ABM INDUSTRIES INC DE

Previous wording

During the third quarter of 2024, we performed a comprehensive actuarial review of the majority of our casualty insurance programs that considered changes in claims development and claims payment activity for the period of November 1, 2023, through April 30, 2024 (the “Actuarial Review”). The Actuarial Review was comprehensive in nature and was based on loss development patterns, trend assumptions, and underlying expected loss costs during the period analyzed.

Current wording

During the first quarter of 2025, we performed a comprehensive actuarial review of the majority of our casualty insurance programs that considered changes in claims development and claims payment activity for the period of May 1, 2024, through October 31, 2024 (the “Actuarial Review”). The Actuarial Review was comprehensive in nature and was based on loss development patterns, trend assumptions, and underlying expected loss costs during the period analyzed.

Previous wording

Based on the results of the Actuarial Review and Interim Update at April 30, 2024, we increased our total reserves related to prior years for known claims as well as our estimate of the loss amounts associated with IBNR claims by $17.9 million during the nine months ended July 31, 2024. During the nine months ended July 31, 2023, we decreased our total reserves related to prior years’ claims by $5.3 million. We will continue to assess ongoing developments, which may result in further adjustments to reserves.

Current wording

Based on the results of the Actuarial Review, it was determined that there was no adjustment required for our total reserves related to prior years during the three months ended January 31, 2025. During the three months ended January 31, 2024, we increased our total reserves related to prior years by $5.3 million. We will continue to assess ongoing developments, which may result in further adjustments to reserves.

Previous wording

Our current reportable segments consist of B&I, M&D, Education, Aviation, and Technical Solutions, as further described below.

Current wording

Our current reportable segments consist of B&I, M&D, Aviation, Education, and Technical Solutions, as further described below.

Previous wording

B&I, our largest reportable segment, encompasses janitorial, facilities engineering, and parking services for commercial real estate properties (including corporate offices for high-tech clients), sports and entertainment venues, and traditional hospitals and non-acute healthcare facilities. B&I also provides vehicle maintenance and other services to rental car providers. We typically provide these services pursuant to monthly fixed-price, square-foot, cost-plus, and parking arrangements (i.e., management reimbursement, leased location, or allowance) that are obtained through a competitive bid process as well as pursuant to work orders.

Current wording

B&I, our largest reportable segment, encompasses comprehensive facility solutions, including janitorial and maintenance, facilities engineering, and parking and transportation management to a diverse range of clients. Our expertise extends to commercial real estate properties, including corporate offices for high-tech clients, sports and entertainment venues, and both traditional hospitals and non-acute healthcare facilities. We typically provide these services pursuant to monthly fixed-price, square-foot, cost-plus, and parking arrangements (i.e., management reimbursement, leased location, or allowance) that are obtained through a competitive bid process as well as pursuant to work orders.

Previous wording

M&D provides integrated facility services, engineering, janitorial, and other specialized services to a variety of manufacturing, distribution, and data center facilities. We typically provide these services pursuant to monthly fixed-price, square-foot, and cost-plus, that are obtained through a competitive bid process as well as pursuant to work orders.

Current wording

M&D provides integrated facility services, engineering, janitorial and maintenance, and other specialized solutions to a variety of manufacturing, distribution, and data center facilities. We typically provide these services pursuant to monthly fixed-price, square-foot, and cost-plus, that are obtained through a competitive bid process as well as pursuant to work orders.

Previous wording

Aviation supports airlines and airports with services ranging from parking and janitorial to passenger assistance, catering logistics, air cabin maintenance, and transportation. We typically provide services to clients in this segment under master services agreements. These agreements are typically re-bid upon renewal and are generally structured as monthly fixed-price, square-foot, cost-plus, parking, transaction-price, and hourly arrangements.

Current wording

Aviation provides comprehensive support services to airlines and airports, including parking and transportation management, janitorial and maintenance services, passenger assistance, catering logistics, aircraft cabin maintenance, and transportation solutions. We typically provide services to clients in this segment under master services agreements. These agreements are typically re-bid upon renewal and are generally structured as monthly fixed-price, square-foot, cost-plus, parking, transaction-price, and hourly arrangements.

