Q1 2025 ABM Industries Inc Earnings Call
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At this time, it's now my pleasure to introduce Paul Goldberg Senior Vice President Investor Relations. Thank you Paul you May now begin.
Good morning, everyone and welcome to a be EMS first quarter 2025 earnings call.
My name is Paul Goldberg and I'm, the senior Vice President of Investor Relations at eight P. M.
Speaker Change: With me today are Scott tell mirrors, our president and Chief Executive Officer.
Speaker Change: Internal level, it's our executive Vice President and Chief Financial Officer.
Speaker Change: Please note that earlier this morning, we issued a press release announcing our first quarter 2025 financial results and outlook.
Speaker Change: A copy of that release and an accompanying slide presentation can be found on our website.
Speaker Change: Dot com.
Speaker Change: After Scott Neuro his prepared remarks, we will host a Q&A session.
Speaker Change: But before we begin I would like to remind you that our call and presentation today contains predictions.
Speaker Change: The estimates and other forward looking statements.
Speaker Change: 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 recent uncertainties that could cause our actual result differ materially.
Speaker Change: We're also confident that commercial real estate markets, especially the high quality office buildings, we servicing DNI will return to growth in 2025, while our other end markets continued to remain constructive.
Speaker Change: With that we are raising the lower end of our full year adjusted EPS guidance and now see adjusted EPS between $3.65 or $3 80 songs.
Speaker Change: Beyond the numbers, there's a law.
Speaker Change: A lot of exciting progress happening across ADM that sets us up for continued success, let me highlight a few key initiatives.
Speaker Change: First our ERP implementation.
Speaker Change: Last year, our education segment fully transitioned to our new cloud based system.
Speaker Change: We took those learnings and apply them as we rolled out the system to be N. I M. G. At the start of the first quarter.
Speaker Change: To support this we set up a hyper care team and conducted invoice by invoice reviews to ensure accuracy and client satisfaction.
Speaker Change: This extra step minimized the usual friction that comes with a project of this scale.
Speaker Change: While the process has temporarily impacted cash flow as we anticipated we expect things to normalize in the coming months.
Speaker Change: More importantly, once fully implemented we expect this new ERP system will drive cost efficiencies.
Speaker Change: Improved synergy capture.
Speaker Change: I'll provide real time analytics to uncover commercial growth opportunities.
Speaker Change: We also launched our new brand platform in the first quarter with a tagline horizon possibility together. This refresh reflects our evolution into a check enabled solution provider focused on modernizing infrastructure and enhancing facility resilience.
Speaker Change: The rebrand highlights our commitment to operational excellence workforce development sustainability, and leveraging AI machine learning and data driven insights.
Speaker Change: We backed this launch with a digital marketing campaign.
Speaker Change: <unk> web site.
Speaker Change: And something we call a b M prospectus.
Speaker Change: But industry insights and best practices.
Speaker Change: The response has been fantastic energizing our team are really resonating with clients.
Speaker Change: Strong statement of where we're headed.
Speaker Change: On the financial side, we expanded and extended our credit facility to $2 $2 billion.
Speaker Change: Oh, well get into the details later, but this move reflects our strong growth over the past few years and the confidence our lenders house and our business model and long term strategy.
Finally, we're continuing to invest in client facing technology with a b M connect our real time data intelligence platform.
This tool consolidates facility financial.
<unk> Iot and service data to provide actionable insights and proactive solutions to our clients as well as our teammates.
Speaker Change: It's already making an impact whether it's streamlining airport operations through a b M connect for aviation, ensuring compliance in regulated industries or optimizing asset performance with predictive maintenance.
Speaker Change: By harnessing data intelligence, we're hoping clients drive efficiency improved user experience and strengthen long term facility management.
Speaker Change: Separately, we're keeping a close watch on the current administration's approach to immigration policy.
Speaker Change: While shifts in policy could affect the balance of supply and demand for qualified workers were confident in our ability to adapt as we have always done well.
Speaker Change: Strong talent acquisition strategies, including technology, driven vetting and hiring help us stay ahead.
Speaker Change: So far we haven't seen any disruptions or meaningful changes in labor supply or course, and we're prepared to navigate any challenges that may come as we've done time and time again.
Speaker Change: Finally, before I hand, it over to Al Let me give you a quick update on where we're going across each of our segments.
Speaker Change: In DNI a recent CBRE report showed that leasing activity for high quality commercial office buildings in the U S increased 24% in the fourth quarter compared to the previous quarter, that's a great sign for us.
