifting our focus to airports and less on airlines because we saw all the modernizations that were happening across the country and the perfect example of that is Laguardia just got named the best New Airport in the World Terminal.

that were happening across the country and the perfect example of that is LaGuardia. Just got named the best new airport in the world. Terminal B is like, I don't know, 80% of that airport. We do everything there. We just got

Speaker Change: It's like I don't know, 80% of that airport, we do everything there we just got.

a very large, we call it APS.

Speaker Change: A very large it's we call it a PFS.

which is ABM Performance Solutions, which is integrated facility services, basically where the client says, look, you self-perform a bunch of these services. In addition to that.

Speaker Change: Which is a b M performance solutions, which is integrated facility services basically where the client says look.

Speaker Change: Self perform a bunch of these services. In addition to that why don't you take care of all of our sub contracted services as well, so basically bundling everything together and letting us run. It. So we just got a massive contract with water to handle all of terminal B also Provident School systems, we got so we're excited about.

Why don't you take care of all our subcontracted services as well? So basically, bum-lowing everything together and letting us run it. So we just got a massive contract that we've awarded to handle all of.

Terminal B, also Providence school systems we got. So we're excited about the ability to take this ABM performance solutions to airports around the country. And our pipeline is growing there.

Speaker Change: The ability to take this a b M performance solutions to airports around the country and our pipeline is growing there. So you know air travel is up it continues to be up aviation.

So, you know, air travel is up. It continues to be up aviation.

had a really, really great year. It was also helped, if you remember, in Q1 by the parking project that happened in 2022. A lot of the expenses happened in 2022, but we got paid in 23, so the profit flow through was about 11 or $12 million.

Really really great here. It was also helped if you remember in Q1 by the parking project that happened in 2022, a lot of the expense as happened in 2022, but we got paid and 23. So the profit flow through was about 11 or $12 million, so that that helps as well.

So that that helped as well. But we were very, very enthusiastic about aviation and its growth ability for next year. And again, loving the team.

Speaker Change: But we're very very enthusiastic about aviation and its growth ability for next year.

Speaker Change: And again loving the team.

Okay, thank you for that. And I just would like to ask for a clarification on the Sherry Purchase Activity this quarter. So there were a couple of comments, certainly already, but I'm just trying to...

Speaker Change: Okay. Thank you for that and I, just would like to ask for.

Speaker Change: A clarification on the share repurchase activity. This quarter. So there were a couple of comments certainly already but I'm just trying to.

sharpened my understanding. Should I assume that the bulk of the fourth quarter activity was kind of concentrated early in the quarter, in other words, you know, after your stock was quite volatile 90 days ago? Is that...

Sharpen my understanding should I assume that the bulk of the fourth quarter activity.

Speaker Change: It was kind of concentrated early in the quarter in other words. After your stock was quite volatile 90 days ago is is that.

You know, when the activity was concentrated in, in other words, more opportunistic, or would you say it was spread a little more evenly and hence, maybe more, I don't know, programmatic or.

Speaker Change: When the activity, Wisconsin traded in in other words more opportunistic or would you say it was spread a little more evenly and hence maybe more I don't know program at our core.

uh... you know more balanced through the quarter

Speaker Change: You know more balanced through the quarter. Thank you.

Yeah, no, it was definitely more front-end loaded, and hence, when we look at the average price, which was $40.82, that is emblematic of where it was trading shortly after the Q3 earnings.

Speaker Change: Yes, no it was definitely more front end loaded.

And hence when we look at the average price, which was $40 82.

Speaker Change: That is <unk>.

Nomadic.

Speaker Change: Kind of like where it was trading shortly after the Q3 earnings call.

Okay, great. Thank you for that. And then last question would be for Scott, I guess, and Scott, I'd like you to maybe look back a few years, and then, you know, compare it to today, but in the immediate aftermath of the pandemic, and I'm sorry, I should say this is kind of

Speaker Change: Okay, great. Thank you for that and then last question would be.

For Scott I guess.

Speaker Change: Scott I'd like you to maybe look back a few years and then.

Speaker Change: Compare to today, but in the immediate aftermath of the pandemic and I'm sorry, I should say this is kind of related to your <unk>.

related to your competitive advantages and your ability to gain new business.

Speaker Change: Advantaged competitive advantages and your ability to gain gained new business, but in the immediate aftermath of when the pandemic began your you know your company was kind of.

