Exchange: NYSE | Sector: Industrials | Industry: Specialty Business Services
Q2 2025
Published: Jun 6, 2025
Earnings Highlights
Revenue of $2.11B up 4.6% year-over-year
EPS of $0.67 decreased by 2.9% from previous year
Gross margin of 12.2%
Net income of 42.20M
"We returned to organic growth in both B&I and M&D, significantly improved our cash flow compared to the first quarter and generated $1.1 billion in new bookings during the first half, marking a new record for ABM." - Scott B. Salmirs
ABM Industries Incorporated (ABM) Q2 2025 Results: Resurgent Organic Growth, Record New Bookings, and Margin Resilience Amid ERP Transformation
Executive Summary
ABM delivered solid top-line momentum in Q2 2025, supported by a return to organic growth in both the Buildings & Infrastructure (B&I) and Manufacturing & Distribution (M&D) segments, alongside continued strength in Aviation and Education. Total revenue rose 4.6% year-over-year to $2.11 billion, with 3.8% organic growth and contribution from the 2024 Quality Uptime Services acquisition. The quarter featured a larger contribution from Technical Solutions and a rebound in M&D, underscored by a diversified services mix (e.g., material handling and test & balancing) that aims to deepen client relationships and improve margins over time. Management reaffirmed full-year guidance for adjusted EPS of $3.65–$3.80 and projected normalized free cash flow of $250–$290 million, signaling confidence in improving cash generation as ERP-related billing frictions unwind in the second half of the year. Backlog remains healthy at ~$700 million in the Technical Solutions pipeline, with the company reporting $1.1 billion in new bookings in the first half of 2025, a company-wide record. While near-term margin pressure persists in ATS/Microgrid due to project timing and mix, ABM expects a substantial recovery in the second half as delayed projects reaccelerate. The balance sheet shows leverage at ~2.9x debt to pro forma adjusted EBITDA, with liquidity of ~$658 million and free cash flow of $15 million in the quarter, reflecting ERP-related working capital dynamics but improving cash generation as the year progresses.
Net Income: $42.2M; net margin 1.99% (YoY -3.65%; QoQ -3.21%).
Diluted EPS: $0.67 (YoY -2.90%; QoQ -4.29%).
Financial Highlights
Revenue and profitability metrics (Q2 2025 vs Q2 2024):
- Revenue: $2.1117B, up 4.6% YoY; QoQ change -0.15% (per reported metrics).
- Gross Profit: $257.5M; gross margin 12.19% (YoY +1.10%; QoQ -0.89%).
- Operating Income: $82.3M; operating margin 3.90% (YoY +1.23%; QoQ +6.06%).
- Net Income: $42.2M; net margin 1.99% (YoY -3.65%; QoQ -3.21%).
- Diluted EPS: $0.67 (YoY -2.90%; QoQ -4.29%).
- Adjusted metrics: Adjusted Net Income $54.1M, or $0.86 per share; Adjusted EBITDA $125.9M; Adjusted EBITDA margin 6.2% (flat vs prior year).
- Segment mix and growth:
• B&I revenue $1.0B, +3% YoY; op profit $83.0M; margin 8.2% (+40 bps).
• Aviation revenue $260.1M, +9% YoY; op profit $16.5M; margin 6.3% (+80 bps).
• M&D revenue $398.1M, +2% YoY; op profit $39.9M; margin 10% (−110 bps YoY).
• Education revenue $227.8M, +1% YoY; op profit $13.8M; margin 6% (+90 bps).
• Technical Solutions revenue $210.2M, +19% YoY; op profit $13.4M; margin 6.4% (−~3.2 pts vs prior year due to project mix and higher amortization).
- Balance sheet and liquidity:
• Total indebtedness: $1.6B; net debt: $1.609B; debt/Adjusted EBITDA 2.9x.
• Available liquidity: $657.8M; cash and cash equivalents $58.7M.
• Free cash flow (quarter): $15.0M; cash from operations $32.3M; capex $17.1M.
- Cash flow and guidance:
• Normalized FCF guidance for the full year: $250–$290M (excludes $30–$40M of ELEVATE and integration costs and any RavenVolt earn-out).