Speaker Change: These space to start filling up we anticipate more growth opportunities. Additionally, we're seeing employers push for greater office attendance, which should drive more work order volume for us.
Speaker Change: We're also excited about being awarded the contract for one of the most advanced corporate headquarters buildings in the world located in Manhattan.
Speaker Change: Well our work there is in its early stages since the building is now fully operational this achievement illustrates the power of our strategy to prioritize high quality properties, just like the 3 million square foot building that we got in Manhattan last year known as the Metlife building.
Speaker Change: When combining all of that with strong performance in our U K and our sports and entertainment businesses, we feel confident that DNI will return to growth in the latter half of fiscal 2025.
Speaker Change: Manufacturing and distribution remains on solid brown, thanks to a strong U S industrial economy and continued growth in the semiconductor and data center markets.
Speaker Change: We're continuing to win new business, including new work for a major E Commerce company and a $30 million annual contract with a major Silicon Valley Tech company, which adds to the 30 million in business, we already have with them.
Speaker Change: Importantly, the new contract as an E. P. S agreement spanning multiple service lines and as a proof point on the quality of our offering and the direction, we're taking our business does.
Speaker Change: For these reasons, we continue to expect mid single digit organic growth in the latter half of fiscal 2025 for M. D. As these new deals take effect in May and we move past the impact of the previously discussed client exit which did not meet our return hurdles.
Speaker Change: Aviation continues to be a bright spot with strong domestic flight volumes and TSA screening, indicating mid single digit market growth.
Speaker Change: We expect to outpace the industry driven by our technology advantages, especially through a b M connect and recent contract wins, including a $40 million shows agreement at a major airport hub and the south east and a nearly $10 million cleaning contract at DSW.
Speaker Change: Both agreements are set to begin in may.
Speaker Change: We're also in discussions regarding several other multimillion dollar opportunities across both the airport and airline sectors with decisions on those contracts are not expected until later in 2025.
Speaker Change: Education remained stable, providing a strong foundation of earnings and cash flow, we've done an excellent job managing cost escalating pricing obtaining more key clients like the world renown private University in the Midwest, which represents an 18 million dollar account.
Speaker Change: Our focus remains on larger school districts colleges and universities and were optimistic about winning more business as the year progresses with a few decisions expected in the second quarter.
Speaker Change: In technical solutions.
Speaker Change: Or micro grid business remains strong supported by a $490 million backlog on a robust sales pipeline, including the significant opportunity with an existing major big box retail client and multiple opportunities in the energy storage system space.
Speaker Change: In fact, we secured an 18 million dollar win with a well known energy storage project developer in Q1, and also about $24 million of new infrastructure projects during the quarter spanning multiple school districts and municipalities.
Speaker Change: <unk>, we expect continued growth in data center activity positioning technical solutions for a strong 2025.
al: With that I'll hand, it over to al to walk through the financials and I'll be back for some closing thoughts.
al: Good morning, everyone. As Scott mentioned, we are pleased with our first quarter results and we believe we are well positioned to achieve our full year financial goals.
Speaker Change: For those of you following along with our earnings presentation. Please turn to slide six.
Speaker Change: First quarter revenue of $2 1 billion increased 2.2% comprised of one 6% organic growth with the remainder from last year's acquisition of quality Uptime services.
Speaker Change: Organic revenue growth was once again led by technical solutions, and aviation, which grew 14% and 8% respectively.
Speaker Change: Education grew 2%, while our B N I M M N D segments remained resilient.
B and I continued to benefit from its focus on high quality buildings and geographic diversification, while the impact of a planned client exit and M. N D has been largely mitigated by new wins.
Speaker Change: Moving on to slide seven net income was $43 $6 million or 69 cents per share as compared to net income of $44 $7 million or 70 cents per share last year.
Speaker Change: This result benefited from higher segment earnings and the absence of prior year self insurance adjustments, which were offset by higher corporate investments as planned higher income taxes and interest expense as well as a legal settlement.
Speaker Change: Adjusted net income was $55 $3 million and adjusted earnings per share was <unk> 87 cents up from $54 $8 million in 86 cents, respectively in the prior year.
Speaker Change: First quarter performance reflected higher segment earnings, which were partially offset by increased corporate investments higher taxes and interest expense.
Adjusted EPS benefited from a lower share count driven by our share repurchase activity.
