Q3 2019 Earnings Call
Greetings and welcome to the ATM industries third quarter 2019 earnings call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Susie Kim Vice President of Investor Relations and Treasurer for Abiam industry. Thank you you may begin.
Thank you all for joining us this morning with US today are Scott Salmirs, our President and Chief Executive Officer, and Anthony Scaglione, Executive Vice President and Chief Financial Officer.
We issued our press release yesterday afternoon announcing our third quarter fiscal 2000 like paint financial results a copy of this release and an accompanying slide presentation can be found on our corporate website.
Before we begin I would like to remind you that I call and presentation today contain predictions estimates and other forward looking statements. Our use of the words estimate expect and similar expressions are intended to identify these statements. These statements represent our current judgment of what the future holds while we believe them to be reasonable. These statements are subject to risks and uncertainties that could cause our actual results to differ materially. These factors are described in the slide that accompanies our presentation as well as in our filings with the FCC. During the course of this call certain non-GAAP financial information will be presented a reconciliation of those numbers to GAAP financial measures is available at the end of the presentation and on the company's website under the Investor tab.
I would also like to remind everyone that this quarter's results reflect our updated five segments structure that health care, we end up and integrated into our business and industry technical solutions and education segment.
For comparative purposes, we have provided historical comparison in the appendix section of today's presentation.
I would now like to turn the call over to Scott.
Thank you Suzy and good morning, everyone as I'm sure you read we announced another solid quarter of performance in yesterday's earnings release, we expanded our business both organically and profitably against last year and our organization is delivering on the commitments we made to manage our business discerningly as we pursue topline new sales growth and remain disciplined on margin seems you have consistently heard specifically, we reported a record revenue quarter, reflecting organic growth of 2.3% with an adjusted EBITDA margin of 5.6%.
Our earnings per share also grew to a GAAP EPS of 55 cents and 60 cents on an adjusted basis.
You see 66, and 853 had a minimal impact on these results, which hopefully will discuss in greater detail.
We are on pace to end the year in line with our expectations, we're reaffirming our EPS guidance outlook on the dollar 70 to $1.80 per share on a GAAP basis, and $1.95 to $2 or five cents per share on an adjusted basis and as a reminder, last quarter, we narrowed our range by raising the low end by five cents a share.
I want to thank our team members for their relentless dedication from another quarter of persistent labor challenges and economic uncertainty.
Unfortunately, the operating environment continues to be extremely difficult for our industry groups as we have not yet reached an inflection point in the current cycle unemployment remains at historic lows and labor supply remains exceedingly tight with a more competitive hiring landscape at higher turnover costs pertaining to recruitment training and on boarding or increasing.
The immigration narrative is likely contributing negatively to wage pressure on supply as well. Unfortunately, we're not expecting any near term changes to east pressures.
As you know in our business wage inflation effects much more dramatically as the majority of our contracts are fixed price.
The pricing environment has not yet caught up to the incremental wage pressures that have been occurring since early 2018.
In many cases, we are still seeing regional competitors bid on work using estimated wage rates that are not reflective of the current market conditions and future expectations. While this has caused retention pressures for us as we rebid work or margins reflect estimates that emanate from our operators responsible and sustainable pricing.
In fact in some instances we have seen clients return to baby as they've experienced how non sustainable low bids can impact service and quality.
We're also beginning to see uncertainty with the economy impact client decision, making.
There are instances where award cycles are more prolonged as clients one time to assess the rising wage environment and see clarity on whether there will be a downturn in the U.S. economy.
All of these factors have contributed to a difficult retention year for us in 2019 and based on what we're seeing today and as I discussed last quarter. We do not expect these dynamics to change in the near term.
To mitigate these challenges we've been managing what is in our control we have steered our business strategically by reviewing all legacy contracts to see price escalations, where and when appropriate.
We adopted a disciplined approach to pricing new business as we balanced pursuing profitability and growth with managing risk, we instituted a cute labor management practices to increase productivity and defend against compression and we've invested heavily in our human resources team to improve recruiting and onboarding.