Previous wording

Education delivers janitorial, custodial, landscaping and grounds, facilities engineering, and parking services for public school districts, private schools, colleges, and universities. These services are typically provided pursuant to monthly fixed-price, square-foot, and cost-plus arrangements that are obtained through either a competitive bid process or re-bid upon renewal as well as pursuant to work orders.

Current wording

Education delivers comprehensive facility services to public school districts, private schools, colleges, and universities. Our services include janitorial and custodial services, landscaping and grounds maintenance, facilities engineering, and parking management. These services are typically provided pursuant to monthly fixed-price, square-foot, and cost-plus arrangements that are obtained through either a competitive bid process or re-bid upon renewal as well as pursuant to work orders.

Previous wording

Technical Solutions specializes in facility infrastructure, mechanical and electrical services, including EV power design, installation and maintenance, as well as microgrid systems design and installation and uninterrupted power supply services. These services can also be leveraged for cross-selling across all of our industry groups, both domestically and internationally. Contracts for this segment are generally structured as electrical contracting services for energy related products such as the installation of solar solutions, battery storage, distributed generation, and other specialized electric trade.

Current wording

Technical Solutions specializes in comprehensive facility infrastructure services, including mechanical and electrical systems, EV charging station design, installation, and maintenance, as well as microgrid systems encompassing uninterrupted power supply (“UPS”) systems and power distribution units. These offerings are strategically leveraged for cross-selling across all our industry groups, both domestically and internationally. Contracts for this segment are generally structured as electrical contracting services for energy related products such as the installation of solar solutions, battery storage, distributed generation, and other specialized electric trade.

Previous wording

Revenues increased by $66.0 million, or 3.3%, to $2,094.2 million during the three months ended July 31, 2024, as compared to the prior year period. Revenue growth was comprised of organic growth of 2.8% and acquisition growth of 0.4%. The organic revenue growth was due to the higher project revenues due to the timing of certain microgrid systems design and installation projects within Technical Solutions, and net new business and expansion of business with existing customers within Aviation and Education. The increase in revenues was partially offset by attrition of engineering customers within B&I and the expected rebalancing of the scope of work with an existing customer within M&D. Acquisition growth was driven by an $8.2 million revenue increase from the Quality Uptime Acquisition, which was completed in June 2024.

Current wording

•Revenues increased by $45.3 million, or 2.2%, to $2,114.9 million during the three months ended January 31, 2025, as compared to the prior year period. Revenue growth was comprised of organic growth of 1.6% and acquisition growth of 0.6%. The organic revenue growth was due to the higher project revenues due to the timing of certain microgrid systems design and installation projects within Technical Solutions and net new business and expansion of business with existing customers within Aviation and Education. The increase in revenues was partially offset by attrition of engineering customers within B&I and a loss of a certain customer within M&D. Acquisition growth was driven by a $12.7 million revenue increase from the Quality Uptime Acquisition, which was completed in June 2024.

Previous wording

•We had a decrease in operating profit of $101.5 million, to $37.4 million, during the three months ended July 31, 2024, as compared to the prior year period. The decrease was primarily attributed to:

Current wording

•We had an increase in operating profit of $3.5 million, to $77.6 million, during the three months ended January 31, 2025, as compared to the prior year period. The increase was primarily attributed to:

Previous wording

•Dividends of $42.4 million were paid to shareholders, and dividends totaling $0.675 per common share were declared during the nine months ended July 31, 2024.

Current wording

•Dividends of $16.4 million were paid to shareholders, and dividends totaling $0.265 per common share were declared during the three months ended January 31, 2025.

Previous wording

•At July 31, 2024, total outstanding borrowings under our Amended Credit Facility were $1.3 billion. At July 31, 2024, we had up to $427.6 million of borrowing capacity.

Current wording

•At January 31, 2025, total outstanding borrowings under our Amended Credit Facility were $1.5 billion. At January 31, 2025, we had up to $238.0 million of borrowing capacity.