Adjusted EBITDA increased 3% to $126 million, while adjusted EBITDA margin was flat at five 9%.
Speaker Change: These results reflected higher segment earnings, particularly from a T S, which I'll discuss shortly.
Speaker Change: We offset by planned increases in corporate costs.
Speaker Change: Now turning to our segment results beginning on slide eight.
Speaker Change: B and I posted revenue of $1 billion, which was slightly below last year.
Speaker Change: This performance demonstrated resilience through our diversified portfolio, which includes exposure to sports and entertainment health care and a focus on high quality properties.
Speaker Change: We remain confident that an improving commercial real estate market and strong sales initiatives will drive growth in the second half of fiscal 2025.
Speaker Change: Encouragingly DNI operating profit and margin were largely consistent with last year on slightly lower revenue as we benefited from tight cost controls.
Speaker Change: Aviation revenue grew 8% to $271 million driven by positive traveller markets and new business wins from both the airport and airline side of the business.
Speaker Change: We have continued to win new business, including core cleaning work at the Dallas Fort Worth Airport as well as a large transportation contract at a major south east hub airports as Scott mentioned.
Speaker Change: We believe 2025 will be another record breaking year for aviation continuing our multiyear streak of organic growth.
Speaker Change: Aviation is operating profit was $12 $2 million up 26% and margin was four 5% an increase of 60 basis points. These.
Speaker Change: These improvements largely reflect normalized operating results compared to the prior year and the benefit of tight cost controls.
Speaker Change: Turning to slide nine manufacturing and distribution generated revenue of $394 $3 million versus $409 million last year.
Speaker Change: This performance was due primarily to our decision to exit a contract with a sizeable client, which did not meet our financial hurdles largely offset by growth from other clients.
Speaker Change: We remain confident in our ability to achieve mid single digit organic growth later in 2025 and M D.
Speaker Change: Operating profit was $39 $4 million and operating margin was 10% as compared to $41 $3 million and 10, 3% respectively last year.
Speaker Change: These results principally reflect increased investments in incremental sales positions and capabilities to drive growth in target markets like semiconductor and data centers.
Speaker Change: Education revenue grew 2% to $225 $3 million driven by favorable net pricing increased work orders and stable retention rates.
Speaker Change: Education operating profit increased 10% to $14 million and margin was six 2% an increase of 40 basis points.
Speaker Change: This was largely attributable to improved labor efficiency and mix.
Speaker Change: Technical solutions had another great quarter growing revenue, 22% to $202 $3 million with roughly two thirds, representing organic growth and the remaining 8% from our acquisition of quality uptime services.
Speaker Change: Organic growth was once again driven by extremely strong micro grid project activity.
Speaker Change: Looking forward results in this segment should remain strong reflecting several medium sized projects recently, one continued strong demand dynamics in our energy resiliency and data center markets and our strong sales pipeline.
Speaker Change: All of which is supported by $490 million of backlog.
Speaker Change: Technical solutions operating profit more than double the $16.6 million and operating margin increased 420 basis points to eight 2%, reflecting significantly higher volume as well as improved operating performance versus last year, which was impacted by project delays.
Speaker Change: Moving on to Slide 10, we ended the first quarter with total indebtedness of $1 $6 billion, including $29 $7 million of standby letters of credit, resulting in a total debt to pro forma adjusted EBITDA ratio of two nine times.
Speaker Change: At the end of Q1, we had available liquidity of $296 $9 million, including cash and cash equivalents of $59 million.
Speaker Change: Of note after the quarter closed we successfully amended and extended our senior secure credit agreement the <unk>.
Speaker Change: Sorry, its credit facility now totals $2.2 billion.
Speaker Change: Consisting of $1 $6 billion of revolving credit facility and a 600 million amortizing term loan maturity maturing on February 26 2030.
This replaces a one 3 billion revolving credit facility and a $650 million amortizing term loan, which had an outstanding balance of $528 million.
Speaker Change: The facility also reflects our growth as a company and the confidence our lenders have in our strategy.
Speaker Change: To thank our treasury team sports exactly renewing the facility.
Speaker Change: Free cash flow in the first quarter was negative $123 million.
Speaker Change: This result, largely reflects a temporary increase in working capital related to the transition to the Companys, new ERP system for P&I and M D.
Speaker Change: This transition involves extended preplanned quality control reviews, we're invoicing and enhanced hyper care processes to ensure client satisfaction.