Of course, it would be on seismic scale. These actions can and have served us well be a nice performance. This year is a great example.
Our diversified portfolio has also benefited us.
Little solutions continues to capitalize on the demand for energy efficiency that has driven growth across all of their offerings, including bundled energy solutions easy charging installation and data center power testing.
In fact, our entire energy and power services group is experiencing phenomenal growth as demand shifts towards sustainability.
Technical solutions has certainly become a critical part of the B M brand offering it's a foundational component of cross selling and we are leveraging our talent and sales expertise to augment other areas of our business for example over the past three months, we have appointed she sells leadership from the technical solutions group to senior roles within our education industry group.
During the recent buying season or education group's bid acceptance was low.
The heavily non union environment, and the ability for regional competitors to make wage assumptions that don't forecast, what we see as a reality of rising wage rates impacted our retention and new sales.
The new sales leaders in this group are building a go to market strategy to differentiate it would be from those competitors.
We intend to change the narrative around pricing to demonstrate to clients. The value. We can create for them by bundling energy programs, along with our leading position in custodial rounds, keeping a maintenance generally speaking cross selling will be at the core of our approach. We are actively adding salespeople and account managers for retention and implementing cross selling training.
We believe in the potential for increased outsourcing in the education sector as schools review their aging operation.
And as Weve envision them first acquiring GCA, we are determined to incentivize new and existing clients to outsource by capitalizing on our unique facilities maintenance and energy bundling capabilities in the way only AB Evan cat.
Our year to date enterprise progress has shown us that focusing on our team members is the key to unlocking greater potential for the firm.
We have invested in people to instill a sales culture that is on pace to achieve a billion dollars in new sales this year, which would be another record year, we've introduced new tools to help operators manager labor more effectively and we continue to invest by adding HR team members to support the growing needs created by the current environment and the need to use speed to hire and best in class Onboarding as a competitive weapon.
In addition to adding HR team members, we are making plans corporate investments and an HR structure that centralizes and more importantly, standardized just hiring and training practices remember when we started 2020 vision, we inherited or legacy distributed approach across our 300 branches with no leverage from standardization.
We are forced during a data driven model that measures as key metrics, such as retention and labor performance to informed decisions and ultimately contain costs with the investments we've been making in our HR technology platform. This is becoming possible.
I just returned from a quarterly business review meetings with our industry group Presidents and they were enthusiastic about the expanded engagement and increased productivity from the HR business partners as we've been rolling out our new HR model, we are starting to see open positions being filled more quickly.
This will lead to reductions in overtime, which as you can imagine there's pressure when job sites have team member vacancies.
And investments in HR or not solely about reducing overtime with speeds higher we believe that supporting the team member experience can drive longer term value through improved retention higher quality talent acquisition and reduce reliance on temporary workers, which are higher cost.
And don't forget these are all elements, which enhance the client experience. In fact, we recently conducted an enterprise wide client survey and reducing employee turnover was one of the central question, we heard across all of our clients.
A higher cost model has been necessary to grow and offset margin compression.
With no near term change on the labor front, a similar level of attention will be required going forward in order for us to maintain our business with the same core principles.
The investments in our HR organization and systems will prove out to be the game changer for ATM over the next two to three years.
As an organization, we're really proud of where weve been heading over the past four years, it's certainly not easy modernizing ingrained process and systems of 110 year old company and if that wasn't enough throw in the worst label crisis in modern history.
Fortunately, we have an amazing team and our confidence has only grown stronger for the long term.
Now before I turn the call over to Anthony I'd be remiss, if I didn't congratulate our finance and shared services teams for successfully closing our first quarter with a new ERP system in the UK.
We still have a long road ahead of us, but our UK launch in May and now our first UK close is a milestone that will benefit the entire organization for years to come and help provide a roadmap for our U.S. ERP upgrade I want to thank ethane. This teams for anchoring our business as they close our financials quarter after quarter, our multiple systems.
Anthony.
Thanks, Scott before I recap the quarter's results I would like to provide my customary synopsis of the impact of ASV six IL six and 853.