Previous wording

•Revenues increased by $66.0 million, or 3.3%, to $2,094.2 million during the three months ended July 31, 2024, as compared to the prior year period. Revenue growth was comprised of organic growth of 2.8% and acquisition growth of 0.4%. The organic revenue growth was due to the higher project revenues due to the timing of certain microgrid systems design and installation projects within Technical Solutions, and net new business and expansion of business with existing customers within Aviation and Education. The increase in revenues was partially offset by the attrition of engineering clients within B&I and the expected rebalancing of the scope of work with an existing customer within M&D. Acquisition growth was driven by an $8.2 million revenue increase from the Quality Uptime Acquisition, which was completed in June 2024.

Current wording

Revenues increased by $45.3 million, or 2.2%, to $2,114.9 million during the three months ended January 31, 2025, as compared to the prior year period. Revenue growth was comprised of organic growth of 1.6% and acquisition growth of 0.6%. The organic revenue growth was due to the higher project revenues due to the timing of certain microgrid systems design and installation projects within Technical Solutions and net new business and expansion of business with existing customers within Aviation and Education. The increase in revenues was partially offset by attrition of engineering customers within B&I and a loss of a certain customer within M&D. Acquisition growth was driven by a $12.7 million revenue increase from the Quality Uptime Acquisition, which was completed in June 2024.

Previous wording

Operating expenses increased by $65.2 million, or 3.7%, to $1,831.0 million during the three months ended July 31, 2024, as compared to the prior year period. Gross margin decreased by 37 bps to 12.6% in the three months ended July 31, 2024, from 12.9% in the prior year period. The decrease in gross margin was primarily driven by an $8.3 million unfavorable self-insurance reserve adjustment related to prior year claims from actuarial evaluations completed in the three months ended July 31, 2024, as compared to a favorable $5.3 million adjustment recorded in the three months ended July 31, 2023, partially offset by labor efficiencies within Aviation and Education and the contract mix within M&D and Technical Solutions.

Current wording

Operating expenses increased by $28.8 million, or 1.6%, to $1,855.1 million during the three months ended January 31, 2025, as compared to the prior year period. Gross margin increased by 53 bps to 12.3% in the three months ended January 31, 2025, from 11.8% in the prior year period. The increase in gross margin was primarily driven by contract and service mix and operational efficiencies as well as an absence of a $5.3 million unfavorable self-insurance reserve adjustment related to prior year claims from actuarial evaluations completed in the three months ended January 31, 2024, partially offset by base wage increases within Aviation and Education.

Previous wording

Selling, general and administrative expenses increased by $107.5 million to $211.8 million during the three months ended July 31, 2024, as compared to the prior year period. The increase in selling, general and administrative expenses was primarily attributable to:

Current wording

Selling, general and administrative expenses increased by $14.4 million, or 9.3%, to $169.0 million during the three months ended January 31, 2025, as compared to the prior year period. The increase in selling, general and administrative expenses was primarily attributable to:

Previous wording

Amortization of intangible assets decreased by $5.2 million, or 27.3%, to $14.0 million during the three months ended July 31, 2024, as compared to the prior year period. The decrease was primarily due to the lower amortization of intangibles, primarily intangibles acquired as part of the RavenVolt Acquisition.

Current wording

Amortization of intangible assets decreased by $1.3 million, or 9.4%, to $13.3 million during the three months ended January 31, 2025, as compared to the prior year period. The decrease was primarily due to the lower amortization of intangibles, primarily intangibles acquired as part of the Able Acquisition.

Previous wording

Interest expense increased by $0.3 million to $21.2 million during the three months ended July 31, 2024, as compared to the prior year period, and was driven by higher borrowings from our Amended Credit Facility to fund the Quality Uptime Acquisition.

Current wording

Interest expense increased by $1.6 million, or 7.1%, to $22.9 million during the three months ended January 31, 2025, as compared to the prior year period, and was driven by higher borrowings from our Amended Credit Facility to fund working capital requirements.

Previous wording

Our effective tax rates from income on operations for the three months ended July 31, 2024, and July 31, 2023, were 74.0% and 17.7%, respectively, resulting in provisions for taxes of $13.3 million and $21.2 million, respectively.

Current wording

Our effective tax rates from income on operations for the three months ended January 31, 2025, and January 31, 2024, were 21.4% and 17.3%, respectively, resulting in provisions for taxes of $11.9 million and $9.3 million, respectively.