Speaker Change: First pass of automated invoicing is ramping up in the second quarter as the first wave of manual quality control activities have been completed.
Speaker Change: As such we expect to hit our full year free cash flow targets, though there will likely be some continued choppiness near term given the scale of the implementation.
Speaker Change: As a reminder, full year normalized free cash flow is anticipated to be in the range of 250 million to $290 million.
Speaker Change: This forecast is normalized for an estimated $30 million to $40 million of elevate and integration costs and $16 million of total earn out payment that will be recorded as a use of operating cash.
Speaker Change: Interest expense was $22 $9 million slightly higher than the prior year, largely reflecting higher debt balances.
Speaker Change: We expect quarterly interest run rate to moderate in the second half of the year.
Speaker Change: We purchased approximately 415000 shares in the first quarter at an average price of $51 23 per share for a total cost of $21 million.
Speaker Change: At quarter end, we had 133 million remaining under our share repurchase program.
Speaker Change: Now, let's briefly review our full year 2025 outlook as shown on slide 11.
Speaker Change: Scott mentioned, we are raising the lower end of our guidance for adjusted EPS based on our solid start to the year and our constructive outlook.
Speaker Change: We are now forecasting full year 2025 of adjusted EPS to be in the range of $3 65.
Speaker Change: $3.80.
Speaker Change: Our outlook for adjusted EBIT margin remains unchanged at $6 three to six 5%.
Speaker Change: Our interest expense forecast is now $4 million higher at 80 million to $84 million, reflecting higher debt and we still expect the normalized tax rate before discrete items to.
Speaker Change: To be between 29% to 30%.
Scott Neuro: With that let me now turn it back to Scott for closing comments.
Scott Neuro: Thanks Al I want to thank our team for their hard work implementing our many initiatives and delivering a great quarter, while staying focused all of our clients.
Scott Neuro: We're doing isn't easy, but it is setting us up for long term success, we're building on our positioning as an industry leader and we appreciate the trust of our clients and investors.
Scott Neuro: With that let's take some questions.
Scott Neuro: Okay.
Scott Neuro: Thank you we will now be conducting a question and answer session.
Scott Neuro: If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
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Scott Neuro: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: She is a time to allow as many thoughtful last question. We ask you. Please limit yourself to one question and one follow up.
Speaker Change: One moment please for our first question.
Yeah.
Speaker Change: Thank you and our first question is from the line of Tim Mulrooney with William Blair. Please proceed with your question.
Speaker Change: Oh good morning.
Speaker Change: Good morning.
Speaker Change: So starting with your <unk> you.
Speaker Change: It'd be a nice business.
Speaker Change: The 24% improvement.
Speaker Change: And commercial office leasing activity in the fourth quarter I'm. Just curious you know how that compares to the last several quarters before that like like was that a significant acceleration in the trend line.
Speaker Change: And you know how does that compare to the fourth quarter typically from a seasonality standpoint in other words can you just put in context for investors how significant that move is.
Speaker Change: Yeah, I mean look at theirs.
Speaker Change: There is no real seasonality in terms of leasing activity it really goes by.
Speaker Change: In large measure the explorations.
Speaker Change: Of tenants leases right, but it is it just it represents a good cadence I mean this is a story that's been playing out over the last year year and a half and we were delighted when we see the activity and we also look at something called net absorption, which is how much additional space is being taken right. Because you can have good leasing activity, but.
Speaker Change: There's a lot of leases that are expiring and they're not getting renewed you don't necessarily see that unless you look at the absorption rates and they've been really good too. So Tim I. Just think this is a continuing trend that has to do with you think.
Speaker Change: Theres some optimism out there and you know returned to work well you know you've been reading about it we've all been reading about it and I've been saying this not only with clients, but in mind networks.
Speaker Change: Management wants people back in the office incrementally more we may never go back to full return five days a week, but hybrid is is incrementally better it feels like quarter after quarter.
Scott Neuro: Yeah that all sounds very encouraging we're certainly seeing that everywhere as well Scott.
Speaker Change: Just one more question about.
Speaker Change: This shifting gears, a little bit, but just wanted to ask about your federal exposure so still.
Speaker Change: On the P&I segment, how much of your P&I segment revenue I guess is generated from work being completed in federal buildings I'm, just trying to think about the potential risk here from does as it relates to our footprint reduction and maybe while you're at it you know whats your technical so how much of your technical solutions.