But in the immediate aftermath when the pandemic began, your company was kind of in a very strong position in some ways to capture new business because of your scale, because of your ability to source scarce equipment, better purchasing power, et cetera, as well as staffing, a number of advantages. And we're kind of in the post-pandemic.

Speaker Change: In a very strong position in some ways to capture new business because of your scale because of your ability to source scarce.

Speaker Change: Equipment, better purchasing power et cetera.

Speaker Change: As well as staffing a number of advantages.

And you know we're kind of in the postpaid.

And at least in some parts of your business, commercial real estate, things are structurally a little softer. But my sense is that your go-to-market strategy or your...

Speaker Change: And at least in some parts of your business commercial real estate, you know things are structurally a little softer.

Speaker Change: But my sense is that you know your go to market strategy or your.

you know, your value proposition to your core, like bread and butter, industrial or commercial customer, is probably, you know, a little bit stronger even than it was a few years ago just in terms of, maybe the enhanced.

Speaker Change: Your value proposition to your core bread and butter.

Speaker Change: Industrial or commercial customer.

Speaker Change: It's probably a little bit stronger even than it was a few years ago just in terms of.

Speaker Change: Maybe the enhancements from.

you know your internal elevate program and what not but you know how would you think about just for the the core kind of bread and butter clientele across you know education

Speaker Change: Your internal.

Speaker Change: Elevate program and whatnot, but you know how would you think about just for the core kind of bread and butter.

Clientele across you know education.

manufacturing, etc. How has your value proposition kind of shifted, let's say, over the last couple of years, and in particular as you kind of look at the post-pandemic environment? Maybe if you could comment on that, that would be helpful.

Speaker Change: Manufacturing et cetera.

Speaker Change: No.

How is your value proposition kind of shifted let's say over the last couple of years and in particular as you kind of look at the post pandemic environment, maybe if you could comment on that that would be helpful. Yes.

Yeah, sure. Yeah, look, I think for us as a brand, it's certainly.

Speaker Change: Yes sure.

Speaker Change: Yeah look I think for us as a brand.

Speaker Change: Certainly.

I guess our positioning has changed a great deal as we came through this pandemic different than our competitors. And, you know, I think our competitors would admit that, too. You know, with developing our enhanced clean product, we got so much more exposure on on social media. If you remember, we did a commercial. So we've become more prevalent and.

I guess, our positioning has changed a great deal as we came through this pandemic different than our competitors and I think our competitors, where they met that too you know with developing our enhanced clean product.

Speaker Change: We got so much more exposure on social media. If you remember we did a commercial so.

Speaker Change: We've become more prevalent and.

Um, it's just, it's a, it's just a different.

Speaker Change: It's just it's a it's just a different swagger I guess, if you will when we're pursuing business development and talking to clients.

swagger, I guess, if you will, when we're pursuing business development and talking to clients.

And then you layer on top of that David all the investments that we're making in technology and

Speaker Change: And then you layer on top of that David all the investments that we're making in technology and.

you know, to sit across from a client in a presentation and show them, you know, a digital dashboard and how we're monitoring their facilities and, you know, with this ABM Team Connect and how very shortly all of our team members in the field are going to have an app.

Speaker Change: To sit across from a client in the presentation and show them, a digital dashboard and how we're monitoring their facilities and you know.

Speaker Change: With this ABM team connected and how very shortly all of our team members in the field are going to have an app.

that is going to connect them to the client to us. It's just going to be game changer. So I just feel like this momentum that we're having is very palpable and I would close off the comment by saying, you know, we just had another record year of new sales, you know, we were up to give you context a few years back.

Speaker Change: That is going to connect them to the client to us its just going to be game changers. So I just feel like this momentum that we're having is very palpable and I would close off the comment by saying Yeah. We just had another record year of new sales we were to give you cant.

Speaker Change: Next a few years back we put a true north of you know is it possible to possibly bring in $1 billion in new sales and we were like that was our that was our like aspiration that you know was really far out there and this year, we did over one six.

We put a true north of, you know, is it possible to possibly bring in a billion dollars in new sales?

And we were like, that was our, that was our like aspiration that, you know, was really far out there. And this year we did over 1.6 billion in new sales.

Speaker Change: <unk> billion in new South.

I mean.