Given we are three quarters into the year I also want to discuss how the new accounting rule has developed throughout the year.
Our quarterly results reflect lower revenues of approximately 12.5 million associated with it the 853 related to service concession arrangements, primarily reflected in our aviation segment.
The deferral of profit on and all materials associated within our technical solutions project with approximately negative point 7 million.
Lower sales commission, which are now deferred and recognized over the expected customer relationship paired with approximately 2.2 million primarily impacting technical solution.
Our initial guidance range anticipated an impact due to pick those there which at the time was primarily related to unfold materials that were a carryover of amounts previously recorded in fiscal 18.
Moving to Q3, and our earnings per share outlook for the full year. The predominance of the fixes that impact has stemmed from the sales commission costs.
I want to point that out, but as the years progressed tremendous growth within our technical solutions segment had the largest impact.
Well for transparency, we have delineated these accounting item I want to note that the sales Commission piece is more operational in nature versus the carry forward of prior years on the raw material.
Now onto the quarter.
Revenues were 1.6 billion driven by our technical solutions and aviation segment.
On a GAAP basis, our income from continuing operations was $36.5 million or 55 cents per diluted share compared to $33.7 million or 51 cents last year.
Before moving on I am pleased to report that these results reflect a 3.7 million favorable impact from insurance.
Material improvements since we launched our comprehensive safety and risk program exactly four years ago.
Year after year, we have seen our prior year adjustment decrease speaking to the success of the program and its result. It is certainly continues to be a significant challenge due to the unpredictability of complicated societal forces.
However, our aggressive procedures to resolve open cases as well as our continued focus and investment in safety personnel and program has resulted in more stability than we have witnessed over the past few years.
I'm cautiously optimistic that our results are demonstrating a sustainable pattern of decreased volatility I like to think Jessica Morgan, who leads our insurance group and the whole risk and safety team for the progress we've made thus far.
Moving to adjusted income from continuing operations for the quarter with 40.2 million or 60 cents per diluted share compared to $38 million or 57 cents last year on both a GAAP and non-GAAP basis. Our results were driven by a combination of higher margin revenue contribution from our technical solutions business segment as well as a higher margin mix and continued disciplined labour management within business and industry.
During the quarter, we generated adjusted EBITDA of approximately $93 million at a margin rate of 5.6% versus 88.4 million and 5.4% last year.
Now turning to our segment results add to these stated earlier, our healthcare segment with seamlessly integrated into our DNA <unk> education and technical solutions segment during the quarter.
We are already starting to see some of the benefits from the new structure. For example, we have begun to pursue and have seen initial success with escalation and the optimization of route based services leveraging the benign network and health care accounts.
Moving to be an eye being I reported revenue of $807.9 million versus $822.6 million last year. The year over year decline in revenue is attributable to the loss of certain can count mainly lower margin an underperforming contract that we did not retain given unfavorable pricing dynamics.
B and I continue to expand with large national account that complements our growth strategy in the current labor market.
Operating profit for the quarter with $45.3 million for a margin rate of 5.6%, reflecting approximately 70 basis point increase versus last year as Scott discussed earlier are discerning approach to labor management and pricing renewals drove this increase and B and I continued to perform well in this challenging environment.
Aviation revenues were 20, 263.3 million, reflecting a $12 million negative impact related to assay a 53 as a result of the accounting for public sector parking leases.
These amounts were previously reported as rental expenses, but are now classified as contra revenue.
Organic growth for the quarter was 5.7%, reflecting new business, including the continued expansion of our catering logistic services and a continued growth in our international operations.
Operating profit was down approximately 1 million to $8.6 million for margin rate of 3.3%.
While we see a strong pipeline and aviation the business continues to underperform versus expectations at higher levels of overtime and tight labor conditions continue to negatively affect the segment.
Technology and manufacturing reported revenues of approximately $227 million versus 231 million last year with operating profit growing to $17 million for a margin rate of 7.5% versus 7.3% last year.