Speaker Change: Revenue is related to projects with federal agencies or are being funded with federal dollars just any color there would be helpful. Thank you.
Speaker Change: Like when you look at the size of our enterprise, we have almost no risk when it comes to that we're not in that segment, where were doing any kind of cleaning where engineering you know in terms of stationary engineering in those in those federal buildings, where we do do a little work as mission critical and that's not anything that does is cutting right now so.
Speaker Change: Our mission critical business, which again is literally small compared to our eight plus billion in revenue.
Speaker Change: Feel like that is highly protected because of the nature of the work, we do with special clearance and working in their data centers are a critical requirement. So we feel we're really resilient there.
Speaker Change: Got it thank you very much.
Tim: Thanks, Tim.
Speaker Change: The next questions are from the line of Josh Chan with UBS. Please proceed with your question.
Josh Chan: Hi, good morning, Scott or on Paul Thanks for taking my question.
Speaker Change: Yeah. Good morning, so thanks, we're proactively addressing the labor situation.
Speaker Change: Could you talk about kind of your playbook. If you were to see kind of a spot rate labor costs accelerating recognizing that you have a decent part of union labor to where maybe you have more visibility. So maybe can you just talk to how you would react what your exposure is to that the spot rate and labor. Thank you.
Speaker Change: Sure you know we are you know to your point, we're fully we feel like we're fully in command here because half of our revenues are from Union labor and those those labor rates or set now for the next three plus years and they're at a very reasonable rate between three and 4%. So we feel really good there and then on the non union.
Speaker Change: Inside them.
Speaker Change: One thing that you guys have always seen as we pass the majority the vast majority of the labor increases through to our clients.
Speaker Change: We have major proof points for that so we feel good there and you know even if there are potential labor shortages due to what's going on with immigration again, if you look at look at our past history, we've always done really well in those times and the only thing that's probably changed for us in the last few years.
Speaker Change: When it comes to capturing labor in the field.
Speaker Change: We've upgraded our talent acquisition team dramatically and through elevate we've invested in technology to cloud based systems for hiring and vetting employees. So our time to hire has dramatically increased too. So we feel like we're in really.
Speaker Change: Great shape here.
Speaker Change: That's good color, yes. Thank you Scott I'm sure and then on the Yeah and then on the.
Speaker Change: ERP side of things.
Speaker Change: What does it take to kind of catch up on the free cash flow and just like operationally and what's your confidence isn't that kind of all within the same fiscal year.
Speaker Change: Yeah no. Thanks for the question Josh So like you know as we stated we went live this past quarter with the new system on two of our largest ERP, our C&I and M. D. Two of our largest industry groups and we did a thorough review of all of the invoices to ensure accuracy and customer satisfaction before.
Speaker Change: We're putting them out that actually resulted in a delay in the invoicing.
Speaker Change: And obviously a delay therefore in cash collections, we anticipate that that will actually start to pick up in Q2 and for the balance of the year will actually resume all of our cash collections and deliver against our committed cash flows for the year and.
Speaker Change: And I'll give you some color on that too.
Speaker Change: Whether it's through our vendor that's doing the ERP or through some of our own networks.
Speaker Change: Heard horror stories about you know ERP conversions and how invoices go out long.
Speaker Change: We weren't going to do that.
You guys know us to be Super cautious and careful so we just said like you know rather delay getting some of these invoices out and go invoice by invoice and review to make sure that clients don't get long invoices. So we're just going to be Super Super cautious here and we feel like for a little bit of it.
Speaker Change: The delay on the invoices in some some pressure on cash flow well worth keeping our customers.
Speaker Change: Okay that makes perfect sense, thanks for that color and things like that.
Speaker Change: Thank you.
Speaker Change: Next questions are from the line of Faiza <unk> with Deutsche Bank. Please proceed with your question.
Faiza: Yes, hi, good morning. Thank you I'm sure. It's not just taking a step back you know you sound really good about it does that it's about the pipeline I'm curious if you can give us some color on you know what maybe what your win rate is like now versus what it was historically and.
Maybe help us think through like what Youre seeing from a retention versus new business versus existing volume perspective and to the extent you are seeing higher win rates, maybe talk a little bit more about how you're differentiating yourself.
Faiza: Sure I mean this is this is another area, where our elevate expenses have come through.
Faiza: Well, there's so much to unpack here I will try to do it in a in a in a.
Faiza: Somewhat since.