What we brought in in new sales is probably three times bigger than our nearest competitor in terms of total revenue, not what they brought in. I'm talking about their book of business. So we feel like we have a really compelling value proposition.

Speaker Change: What we brought in a new self is probably three times bigger than our nearest competitor in terms of total revenue not what they brought in and I'm talking about their book of business. So.

Speaker Change: We feel like we have a really compelling value proposition.

Thank you. Our final questions come from the line of Mark Riddick with Sidoti. Please proceed with your question.

Speaker Change: Thank you our final questions come from the line of Marc Riddick with Sidoti. Please proceed with your questions.

Hey, good morning, everyone. I'll be brief on this. I know we've gone deep into a lot of things. So I wonder if you could talk a little bit about what you're seeing with education. And the commentary was around the strength that you saw there and some of the prior new business wins, the benefits of that. Maybe you could bring us a little bit of an update as to maybe what you're seeing there on revenue visibility, the margin profile there, and the opportunity to continue to gain share and space.

Speaker Change: Hey, good morning, everyone.

Speaker Change: I'll be brief on this I know, we've gone deep into a lot of things. So once you could talk a little bit about what you're seeing with education in the commentary.

Speaker Change: It was around the you know the the.

Speaker Change: The strength that you saw there in some of the prior and new business wins, the benefits of that maybe you could bring us a little bit of an update as to maybe what you're seeing there on revenue visibility the margin profile, there and the opportunity to continue to gain share in this space.

Speaker Change: Sure.

Speaker Change: We're like so happy about our education positioning where you know if it was a clear number one.

So happy about our education positioning. We're the clear number one.

in education and we were split between K through 12 and higher ed. We had a great growth this year, brought in over $100 million in new business, never done that before. And our margins are up since the pandemic. We've held on to that. And then what I said earlier, Mark, about our APS or our integrated solution that we...

Speaker Change: And in education.

Speaker Change: Were split between K through 12, and higher Ed we have great growth. This year brought in over $100 million of new business they'll never done that before and our margins are up since the pandemic, we've held onto that and then or what I, what I said earlier mark about our Aps.

Or our integrated solution that we.

not only got at LaGuardia, but Providence School District. That's something that we're pitching now to our educational clients that like, listen, we can do so many things and self-perform, put everything under us, and we'll strategically manage it. Our pipeline is really growing there. We picked up George Washington University last year. So we're just really excited about that.

Speaker Change: Not only got at Laguardia, but Providence School district, that's something that we're pitching now to our education clients that like listen we can do so many things and self perform put everything under us and and we will strategically manage it our pipeline is really growing their we picked up.

Speaker Change: George Washington University last year. So we're just really excited about that.

that industry group. And we typically project like kind of GDP-ish growth. And hopefully, we'll get to GDP-plus. Usually, it's longer decision time frames in that segment. But again, the proof's in the pudding. And we just had a tremendous year this year. So I appreciate you asking that question.

Speaker Change: That industry group.

Speaker Change: And you know, we typically project like kind of GDP ish growth and hopefully we will get to GDP plus.

Speaker Change: Usually there it's longer decision time frames and in that segment, but again the proofs in the pudding and we just had a tremendous year. This year. So I appreciate you asking that question.

Speaker Change: Absolutely. Thank you.

Thank you.

Thank you. We have reached the end of our question and answer session. I would now like to turn the call back over to Scott Stalmers for any closing remarks.

Speaker Change: Thank you we have reached the end of our question and answer session I would now like to turn the call back over to Scott summers for any closing remarks.

I just want to thank everybody for their interest, and we were excited to close out the year the way we did, and 24 will be a challenging year for everybody in the business environment. We know that, but I could just tell you that this team at ABM is going to be attacking it with enthusiasm.

Scott summers: Just wanted to thank everybody for for their interest and.

Scott summers: We're excited to close out the year the way, we did and you know 24 will be a challenging year for everybody in the business environment, We know that but I can just tell you that this team at a b M is going to be attacking attacking it with enthusiasm and I'm really excited about it so having amazing holiday ever.

And we're really excited about it. So have an amazing holiday, everybody. Hopefully, you get some time with your loved ones. And we look forward to giving you an update in Q1. So take care, everybody.

The body hopefully get some time with your loved ones and we look forward to giving you an update in Q1, so take care everybody.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect at this time. Enjoy the rest of your day.

Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect at this time enjoy the rest of your day.

Scott summers: [music].