ABM Industries Incorporated (NYSE:ABM) Q4 2022 Earnings Call Transcript

Andy Wittmann: Yes, great. Good evening, guys. Thanks for taking my question and time here tonight. I thought I would ask a question here just on some of the implications from your guidance on the revenue line. You went through this a little bit by the segment, but I guess, with EBITDA expected to be up mid-single-digits. You obviously have some inorganic contribution from RavenVolt, and the other deal. I guess in margins basically at the mid-point guided, EBITDA margin is guided flat year-over-year. I guess that means that the organic revenue guidance is probably what like in the 3% or 4% range. I guess I just wanted to see have you comment on that? And then it sounds like you’re expecting good growth in Technical Solutions, it sounds like there’s good momentum in education.

M&D has been strong for years and had a good quarter here. So, it feels like the slower growing segments are Aviation and B&I. So, maybe Earl, do I have that right or is there some way I should be thinking about that differently?

Earl Ellis: Yes. No. Thanks, Andy. To answer your first question with regards to revenue, so, I think one way of thinking about it is that we’re planning on growing our revenue organically above GDP. And again, if you think about it, we’re continuing to see good demand for our services across each of our IG’s. And again, if you look at that plus the contributions associated with acquisitions and to your point, you know flat margin, that kind of gets you to that mid-single-digit EBITDA growth year-over-year. With regards to the IGs, one thing to note, you’re absolutely right. ATS, we will see probably above average growth as we continue to see the benefits associated with e-mobility and sustainability projects. However, Aviation because we’re still, you know if you think about the first couple of quarters of FY 2022 where we weren’t still back to, kind of like pre-pandemic levels, as we now have been emerging to pre-pandemic levels and we lap those periods, you will see, kind of like outpaced growth in aviation as well.

Andy Wittmann: Okay. Speaking of Aviation, I guess, could you help us understand the magnitude of the work order or the change order that you’re waiting for on the approval for that one? And why is €“ is there a dispute over the work? Is that why taking longer to pay it, maybe just some background on that? It looks like just judging on the margins here versus, kind of historical level? It looks like it’s fairly material.

Earl Ellis: Yes. No, I mean, relatively speaking, not for the enterprise, but for aviation it was only because if you just think about half that we’ve had for aviation, you know at 5% operating profit, right. So, now this gets a flat. So, you could do the math as well as I can. It’s about a $10 million issue. And it’s €“ this context Andy is, we’re in this very large project with a client that involves construction operations. We’re putting in our ABM Vantage. So, what happens, these projects are super dynamic, right? And there’s changes that happen along the way. And as these changes are requested by clients, we’ll do that even ahead of the formality of some approval processes that clients go through. So, in this case towards quarter-end, we were in the process where the work got ahead of the formality of the approval process we’re highly confident that in the first half of the year we’re going to get that payment. It’s for us just a timing issue.