Faiza: Or to hear but like when you first thing to do from win rate as you have to have you have to have business development people in the field and we've invested in business development or salespeople. If you will and we've increased the number there that we have out in the field, which is which has been incredible we've spent a ton of time and energy.
Faiza: <unk> on training them up we have all new initiatives now on how to get people into our company and up to speed quickly or are we call them rookies people in the first year or so the win rate on new business for rookies and what they've been able to book has been at an all time high.
Faiza: Another thing that we've been doing which has been great is leveraging AI and working on something called arc deal desk, which is where we respond to rfps and between upgrading the talent there over the last couple of years and adding AI.
Faiza: So much more efficient in how we've been able to respond to Rfps and it's you know we.
Faiza: We don't publish our win rates, but I can tell you they've been incrementally better and we're feeling really good we had incredible bookings. We have here is when we publish our new bookings and I think for the last five years, we had record wins and increases in new bookings and we think that.
That trend will continue and just the last piece of it and hopefully it's comforting were really really selective.
Faiza: Sure.
Faiza: <unk> accounts and the clients, we pick up because as you guys know that as you've been on the path with US we don't work for free here and that's something that we've changed culturally at ABM. So we're really we're really.
Faiza: I guess decisive about the margin profile and the type of claim that we that we bring on so I know that was a long long diatribe here, but we're really enthusiastic about what we're doing on the new business side.
Faiza: Great. Thank you.
Speaker Change: Then just a follow up on the E. T. S doesn't that's right we've seen some volatility ups and downs over the last couple of years do you think things have stabilized at this point like how should we think about revenue growth. There I know you've talked about historically, you've talked about sort of backlog in the business.
Speaker Change: So give us some perspective on how to think about maybe the various pieces, but then within Etfs.
Speaker Change: Sure so.
Speaker Change: One thing we have over on the you know when I think about a T. S. Right now for purposes of that question and I'll talk about two areas. One is our micro micro grid business, where we have a record backlog and that's debt.
Speaker Change: That business has been on fire would you I know you've been following US you know.
Where as encouraged as we've ever been in the 'twenty two 'twenty to 'twenty five is going to be just a phenomenal year for us.
Speaker Change: On the Microgrid business, and we're still seeing softness on the bundled energy solution, which is the project side.
Speaker Change: As you know that's really dependent on interest rates and finding rois and so which we actually are seeing incremental pick up versus where we were last year. So that's a really good time, but.
Speaker Change: In terms of overall would still need to see interest rates come down a bit to have that really start taking off.
Speaker Change: Got it thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Jasper Bibb with Truth Securities. Please proceed with your question.
Jasper Bibb: Hey, good morning, guys.
Speaker Change: <unk> came in a bit better than we expected in the quarter just wanted to ask about the large client rebalancing impact I'm curious if you have a little bit more visibility in revenue there has.
Speaker Change: That move through the additional phases and separately you talked about the new wins in that segment too. So I'm curious if the run rate in the second half on revenue is a little bit better than the initial consumption.
Speaker Change: Sure so on the large client.
Speaker Change: We've really lap that now it's not making a material impact there was another large client to the tune of about $50 million of revenue, where we passed on the business. It was gonna be awarded to us, but it was going to be at a margin profile that was just not acceptable to us. So we had the courage to.
Speaker Change: You too should not take that business, which I was really proud of the team on and you know that was last year.
Speaker Change: So we've lapped those and we'll lap.
Speaker Change: Next year, we'll end up lapping that customer the 50 million dollar customers. So you'll see some pressure really what we're looking for an M. D. As the back half to start becoming incrementally positive on a year over year comparison, so that's that and.
Speaker Change: Think when you look at LNG and you think about what's going on right now with the push towards onshoring of manufacturing and semiconductor business, which are which are our big segments within within the <unk> space. We are really really excited and our pipeline is strong we had one of our highest.
Speaker Change: Quarters in terms of new sales this quarter and it's going to be one of our big stories for 2025, a M in the segment.
Speaker Change: Okay.
Speaker Change: Thanks, and then I apologize if I missed it but hoping you could specifically quantified.
Speaker Change: Elections that were deferred out of the first quarter into the balance of the year.
Speaker Change: I guess more broadly I'm.
Speaker Change: I'm wondering how you're thinking about the opportunity to generate cost savings from the ERP as you've now by Brexit I think most of the revenue based on the new platform.