These results reflect the loss of certain accounts, partially offset by the addition of new business wins within high Tech and logistics clients.
Operating margin expansion versus last year was driven by lower reserves established for a client receivables and the loss of certain lower margin account.
We continue to monitor the pace of expansion, particularly with our manufacturing Cline for any change in decision, making or scope.
Revenue in education with $215.4 million and operating profit was 12.69 for a margin rate of 5.8%, which expanded 24 basis points versus last year. As Scott noted we are excited about our new go to market strategy, given the rationalization of our education portfolio. Following some softness in the recent buying season.
Technical solutions reported revenue of 165.79 up 27.6% organically versus last year. This represents an all time quarterly high since the reorganization of this business in 2017, driven by broad based demand in the U.S. energy projects continue to expand with municipalities and large school systems, We recently announced contract win with Warren County, Pennsylvania, and Aken County public schools in South Carolina.
The two Mega project that I highlighted in Q2, we have also contributed to this revenue growth also our easy charging business has also expanded aggressively this year with sales growth outperforming any other year.
Clearly we are all thoroughly excited about the growth of our technical solution business and how well our solutions are resonating in the market. However, I would like to reiterate my sense sentiment from last quarter growth in that business is project based and has historically grown in the high single digit to low teens range current performance does not necessarily signal on new long term outlook.
Operating profit for the segment was $17.9 million at 10.8% margin compared to 13.19, and 10% margins last year. This reflects higher project revenue and lower amortization expense following the impairment of our UK business at the end of last year.
Partially offsetting these results was the blend of our project and related churn rate and again. These results reflect a 1.3 million impact related to the treatment of commissions under 86, the six given technical solutions exceptional growth.
Turning to cash and liquidity cash flow from operations was 57.6 million during the quarter, we've seen a slight increase in our dsos over the last several months that is attributable to a few items, including working capital need for our larger technical solution projects and some delayed due to unique billing reconciliations innovation.
For the remainder of the year, we remain staunchly focus on reducing our dsos.
We ended the quarter with total debt, including standby letters of credit of $1.1 billion and a bank's adjusted leverage ratio of approximately 3.2 times.
During the quarter, we paid our 213 consecutive quarterly cash dividend for a total distribution of $11.9 million.
Now turning to guidance.
As stated in our press release, we are reiterating our guidance outlook for the year. We continue to expect GAAP income from continuing operations to be in the range of $1.70 to $1.80 and $1.95 to two all five on an adjusted basis. This guidance includes the impact from the new accounting pronouncement at the 66, and 853, which we believe could be approximately five cents for the year looking to fiscal 2020 inline with Scotts commentary, we remain cautious regarding retention and continue to monitor labor carefully for the remainder of the year based on our visibility in the near term. We are expecting the go forward to have a very similar operating environment to this year and a corresponding level of pressure on retention.
Additionally, while helping us navigate the current challenging environment, we continue to make investments in HR and IP projects as part of our commitment to elevating our people processes and systems.
On the IP and systems front as Scott Graciously acknowledged we just closed our first quarter under our new ERP system in the UK. This was the first step to our phase implementation roadmap our target dates have shifted slightly given our year end and to ensure we have accounted for all the testing training and change management strategies necessary to launch in North America. We now intend to go live in North America in early 2020, rather than later this calendar year, Canada will be the first north American launch and the US will follow shortly thereafter.
With all the changes we have implemented over the past several years and continuing in the foreseeable future I've seen an admirable level of adaptability from the entire organization and I. Thank everyone for enabling us to make the necessary progress to strengthen the IBM for our future operator, we're now ready for questions.
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One moment, please while we poll for questions.
Thank you. Our first question comes from the line of Andy Wittmann with Robert W. Baird. Please proceed with your question.
Great. Good morning, I have a few questions here to start out with but I guess the first one is for Scott wanted to.
Kind of get a sense from you.
As to the outlook here, obviously I think the exits that you've made in parts of your business, including benign other segments as well.
Clearly contributing.
To the margin performance that you're seeing in those segments.
