ABM Q1 Earnings Call: Organic Growth Returns, Margin Outlook Steady Amid Project Delays

Facility services provider ABM Industries (NYSE:ABM) exceeded Wall Street’s revenue expectations in Q1 CY2025 as sales rose 4.6% year on year to $2.11 billion. Its non-GAAP profit of $0.86 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

ABM Industries’ first-quarter results were shaped by the return to organic growth across its key segments, particularly in Business & Industry (B&I) and Manufacturing & Distribution (M&D), as well as record new bookings in the first half of the year. Management, led by CEO Scott Salmirs, emphasized the improvement in core commercial office markets and new contract wins, while noting that project delays and a shift in service mix temporarily impacted profitability in the Technical Solutions segment. The company also highlighted its ability to expand service offerings into higher-value areas, such as material handling and technical services within M&D, which Salmirs described as “more strategic, more sticky with the client.”

Looking ahead, ABM’s management reaffirmed its full-year adjusted EPS guidance and expects delayed projects in Technical Solutions to resume in the third quarter, supporting both revenue and margin recovery. CEO Scott Salmirs cited ongoing momentum in high-quality office properties, manufacturing and distribution facilities, and energy resiliency projects as key growth drivers. CFO Earl Ellis highlighted improved billing and collections processes following ERP system upgrades, which are expected to drive sequential cash flow improvement in the second half of the year. Management acknowledged some uncertainty from potential regulatory changes affecting energy project tax credits, but overall, Salmirs expressed confidence in ABM’s ability to “sustain healthy top line growth and expand margins over time.”

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to expanded service offerings, new contract wins, and ongoing investments in technology and talent, while project delays in Technical Solutions created temporary margin pressure.

• Organic growth in core segments: Both Business & Industry and Manufacturing & Distribution divisions returned to organic revenue growth, supported by improved market conditions in prime commercial office space and expanded relationships with e-commerce and semiconductor clients.
• Technical Solutions faces timing headwinds: Project delays and a shift in service mix—particularly a move from higher-margin engineering work to lower-margin field execution—temporarily reduced margins in the Technical Solutions segment, though management expects a rebound as delayed projects resume.
• Record new business bookings: ABM secured $1.1 billion in new bookings during the first half of the year, including a $190 million microgrid contract with a major retailer and a large battery energy storage system project. These wins underscore growing demand for ABM’s expertise in electrical engineering and sustainability-related services.
• Expansion of service offerings: The company is evolving its M&D segment from traditional janitorial and maintenance work to include ancillary services like material handling and test and balancing, aiming for higher-margin and more integrated client relationships, especially in sectors like semiconductors and automotive.
• ERP implementation progress: ABM reported improvements in operational efficiency and billing accuracy following the rollout of a new enterprise resource planning (ERP) platform, which is expected to further reduce friction and support stronger cash flow in the coming quarters.

Drivers of Future Performance

Management’s outlook centers on sustained organic growth, margin recovery in Technical Solutions, and expanded service offerings in key end markets.

• Resumption of delayed projects: The completion of delayed Technical Solutions projects, especially in microgrids and battery storage, is expected to drive margin improvement and revenue growth in the second half, provided regulatory conditions remain stable.
• Focus on premium segments: Management sees continued opportunity in high-quality office properties, manufacturing facilities, and energy resiliency, with targeted investments in talent and technical capabilities to win larger, more complex contracts and deepen client relationships.
• Cash flow and operational execution: The ERP system upgrade is anticipated to normalize billing and collections, enabling ABM to meet its full-year cash flow targets. However, risks remain from potential changes in energy project tax credits and the timing of customer approvals.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will track (1) the resumption and completion of delayed Technical Solutions projects to assess margin recovery, (2) continued expansion of higher-margin service offerings in M&D and their adoption by key clients, and (3) progress in billing and collections as the ERP upgrade is fully implemented. Regulatory changes affecting energy project incentives and new contract wins in premium office and infrastructure markets will also be key indicators.

ABM currently trades at a forward P/E ratio of 13.2×. In the wake of earnings, is it a buy or sell? See for yourself in our full research report (it’s free).

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