Previous wording

Our effective tax rate for the nine months ended July 31, 2024, was impacted by discrete items, primarily from a change for uncertain tax positions, energy efficiency incentives, a return to provision adjustment related to our non-U.S. operations, a benefit for share-based compensation, and the non-taxable change in fair value of the contingent consideration related to the RavenVolt Acquisition. Our effective tax rate for the nine months ended July 31, 2023, was impacted by discrete items, primarily from share-based compensation, ERC refunds received from the IRS, and the non-taxable change in the fair value of the contingent consideration related to the RavenVolt Acquisition.

Current wording

Our effective tax rate for the three months ended January 31, 2025, was reduced by discrete items, primarily return to provision adjustments related to our non-U.S. operations. Our effective tax rate for the three months ended January 31, 2024, was reduced by discrete items, primarily adjustments for uncertain tax positions, share based compensation, and return to provision adjustments related to our non-U.S operations.

Previous wording

We had a loss of $12.4 million on interest rate swaps during the three months ended July 31, 2024, as compared to a gain of $12.8 million during the three months ended July 31, 2023, primarily due to underlying changes in the fair value of our interest rate swaps.

Current wording

We had a loss of $1.1 million on interest rate swaps during the three months ended January 31, 2025, as compared to a loss of $16.0 million during the three months ended January 31, 2024, primarily due to underlying changes in the fair value of our interest rate swaps.

Previous wording

We had a foreign currency translation gain of $2.7 million during the three months ended July 31, 2024, as compared to a foreign currency translation gain of $3.1 million during the three months ended July 31, 2023. This change was due to fluctuations in the exchange rate between the U.S. dollar (“USD”) and the British pound sterling (“GBP”). Future gains and losses on foreign currency translation will be dependent upon changes in the relative value of foreign currencies to the USD and the extent of our foreign assets and liabilities.

Current wording

We had a foreign currency translation loss of $7.6 million during the three months ended January 31, 2025, as compared to a foreign currency translation gain of $5.4 million during the three months ended January 31, 2024. This change was due to fluctuations in the exchange rate between the U.S. dollar (“USD”) and the British pound sterling (“GBP”). Future gains and losses on foreign currency translation will be dependent upon changes in the relative value of foreign currencies to the USD and the extent of our foreign assets and liabilities.

Previous wording

B&I revenues decreased by $10.8 million, or 1.1%, to $1,010.6 million during the three months ended July 31, 2024, as compared to the prior year period. The revenue decrease was primarily driven by the attrition of certain engineering clients and soft commercial office market conditions, partially offset by client expansions both domestic and international. Management reimbursement revenues for this segment totaled $69.9 million and $70.1 million for the three months ended July 31, 2024 and 2023, respectively.

Current wording

B&I revenues decreased by $10.2 million, or 1.0%, to $1,022.9 million during the three months ended January 31, 2025, as compared to the prior year period. The revenue decrease was primarily driven by the attrition of certain engineering clients and a decrease in work orders, partially offset by client expansions and new wins both domestic and international. Management reimbursement revenues for this segment totaled $71.3 million and $70.5 million for the three months ended January 31, 2025 and 2024, respectively.

Previous wording

Operating profit decreased by $1.1 million, or 1.3%, to $77.8 million during the three months ended July 31, 2024, as compared to the prior year period. Operating profit margin decreased by 2 bps to 7.7% in the three months ended July 31, 2024, from 7.7% in the prior year period. The decrease in operating profit margin was primarily driven by contract and service mix and higher bad debt expense, partially offset by lower amortization of intangible assets.

Current wording

Operating profit decreased by $0.2 million, or 0.3%, to $79.4 million during the three months ended January 31, 2025, as compared to the prior year period. Operating profit margin increased by 5 bps to 7.8% in the three months ended January 31, 2025, from 7.7% in the prior year period. The increase in operating profit margin was primarily driven by contract and service mix, lower bad debt, and legal expense as well as amortization of intangible assets.

Previous wording

M&D revenues decreased by $4.8 million, or 1.2%, to $377.1 million during the three months ended July 31, 2024, as compared to the prior year period. The decrease was primarily attributable to the expected rebalancing of the scope of work with an existing customer and a loss of a certain customer, partially offset by new business.