Given that it sounds like the labor market continues to be challenging for you guys. It sounds like there's at least some potential for more exits to continue so with that in mind, Scott I wanted to get your sense as to what the revenue trends could look like in your key segments over the next several quarters, obviously, you've walked away from some business that's going to.
Way on the revenue trends into next year, but how should we be thinking about that in general given the challenges that you're facing there and the discipline that you've.
That you've you've gone to here in the last couple of years.
Well, we don't give revenue guidance, but I will tell you why we think next year will look pretty similar to this year, we don't expect any dramatic change things to kind of the discipline.
That you pointed out is not going to change, but we will be adding salespeople, we're going to continue to grow the business where on a record pace. This year and hope to be next year last year's performance. So.
Still healthy on the new business front, but I think next year will look a lot like this year.
Okay. That's helpful. I think there's probably a similar question, but in a little bit different vein on the technical solutions portion here I mean, obviously.
This is the segment that carried the quarter. This is probably the area that most people will be surprised with even if you guys aren't internally but.
We heard Anthony his commentary I guess.
About this is not what we should be thinking about the long term, but can you just talk about the backlog of work that you have there if that gives you confidence for at least high single digit growth here as we move into 20 and then just.
You know this is a project business.
That means it could be more economically sensitive and I want to understand if you guys are seeing any cracks and the foundation get had been given everyone's concerned about the economy and how that could be affecting that project based business.
Andy I'll take the first part of that question. So our revenue continue to really benefit from a robust backlog that churn, which is the project conversion rate and our pipeline, which is translating into the growth that you're seeing and we continue to see a great amount of growth in that in the short term.
As I mentioned previously when we see backlog and churn of roughly 150 million at 20% those are healthy indicators of the business and our backlog is well in excess of those them out so for the short to medium term, we don't see any real change in terms of the trajectory for the business.
But as Scott mentioned in his prepared remarks, you know it's a business that is project based and therefore, we have to continue to invest in to help people, but its resonating quite dramatically with our with our customer base and we don't see anything that should impact on the short term.
Yes, I mean look and for US Andy This is.
I tell you like if we talk about potential slowdown if you. If you think about how we performed in the last recession, which was the great recession was pretty dramatic.
We did well as a firm we didnt have technical solutions, and we didnt have that lever and if you think about it from a from standpoint, we were organized by service line back then so when we were helping to solve problems with clients back then it was kind of a one solution thing right. This was a janitorial assignment we talk about how they help us through the recession from janitorial and you know how well we performed relative to all the others as a firm last time, we'll now we can talk to them because of the way we structure our industry groups. Hopefully we can provide solutions with other service lines, but on top of that we have the technical solutions lever that has you know with these projects they set their capital they're not operating in terms of an impact to a client in a recession. So its capital and it reduces operating costs. So we think the technical solutions team should be really well positioned if the economy turns down.
That's helpful. I have one other question for now and they might jump in the question queue later, but it has to do with cash flow and you guys mentioned the dsos were up a little bit you had a big target for free cash flow. This year that you previously articulated it seems like the fourth quarter would have to be unusually strong to get to that $200 million level free cash flow Anthony how should we be thinking about the free cash flow here for the year, great. So you know our free cash flow for the year to date with as I mentioned somewhat disappointed due to a few reason dsos slippage, primarily in our aviation, but little slippage across all of our industry group and nothing systemic but slippage and due to the larger project based work, there's some working capital tie up which you know the that's the type of tie up that I like right at the end of the day, the indicative of us growing that that pipeline and growing that business, but given all those factors and given where we stand at the end of Q3, I'll along with our outlook for the remainder of the year.
We expect our free cash flow to be closer to the 175 million Mark versus the 200 million plus mark that we achieved in 2019, so a little bit down, but we're constantly focusing on that on that and we are have all sellers looking to improve the DSL in Q4 and beyond.
Cool thank you very much.
Thank you. Our next question comes from the line of Sean Eastman with Keybanc capital markets. Please proceed with your question.
Hi, Jim Thanks for taking my questions.