Speaker Change: Yes. So you know as we stated you know we did a very manual process of reviewing all of the invoices. So we anticipate that Q2 will actually have a.
Speaker Change: Significant increase in cash flow versus Q1 and that in the back half, we will actually catch up and in order to actually resume our committed to full year cash flows. So.
Speaker Change: So we feel very comfortable and confident on that with regards to elevate we are well through kind of like the elevate program now that we actually have three of our industry groups on there and when we look at the benefits. We've now realized probably close to two thirds of the total benefit case now the balance will actually come.
As we get the full enterprise on the new suite of systems, because as you can see right now we're actually still maintaining legacy systems now once we actually have the full enterprise on the new suite will actually get rid of the legacy systems and actually get to the full optimization of the implementation and that should <unk>.
Speaker Change: Come through in the next fiscal.
Speaker Change: Yeah.
Speaker Change: Great. Thank you guys.
Thanks.
Speaker Change: The next question is from the line of David Silver with C. L. King. Please proceed with your question.
Speaker Change: Yeah, Hi, thank you.
Speaker Change: Just a couple of questions I think for URL, but.
Speaker Change: Lee you know with a T S growing 22% I'm just kind of scratching my head there was not a.
Speaker Change: Incremental accrual for contingent.
Speaker Change: Contingent consideration or anything on Raven volt.
Speaker Change: You know it is it's a.
Speaker Change: I know you took a larger.
Speaker Change: Through all of last year, but are we are you fully accrued on that or should we be.
Speaker Change: Looking for some incremental you know charges as maybe fiscal 'twenty twenty-five goes on and then separately just to comment on the 21 million of share repurchase would you characterize that as you know opportunistic and.
Speaker Change: May be a permanent reduction in share count or is that really designed to.
Speaker Change: Offset a new issuance this year. Thank you.
Speaker Change: Yeah no. Thanks, David for the question first of all on the H, Yes, you're absolutely right. We're very pleased with Raven boats, our performance over the last number of quarters as you recall last quarter, we actually took that contingent liability up and if you recall you know the earn out was really based on three years.
Speaker Change: On a calendar year 'twenty three 'twenty four 'twenty five so we're in that last year.
Speaker Change: And so we feel that we are adequately reserved now having said that you know there is still potential for higher earn outs based on higher levels of performance. We look at this on a quarterly basis. We will continue to look at this for the balance of the year and provided that you know they continue to perform high you know we.
Speaker Change: You'll accrue accordingly, and remember the the good news is that you know any incremental accrual obviously comes with higher EBITDA and actually has a very attractive payout. So we will continue to look at that on a quarterly basis with regards to this year.
Speaker Change: The share purchases that we did in this last quarter.
Speaker Change: We're always committed to buy back shares against the anti dilutive share based compensation and that's what we actually did this past quarter provided that we continue to see opportunistic opportunities, we will evaluate those accordingly, and and look to do more if it makes sense from an economic perspective.
Speaker Change: Okay, Great and then one one more question I think on the a M. D side the previous questioner covered off most of what I was going to ask but.
Speaker Change: You know Scott I was wondering if you could just comment on kind of the success with new business. There in terms of your value proposition I mean, I'm guessing M D. As a category, where there's larger spaces, theres, probably more automation or digitalization and your product offering you know of.
Speaker Change: Apart from growth in this segment.
Speaker Change: In terms of the customer base, but.
Speaker Change: Maybe if you could just touch on your your go to market strategy or your value proposition there.
Speaker Change: And you know why you're you're very optimistic about it for the balance of the year.
Speaker Change: The win rates and whatnot. Thank you.
Speaker Change: I think theres a couple of things I appreciate the question one.
Speaker Change: We had record Q1 bookings this year, which was great and our pipeline is fantastic as I said on the last call So super optimistic.
Speaker Change: What makes us so special in this space is that we do not attack. This segment as we would in office building.
Speaker Change: Or a.
Speaker Change: And just as a straight janitorial job, we look at these as almost like an Aps account like a bundled offering meaning we may get in with the janitorial assignment, but we're really good about being in the facility taking on additional work production support working in clean rooms.
Everything from that to like constructing boxes right. We will do anything that we can so that in this segment, our clients think of us as extra.
Speaker Change: Really a resource in the facility that can handle things that they may have been subconsciously sub contracting to four or five other vendors and now theyre consolidating under us and we've been really intentional in this segment of hiring subject matter experts so whether it's in pharma.