Current wording

M&D revenues decreased by $6.6 million, or 1.6%, to $394.3 million during the three months ended January 31, 2025, as compared to the prior year period. The decrease was primarily attributable to a loss of a certain customer, partially offset by new business.

Previous wording

Aviation revenues increased by $30.4 million, or 12.8%, to $268.4 million during the three months ended July 31, 2024, as compared to the prior year period. The increase was primarily attributable to new business and scope expansions with the existing clients as well as continuing recovery in travel volume. Management reimbursement revenues for this segment totaled $9.6 million and $7.7 million for the three months ended July 31, 2024 and 2023, respectively.

Current wording

Aviation revenues increased by $20.6 million, or 8.2%, to $270.1 million during the three months ended January 31, 2025, as compared to the prior year period. The increase was primarily attributable to new business and scope expansions with the existing clients. Management reimbursement revenues for this segment totaled $10.6 million and $9.5 million for the three months ended January 31, 2025 and 2024, respectively.

Previous wording

Operating profit increased by $6.1 million, or 51.6%, to $17.8 million for the three months ended July 31, 2024, as compared to the prior year period. Operating profit margin increased by 170 bps to 6.6% in the three months ended July 31, 2024. The operating profit margin increased primarily due to labor efficiencies, primarily due to an increase in travel volume, and contract mix.

Current wording

Operating profit increased by $2.5 million, or 25.9%, to $12.2 million for the three months ended January 31, 2025, as compared to the prior year period. Operating profit margin increased by 63 bps to 4.5% in the three months ended January 31, 2025. The operating profit margin increased primarily due to contract mix, partially offset by base wage increases.

Previous wording

Education revenues increased by $9.2 million, or 4.2%, to $228.3 million during the three months ended July 31, 2024, as compared to the prior year period. The increase was primarily attributable to expansion of business with existing customers, partially offset by a decrease in work orders.

Current wording

Education revenues increased by $5.2 million, or 2.4%, to $225.3 million during the three months ended January 31, 2025, as compared to the prior year period. The increase was primarily attributable to new business wins and an increase in work orders.

Previous wording

Technical Solutions revenues increased by $41.8 million, or 24.9%, to $209.7 million during the three months ended July 31, 2024, as compared to the prior year period. Revenue growth was comprised of organic growth of 20.0% and acquisition growth of 4.9%. The organic revenue growth was primarily driven by higher project revenues due to the timing of certain microgrid systems design and installation projects, partially offset by a decrease in electric vehicle charging station sales. Acquisition growth was driven by an $8.2 million revenue increase from the Quality Uptime Acquisition, which was completed in June 2024.

Current wording

Technical Solutions revenues increased by $36.4 million, or 21.9%, to $202.3 million during the three months ended January 31, 2025, as compared to the prior year period. Revenue growth was comprised of organic growth of 14.2% and acquisition growth of 7.7%. The organic revenue growth was primarily driven by higher project revenues due to the timing of certain microgrid systems design and installation projects, partially offset by a decrease in electric vehicle charging station sales. Acquisition growth was driven by a $12.7 million revenue increase from the Quality Uptime Acquisition, which was completed in June 2024.

Previous wording

Corporate expenses increased by $114.7 million to $130.6 million during the three months ended July 31, 2024, as compared to the prior year period. The increase in corporate expenses was primarily attributable to:

Current wording

Corporate expenses increased by $8.5 million, or 11.4%, to $83.2 million during the three months ended January 31, 2025, as compared to the prior year period. The increase in corporate expenses was primarily attributable to:

Previous wording

•a $3.0 million increase in compensation and related expenses primarily due to an increase in certain incentive plans, partially offset by the headcount reduction at the end of October 2023.

Current wording

•a $4.3 million increase in compensation and related expenses primarily due to higher salaries and certain incentive plans; and

Previous wording

In addition to normal working capital requirements, we anticipate that our short- and long-term cash requirements will include funding legal settlements, insurance claims, dividend payments, capital expenditures, share repurchases, mandatory loan repayments, and systems and technology transformation initiatives under our ELEVATE strategy. We anticipate long-term cash uses may also include strategic acquisitions. On a long-term basis, we will continue to rely on our Amended Credit Facility for any long-term funding not provided by operating cash flows.