I guess first one from me is just kind of reading between the lines on the prepared remarks it seems like.
Assuming the status quo and current operating environment that.
It's going to be pretty tricky to expand margins and fiscal 20.
Am I thinking about that correctly and secondly, it would be helpful. At this point to just kind of round out some of the headwinds and Tailwinds as we think about next year just in terms of.
Maybe some.
Nonrecurring items, the discrete tax items.
Whereas the level of ITC spends going.
Things like that just just so we can think about some of the puts and takes for the out year.
Sure sure a good question so.
I think when we look at margin, we look at it and the operating segment and then you can look at the bottom line EBITDA. So for US. It so core in this market to protect the operating margins in the segments and yeah. We've done a really good job of that I think some surprising a lot of folks to be quite honest right and how well weve done and we expect to be as disciplined next year to protect those margins as it flows through to the bottom line margin yeah that can be pressure. Because we are we are making investments in our chief I T systems, and HR and shown a lot of this was planned starting back in 2016, when we said how do we how do we accelerate this company, we said right out of the gate that our systems were not where they need to be our process wasn't where we need to be so these were all planned investments that are coming to fruition and.
It has been a little bit more acute on the HR side, because we had to react to this environment right. We hire 70000 people here right. So we have to make those investments. So you will see incremental year over year in that corporate side related to HR and systems that will pressure the flow through on the bottom line margin, but as you know we would encourage everyone to look to the operating segments.
Okay. So.
I mean, all and does that mean margins might actually tick down next year.
Just trying to get to.
Just make sure we're kind of thinking about things correctly.
Yes, I mean look we're still wrapping up the budgets were just entering into the fourth quarter, but yeah that there is a chance that it will head down next year.
All things being equal.
Okay got it thats helpful.
Yes, and again I would say look at operating segments versus bottom line EBITDA, you know operating segments kind of the health of what we're doing.
I got it.
I guess another question is is this year.
The HR system in place you've got the cloud based time and attendance system in place.
The ERP back office consolidations underway, I'm wondering where where the incremental R&D investments are going next year exactly.
Yes, Sean it's not incremental so some of those systems that we're investing in today go live in the next fiscal year, we'll take our U.S. ERP.
Capex that just becomes a part of the operating environment next year. So.
All in line with my previous remarks in Q2 in terms of the year over year impact related to IP and it's really just a deferral of expense that we expected this year being deferred into next fiscal year. So from a cash flow perspective, the investments that we're making should temper off because some of that gets systems up and running and then move to a more operating environment in terms of the expense Yeah and you know.
The incremental side, if there's going to be instrumental side. It will be really around HR, because we again, we're going to continue to invest in so critical for us right hiring speed to hire and this market. You know we spent this for a while now someone comes in and fills out an application you want to close them in that day or the next day you wait a week, they're going to have a job somewhere else right. So we're bringing on recruiters were enhancing our systems and we're standardizing practices.
Sean If you if you were to go back to 2016 everything in the spring was distributed into the field. We have 300 branches. They all have their own hiring practices are ways of doing things with centralizing and now into more of a corporate orientation, where hiring practices onboarding training all going to be standardized with best practices, which was really the theme of 2020 vision. So there will be some incremental costs, but you'd expect it because we don't believe the label crisis is going to abate in 2020, I don't think anyone does.
Yes that makes a lot of sense and last one for me just on the free cash flow outlook.
Revise down a little bit for fiscal 19, but I'm wondering how to think about next year with some of the aviation receivable unwind.
Should that kind of.
Should we see decent free cash flow growth next year in your view and that's good or bad I mean.
Yes, I think it's a little too early in the year and will provide the outlook in terms of the aviation is challenging consolidated customer base that.
I don't think it I don't think we're any different than any supplier that deals with the aviation big clients, some big customer base.
In terms of their ability to.
Drag out their payable.
So were working actively to ensure that where we work with them and ensure that the dsos are a focus area. They have in a focus area.
But we also have some incremental costs as Scott mentioned, but offset by investment that we're making today in our system that should abate next year. So overall, we see a continued good cash flow generation for the future.