• ERP implementation progress improving billing and collections; management expects Q3 and Q4 sequential improvements and full-year normalization toward the $250–$290M range.
• Backlog and bookings: backlog in Technical Solutions at ~$700M; first-half new bookings of $1.1B, up 11% YoY; notable $190M new micgrogrid-related project with a major big-box retailer.
• Outlook: Adjusted EPS guidance reaffirmed at $3.65–$3.80; Adjusted EBITDA margin guidance 6.3%–6.5%; tax rate guidance 29–30%; interest expense ~$80–$84M for the year.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.11B
4.63%
-0.15%
Gross Profit
257.50M
1.10%
-0.89%
Operating Income
82.30M
1.23%
6.06%
Net Income
42.20M
-3.65%
-3.21%
EPS
0.67
-2.90%
-4.29%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key takeaways from ABM's Q2 2025 earnings call and Q&A:
- Strategy and growth trajectory: Scott Salmirs highlighted that ABM returned to organic growth in both B&I and M&D, with a record $1.1B in new bookings in H1 and 3.8% organic revenue growth, underscoring ABM's ability to win higher-quality contract work and expand in core markets. Quote: "We returned to organic growth in both B&I and M&D, significantly improved our cash flow... generated $1.1 billion in new bookings during the first half, marking a new record for ABM." (Scott B. Salmirs)
- Margin and margin mix: Salmirs noted ongoing strength in ATS but acknowledged profitability headwinds in Microgrid due to project mix and timing; the team expects improvements as delayed projects advance in H2. Management reiterated that ATS growth remains strong and margin improvement is anticipated as project timing normalizes. Quote: "margin headwinds that impacted profitability... we expect ATS to deliver a very strong year" (Scott B. Salmirs)
- ERP implementation and cash flow: Earl Ellis emphasized progress on the ERP rollout reducing operating friction and enabling cash flow improvements; Q2 cash flow improved quarter-over-quarter, and management expects continued improvement in Q3 and Q4. Quote: "we've made important progress on our ERP implementation this quarter, reducing operational friction and setting the stage for continued improvements in the second half, particularly in cash flow." (Scott B. Salmirs)
- Backlog and market dynamics: ABM reported $700M backlog in Technical Solutions and a robust data-center/microgrid opportunity pipeline; JLL data pointed to improving prime office vacancies (14.8% in Q1) and strong demand for high-quality facilities. Quote: "total segment backlog now sits at $700 million... data center capacity will grow 15% annually" (from the prepared remarks).
- Guidance and outlook: The company reaffirmed its full-year guidance for adjusted EPS of $3.65–$3.80 and normalized free cash flow of $250–$290M, signaling confidence in a stronger second half from the ERP program and project recoveries. Quote: "we are reaffirming our full year guidance for adjusted EPS to be in the range of $3.65 to $3.80" (Earl Ellis).
We returned to organic growth in both B&I and M&D, significantly improved our cash flow compared to the first quarter and generated $1.1 billion in new bookings during the first half, marking a new record for ABM.
— Scott B. Salmirs
We've made important progress on our ERP implementation this quarter, reducing operational friction and setting the stage for continued improvements in the second half, particularly in cash flow.
— Scott B. Salmirs
Forward Guidance
ABM reaffirmed its full-year adjusted EPS guidance of $3.65–$3.80 and an adjusted EBITDA margin range of 6.3%–6.5%. The company also reaffirmed a normalized free cash flow target of $250–$290 million for FY25, excluding $30–$40 million of ELEVATE and integration costs and any RavenVolt earn-out cash outflow. Management expects Q3 and Q4 to show sequential improvement in billing and collections as the ERP system goes live more broadly and as delayed Q2 projects resume in the second half. Key drivers and risk factors to monitor:
- Growth drivers: Sustained upswing in prime office markets in high-quality properties (B&I), continued manufacturing/semiconductor activity (M&D), strong data-center demand, and the microgrid energy transition (Technical Solutions) with a backlog of $700M.
- Operational execution: ERP-driven reductions in billing friction should translate into stronger cash flow in H2; continued investment in sales talent for M&D to monetize higher-margin, strategic service lines.