Current wording

In addition to normal working capital requirements, we anticipate that our short- and long-term cash requirements will include funding legal settlements, insurance claims, dividend payments, capital expenditures, share repurchases, mandatory loan repayments, contingent consideration payments from acquisitions and systems and technology transformation initiatives under our ELEVATE strategy. We anticipate long-term cash uses may also include strategic acquisitions. On a long-term basis, we will continue to rely on our Amended Credit Facility for any long-term funding not provided by operating cash flows.

Previous wording

During the three and nine months ended July 31, 2024, we made principal payments of $8.1 million and $24.4 million, respectively, under the term loan. At July 31, 2024, the total outstanding borrowings under our Amended Credit Facility in the form of cash borrowings and standby letters of credit were $1.3 billion and $57.9 million, respectively, and our weighted average interest rate on all outstanding borrowings, excluding letters of credit, was 7.19%. At July 31, 2024, we had up to $427.6 million of borrowing capacity.

Current wording

During the three months ended January 31, 2025, we made principal payments under the term loan of $8.1 million. At January 31, 2025, the total outstanding borrowings under our Amended Credit Facility in the form of cash borrowings and standby letters of credit were $1.5 billion and $29.7 million, respectively, and our weighted average interest rate on all outstanding borrowings, excluding letters of credit, was 6.17%. At January 31, 2025, we had up to $238.0 million of borrowing capacity.

Previous wording

We plan to reinvest our foreign earnings to fund future non-U.S. growth and expansion, and we do not anticipate remitting such earnings to the United States. While U.S. federal tax expense has been recognized as a result of the Tax Cuts and Jobs Act of 2017, no deferred tax liabilities with respect to federal and state income taxes or foreign withholding taxes have been recognized.

Current wording

We plan to reinvest our foreign earnings to fund future non-U.S. growth and expansion, and we do not anticipate remitting such earnings to the United States.

Previous wording

We did not repurchase shares under the share repurchase program during the three months ended July 31, 2024. Share repurchases may take place on the open market or otherwise, and all or part of the repurchases may be made pursuant to Rule 10b5-1 plans or in privately negotiated transactions. The timing of repurchases is at our discretion and will depend upon several factors, including market and business conditions, future cash flows, share price, share availability, and other factors. Repurchased shares are retired and returned to an authorized but unissued status. The share repurchase programmay be suspended or discontinued at any time without prior notice. At July 31, 2024, authorization for $186.5 million of repurchases remained under our share repurchase program.

Current wording

We repurchased shares under the share repurchase program during the three months ended January 31, 2025, as summarized below. Share repurchases may take place on the open market or otherwise, and all or part of the repurchases may be made pursuant to Rule 10b5-1 plans or in privately negotiated transactions. The timing of repurchases is at our discretion and will depend upon several factors, including market and business conditions, future cash flows, share price, share availability, and other factors. Repurchased shares are retired and returned to an authorized but unissued status. The share repurchase programmay be suspended or discontinued at any time without prior notice. At January 31, 2025, authorization for $133.2 million of repurchases remained under our share repurchase program.

Previous wording

Net cash used in investing activities increased by $113.0 million during the nine months ended July 31, 2024, as compared to the prior year period. This quarter’s activity was primarily related to the Quality Uptime Acquisition completed in June 2024.

Current wording

Net cash used in investing activities increased by $1.4 million during the three months ended January 31, 2025, as compared to the prior year period. This quarter’s activity was primarily related to purchases of property, plant and equipment.

Previous wording

Net cash used in financing activities was $23.0 million during the nine months ended July 31, 2024, as compared to net cash used in financing activities of $38.4 million during the prior year period. The change was primarily related to a decrease in net borrowings from our Amended Credit Facility due to the $196.3 million of net cash provided by operating activities.

Current wording

Net cash provided by financing activities was $116.9 million during the three months ended January 31, 2025, as compared to net cash provided by financing activities of $0.5 million during the prior year period. The change was primarily related to an increase in net borrowings from our Amended Credit Facility to fund $106.2 million of net cash used by operating activities.