Okay, and I'll just sneak one more in.
Apologies to the other people on the call but.
Maybe you could just update us on the anticipated de leveraging trajectory and whether you guys think you might be sort of back in the market for an acquisition and at some point in that by 20.
Yes, I mean, that's always been the plan, we said when we did the GCA acquisition in September of 17, We said we were going to take a pause on acquisitions for them. That's 18 24 months is first of all we had to integrate GCA. We were over four times Levered and we said we want to get to under three times Levered before we go back in the market. So.
Thats, where it will be in 2020, and we expect us areas.
You know.
Opportunity that makes sense for our strategy that will be acquisitive in 2020 for the right opportunity.
Thanks, So much gentlemen, appreciate it.
Thank you. Our next question comes from the line and Tim Mulrooney with William Blair. Please proceed with your question.
Good morning.
Good morning, Jim.
Yeah can you guys dive a little deeper into the conversations that you're having with clients. These days and it sounds like maybe there incrementally more cautious than maybe they were six months ago is that a fair characterization and is there any more color you can share with investors. This morning.
Sure. That's good yeah, I think everyone's more cautious right because you know I mean, I don't have to tell you right. If we could read the paper any day.
Is there a tower so they're not terrorists right, what's going on with trade wars with a potential recession. So everyone is in this mode of what's next but.
We still have really good traction good conversations with clients and.
I think they appreciate what we're doing and the data that we bring you know were different than many competitors. Because we do think we have better analytics. So a lot of times they look to us for insight of what we're seeing with the clients, which is where our scale helps because we could kind of rationalize what's going on in the market across different regions, but they're active conversations and everyone's just curious about what everyone else is doing and and where where the economy is gone.
Okay, yeah. Thanks. Thanks.
The.
You kind of along that same line.
Scott given all the changes that you've made in the portfolio and Anthony and the operational changes you've done over the last couple of years I mean would you expect the business.
To perform differently in the next slowdown as compared to last several recessions.
You know we are.
I would I would have to say, yes, and and is what I alluded to earlier now that weren't industry group format and not selling single services hopefully we have more solutions to bring to the clients to get better traction. We like to think we have embedded data now better analytics to help clients understand what their options are from a cost standpoint from an efficiency standpoint, if they make specification changes.
We have technical solutions now we have this extra component to say look we know you're pressured on cost here's an opportunity to reduce energy right and become more efficient so.
We think we have a much better positioned in a recession as a firm and again I'll read it back. It was it was a terrible period for our economy and only when I last time, we did relatively speaking pretty well. So hopefully that will that will prove out again and with a little plus sign next time.
Okay. Thank you and then.
Anthony just one more for you.
You know and you see six of 653, I think you said that could be a favorable five cent impact for the full year, what where are we today, what's the impact today, so that I can understand the implied impact for the fourth quarter. Thank you, yes year to date were roughly seven cents of a positive impact and if you recall when we initially gave guidance back in December of last year, we had anticipated the around the five cents and that was primarily related to the uninstalled component, which was a carryover.
From fiscal 18 so.
At this point, we continue to feel it's going to be closer to that five cents, obviously going to be.
Somewhat contingent on operation, but that's what we're going with in terms of our guidance for the full year.
Got it thank you.
Thank you. Our next question comes from the line of Tate Sullivan with Maxim Group. Please proceed with your question.
Hi, Thank you thanks good morning.
First on education, I mean, the the revenue was up 4% year over year, but you mentioned some aggressive bidding I mean, what and then I think you slightly in indicated slightly higher margins in education.
It was a below plan or did you lose that you thought you'd winter can you just give more context to that comment. Please because it seemed it certainly performed better than some of your other segments.
Yeah.
Thanks for the question generally we were disappointed with the buying season, the execution and that was really a function of two things one was the pricing environment as well as the realization on new sales and retention that being said the operating profit came in line, we are able to offset our labor cost by good overhead savings and other savings within the mix.