- Customer and project risk: Project timing/mix volatility in ATS and Microgrid; potential tariff and tax credit policy changes affecting energy project economics; execution risk around large, multi-year contracts.
- Profitability: Expect margins to recover in H2 as delayed projects are completed and as mix normalizes; the bulk of earnings upside is tied to higher-margin, annuity-style services and engineering/design phases of microgrid projects.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ABM Focus
12.19%
N/A
N/A
N/A
CASS
87.70%
-63.50%
1.95%
30.62%
FA
50.00%
5.37%
0.20%
306.51%
RTO
14.20%
11.90%
4.71%
15.03%
CBZ
12.80%
7.59%
2.22%
46.64%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
ABM's QQ2 2025 results reinforce a constructive intermediate-term outlook driven by an improving Office market, resilient manufacturing/e-commerce demand, and a fast-growing Technical Solutions platform. The firm’s organic growth reacceleration in B&I and M&D, along with a robust backlog and record new bookings, provide a credible path to higher earnings and cash flow in H2 2025. The ERP program should unlock sustained improvements in billing efficiency and working capital, supporting a path to the normalized free cash flow target of $250–$290 million. The market remains favorable for ABM's premium-service offerings, particularly in high-quality office properties, data centers, and energy-transition projects. Risks to monitor include project timing, regulatory changes affecting energy incentives, and execution risk related to M&A integration. Overall, ABM trades with a solid growth-and-margin expansion trajectory, supported by a diversified portfolio and a stronger services mix that could lead to multiple expansion if the company sustains its organic growth and cash-flow trajectory.
Key Investment Factors
Growth Potential
ABM's growth runway rests on three pillars: (1) a rebound in high-quality office markets enabling B&I menu expansion and account wins; (2) an expanding M&D portfolio that moves deeper into fabrication facilities, materials handling, and testing/balancing—areas with higher margin potential and stickier customer relationships; (3) a robust Technical Solutions franchise (microgrids and data-center readiness) supported by a ~$700M backlog and ~$1.1B in new bookings in H1 2025, with the Big Box retailer microgrid project exemplifying the scale of the opportunity.
Profitability Risk
Key downside risks include: (1) material project delays or scope changes in ATS/Microgrid; (2) macro volatility affecting corporate office leasing and manufacturing investments; (3) execution risk and integration challenges related to ERP deployment; (4) regulatory and policy shifts impacting energy incentives and grid investments; (5) competition for premium office and mission-critical facilities leading to potentially tighter pricing in select segments.
Financial Position
ABM has a disciplined balance sheet with total debt of $1.6B and debt to pro forma adjusted EBITDA of 2.9x. Liquidity stands at $658M with cash of $58.7M, and quarterly free cash flow of $15M in Q2, reflecting ERP-related working capital effects but improving cash generation as the year progresses. Management targets normalized free cash flow of $250–$290M for FY25, underscoring a path to deleveraging and capacity to fund organic growth and select M&A.
SWOT Analysis
Strengths
Diversified platform across B&I, M&D, Aviation, Education, and Technical Solutions reducing reliance on any single end-market
Record new bookings and return to organic growth in two core segments
Strong backlog in Technical Solutions ($700M) and leadership in microgrid and energy-transition services
Scale and tech-enabled capabilities drive customer stickiness and pricing power in premium property markets
Weaknesses
Near-term margin pressure in ATS/Microgrid due to project timing and mix; elevated amortization costs
ERP deployment friction causing temporary working capital and cash flow headwinds
Dependence on large, project-based revenues which can be lumpy quarter-to-quarter
Opportunities
Expansion of M&D services into fabrication facilities through materials handling and testing/balancing
Growth in data centers and semiconductors; strong macro tailwinds in manufacturing and e-commerce
Bundled APS offerings to win larger contracts and increase cross-sell opportunities
M&A pipeline to accelerate market share gains and capability differentiation
Threats
Timing risk of delayed projects in energy/ATS segments could pressure near-term margin
Regulatory shifts affecting energy incentives and construction-related tax policies
Competitive pricing pressure if macro conditions deteriorate or if client budgets tighten
Execution risk from large ERP deployment and integration efforts
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