Speaker Change: Whether it's in semi conductor, whether it's an e-commerce we have.
Speaker Change: Sweet of executives that are subject matter experts that can talk to the clients in their language and that's been the secret to our success, David It's been taking a very focused intentional approach with experts rather than just treating it like a janitorial assignment and an office building.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next questions come from the line of Justin Hauke with Robert W. Baird. Please proceed with your questions.
Speaker Change: Oh, great yes.
Speaker Change: Look I mean, it seems like you know the story is at least going forward is the improvement in DNI and an M D.
Speaker Change: The markets that have been really strong for you then aviation and technical solutions and I guess I am first on aviation I guess I just wanted to ask you know we saw the delta pre announcement on kind of demand trends and just any updated thoughts on what you're seeing there in terms of sustainability and then in the technical solutions it looks like the <unk>.
Speaker Change: <unk> are the $490 million a year ago, it was $590 million and I guess is that mostly the.
Speaker Change: The kind of the the bundled solutions and the the EV charging stuff that's down or just what's been the driver of that backlog decline. Thank you.
Speaker Change: Sure. So let me start with aviation that indulges announcements.
Speaker Change: Not an effect on us.
If you think about what we're doing in that space right, where inside an airport and if even if demand is down incrementally it doesn't change our scope of work whether you have 10000 people in an airport at any given time or 9000.
Speaker Change: It's not going to change or reduction in scope. So we feel really good about the fact that we are resilient around the edges on any shifts in demand there.
Same thing with with the other things that we do which will be like to do the cabin cleaning of a plane.
Speaker Change: Your full or you're 90% occupied on a plane and you still have to go through and do the cleaning. So we haven't seen any falloff in demand our bookings have been great in aviation and our pipeline is terrific. So.
Speaker Change: No real warning signs for us yet based on an adult announcement.
Speaker Change: Yeah.
Speaker Change: Raven volt, which has been one of the key drivers and in our technical solutions group has been just super strong and the.
Speaker Change: The backlog is terrific and.
Speaker Change: Give us another quarter or two I think we're going to have some really good news for you on the other things that are happening so.
Speaker Change: Probably as excited as we've ever been at this point in time about their offering for the Washrooms in Etfs and you know I guess the last color commentary is any client that we talk to whether it's directly regarding our technical solutions business or it may be in aviation or being.
Speaker Change: Everyone's talking about power resiliency right now everyone is talking about the grid everyone's talking about what's going on in the overall geo political spectrum around energy and we just feel like we are the right time in the right place to have such an unbelievable offering so really optimistic.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Prospect I appreciate it.
Speaker Change: Got it.
Speaker Change: Thank you. Our final question is from the line of Tate Sullivan Maxim Group. Please proceed with your question.
Tate Sullivan: Okay, great. Thanks, Thanks, Scott reviewing some of your comments about large larger awards. You said you were awarded a large contract for an advanced office building in New York and I think you also mentioned $30 million business from a large tech company or these two two separate.
Speaker Change: Contracts.
Speaker Change: Yes, they are two separate contracts.
Speaker Change: And then the large.
Speaker Change: And then the large contract for the office building in New York is is that still a building that employers are moving into its not fully.
Speaker Change: And operator, that's correct that's correct, it's a brand new construction that's going to be.
Speaker Change: Occupancy and full.
Speaker Change: By the end of this year and first quarter of next year, but we're already starting with construction cleanup and it's going to be a wonderful project for us from a great client.
Speaker Change: And then is there ive asked before but is there opportunity for backup power work on this type of advanced building or is that already in the engineering specs before it.
Speaker Change: When they did the contract yeah that happens when you when you're building a new building you don't go to a provider like a b M O M.
Speaker Change: In the commercial space that will be done with the general contract. When you when you let that contract so for us it's more about going into data centers schools existing facilities.
Speaker Change: Great. Okay. Thank you for that background.
Speaker Change: Thanks.
Thank you.
Speaker Change: At this time I'll now turn the floor back to management for closing remarks.
Speaker Change: Well thanks, everyone. Appreciate you.
Speaker Change: Taking the calls today and listening in.
Speaker Change: We're really optimistic hopefully you can hear that in our remarks, and we feel like we're going to have a strong 2025 and I'm looking forward to getting back to you in Q2 with our results. So have a good spring and we will see you soon.
Speaker Change: Thank you. This does conclude today's teleconference. We thank you for your participation you may now disconnect your lines at this time.
Yeah.