But clearly disappointed by the buying season, which really impact half the business. It's really the K through 12, the other half on the University, a higher Ed side that buying season and throughout the year. So to Scott's earlier remarks around our new go to market strategy and leading with solutions. We remain optimistic that the next 12 months will produce a better operating environment and hopefully a better margin pull through than we've seen this year.
Okay. Thank you and well switching aviation real quickly did I can I think you did I hear you say that organic growth rate of 5.7% in one of the segments and aviation or can you just go back and review that comment please.
Yeah, we've had negative organic growth in aviation.
But we've we've also had some contraction in the U.S. business. So when we look forward a lot of new sales and retention has been somewhat of a challenge we are seeing good opportunities.
As it relates to specifically are.
Fueling and catering and our UK operations and I believe that comment was in relation to our service concessions.
Service Oh excuse me Okay. Thank you and then last for me and then in technical solutions can you just give some context, what specifically do you do in each charging.
So an easy charging will actually do the installation will partner with the actual hardware companies and then we'll go to big manufacturers.
Someone like a BMW or Porsche and will say look for in all your dealerships or an all of the locations you want in North America, Let's plan that out and then we do kind of a full turnkey installation and then try to lock in the servicing after that.
Weve. This business has grown for us dramatically. We are the clear number one now in this segment and it's getting more traction and we haven't even scratched the surface yet of cross selling this to to our clients. We just starting but this is kind of kudos to our HTS team. This is all organic growth. They are finding out there and it's been spectacular for us and you know as we all know the trends are heading in such a positive direction, so really going to be a good platform for us.
Do you currently just a quick follow up on that do you currently do that you'd be charging service for any of clients and janitorial service for instance, or hurt.
Does that go to your point about starting that effort.
We do but it's it's more spotty than we'd like right and that's part of really for us.
Getting more mature in cross selling.
Okay. Thank thank you for those comments.
Thanks.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question Kim. Please press star one at this time.
Our next question comes from the line of Marc Riddick with Sidoti and company. Please proceed with your question.
Hi, good morning.
Morning.
Wanted to touch on a lot of my other questions are already answered. So I just wanted to touch on maybe some of the progress or some of the areas that you're looking at as far as new service offerings.
You touched a little bit on some of this earlier, but I just wanted to get a sense of sort of where you're seeing opportunities in some of the initial benefits on Neal where there was the airplane fueling assignments or some of the other things that we might look for which is for fruit from new or new services. Thanks.
Yeah. So I think we've seen we've seen.
What we can do in fueling a catering and that's really just really this you're talking about something that really over the last 12 18 months has really started taking off.
No pun intended [laughter] in the aviation sector. So we are as we look and build on that and let's go back to the Ats group and how really easy charging started organically too.
Outside of the core projects, we were starting to look at how much work, we're doing in data centers and kind of mission critical stuff I think that's an area that we're going to be exploring over the next 12 to 24 months as how this can really turn into something because you know that if I were to give you the list and I'm not allowed to but I would give you a list of the Silicon Valley based firms that we do work and for their data center and their power testing.
And have them think about what's going on with cloud right, which is essentially data centers right that the the expansion plans for our clients in terms of opening and lighting up Datacenters is the is actually mindblowing and we're right there with them. So I think there's opportunities for US you know what we do is kind of we think about leveraging the adjacent seas right. We have our core businesses. What are the adjacent season, how do we leverage them and that's kind of all wraps into our strategy for next year and the next three to five years.
Okay, great. Thank you very much.
Great. Thanks, Mark.
Thank you, ladies and gentlemen that concludes our question and answer session I'll now turn the floor back to management for any final comments.
Yes, I just wanted to thank everybody for the call you know sadly some was over and ER, which charging charging into fall here, but we're excited to come back to you and Q4 will have.
You know our budgets all wrapped up or who will talk about how we finished the year hopefully going to have some good announcements on our sales trajectory.
Which you know we've been spending so much time on it so much focus on so.
Looking forward to the follow up conversations assembled and thanks, everyone and again I just have to thank my team for everything they've done to get us deploying its really proven out team and thank you.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.