Exchange: NYSE | Sector: Industrials | Industry: Specialty Business Services
Q4 2024
Published: Dec 19, 2024
Earnings Highlights
Revenue of $2.18B up 4% year-over-year
EPS of $-0.19 decreased by 119.6% from previous year
Gross margin of 16.3%
Net income of -11.70M
"ABM finished the year on a high note, driven by double-digit revenue growth in Technical Solutions and Aviation in the fourth quarter, and our performance also reflects the continued resilience of our Business & Industry segment." - Scott Salmirs
ABM Industries Incorporated (ABM) QQ4 2024 Results and Outlook — Diversified Industrials Leader with AI-Enabled Growth Initiatives
Executive Summary
ABM delivered a fourth quarter of fiscal 2024 characterized by solid top-line momentum in higher-growth segments, tempered by a non-operating earnings hit and transition costs. Q4 revenue reached $2.177B, up 4% YoY with 3% organic growth and $0.9% contribution from the Quality Uptime Services acquisition. Management highlighted double-digit growth in Technical Solutions and Aviation, underpinning ABM’s diversified service mix and resilience in a volatile macro environment. However, net income was negative at $11.7M (EPS -$0.19) primarily due to a $59.7M RavenVolt contingent consideration adjustment and other discrete items; adjusted diluted EPS was $0.90, down 11% YoY, and adjusted EBITDA declined 11% to $128M (margin 6.1%).
Looking ahead, ABM reaffirmed a constructive medium-term outlook for 2025. Guidance calls for annual adjusted EPS of $3.60–$3.80 and adjusted EBITDA margin of 6.3%–6.5%, with revenue and margin improvement anticipated as B&I and M&D return to growth in the back half of 2025. Free cash flow is expected to be $250–$290M for the full year, supported by an asset-light, flexible business model. Management stressed ongoing investment in AI and technology (ABM Clean, APS, workforce productivity tools) as differentiators, with ERP upgrades (three Industry Groups completed; remaining rollouts 12–18 months) aimed at lifting efficiency and service outcomes.
The results underscore ABM’s strategic position as a multi-segment facilities solutions provider, with meaningful backlog in Technical Solutions (>$500M) and a robust aviation platform that benefits from a secular airport modernization cycle. The near-term earnings progression will hinge on CRE market inflection, the pace of ERP integration, and the sustained productivity gains from the workforce optimization program.
Key Performance Indicators
Revenue
2.18B
QoQ: 3.97% | YoY:4.04%
Gross Profit
353.90M
16.25% margin
QoQ: 34.46% | YoY:-0.76%
Operating Income
19.20M
QoQ: -48.66% | YoY:-81.95%
Net Income
-11.70M
QoQ: -348.94% | YoY:-118.63%
EPS
-0.19
QoQ: -355.03% | YoY:-119.59%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $2.177B, up 4% YoY; 3% organic growth, 1% from Quality Uptime Services acquisition. QoQ growth about 4% (3.97%).
Gross profit: $353.9M; gross margin 16.25% (0.16x). YoY gross margin was -0.76%; QoQ margin rose 34.46% as mix and quarterly fluctuations weighed in.
Operating income: $19.2M; operating margin 0.88% (0.0088x). YoY and QoQ declines reflect higher corporate costs and lower segment earnings in total.
Net income: -$11.7M; net margin -0.54%. Adjusted net income: $57.5M; adjusted EPS $0.90 (down 11% YoY).
Financial Highlights
Revenue and profitability highlights (Q4 2024):
- Revenue: $2.177B, up 4% YoY; 3% organic growth, 1% from Quality Uptime Services acquisition. QoQ growth about 4% (3.97%).
- Gross profit: $353.9M; gross margin 16.25% (0.16x). YoY gross margin was -0.76%; QoQ margin rose 34.46% as mix and quarterly fluctuations weighed in.
- Operating income: $19.2M; operating margin 0.88% (0.0088x). YoY and QoQ declines reflect higher corporate costs and lower segment earnings in total.
- EBITDA: $178.2M; EBITDA margin 8.18%. Adjusted EBITDA: $128.0M; adjusted EBITDA margin 6.1% (down 110 bps YoY).
- Net income: -$11.7M; net margin -0.54%. Adjusted net income: $57.5M; adjusted EPS $0.90 (down 11% YoY).
- Cash flow: Operating cash flow $30.4M; capex $14.8M; free cash flow (FCF) $15.6M for Q4; full-year 2024 normalized FCF $217M (adjusted for ELEVATE/integration costs of $49M).
- Balance sheet: Total assets $5.10B; goodwill $2.58B; intangible assets $282.4M; total debt $1.452B; net debt $1.379B; cash $64.6M; total equity $1.782B; liquidity $488.2M; current ratio 1.33x.
- Leverage and efficiency: Debt to pro forma adjusted EBITDA 2.6x; labor efficiency program contributed to a near 1% labor-cost reduction in Q4; ERP upgrades underway with 3 IGs completed and remaining 12–18 months.
- Segment mix and highlights: B&I revenue >$1.0B (down <1%); Aviation revenue $276.5M (up 11%); M&D $387.7M (O.I. margin 10.4%); Education $230M (O.I. margin 5.7%); Technical Solutions $257.4M (O.I. margin 10.9%, excluding a $4.3M remediation cost, margin would be 12.6%).
- Backlog and orders: Technical Solutions backlog >$500M; new Q4 orders >$100M including battery energy storage systems for a private renewables developer.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.18B
4.04%
3.97%
Gross Profit
353.90M
-0.76%
34.46%
Operating Income
19.20M
-81.95%
-48.66%
Net Income
-11.70M
-118.63%
-348.94%
EPS
-0.19
-119.59%
-355.03%
Key Financial Ratios
currentRatio
1.33
grossProfitMargin
16.3%
operatingProfitMargin
0.88%
netProfitMargin
-0.54%
returnOnAssets
-0.23%
returnOnEquity
-0.66%
debtEquityRatio
0.82
operatingCashFlowPerShare
$0.48
freeCashFlowPerShare
$0.25
dividendPayoutRatio
-120.5%
priceToBookRatio
1.88
priceEarningsRatio
-71.65
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management insights and quotes grouped by theme:
Strategy and AI-enabled growth
- 'ABM finished the year on a high note, driven by double-digit revenue growth in Technical Solutions and Aviation in the fourth quarter, and our performance also reflects the continued resilience of our Business & Industry segment.' — Scott Salmirs
- 'We introduced our workforce productivity optimization tool... Labor as a percent of revenue was down nearly 1% in the fourth quarter... the rollout played an important role.' — Scott Salmirs
- 'We are convinced these investments will provide critical differentiation as we move forward' (AI initiatives in data mining, RFP enhancements, HR platforms). — Scott Salmirs
- 'Technical Solutions backlog of well over $500 million' and 'booked well over $100 million in new orders in the fourth quarter' illustrate strong pipeline and growth runway.
Operational execution and market dynamics
- 'Aviation set a new record in 2024, surpassing $1 billion and servicing 27 of the 30 busiest U.S. airports' — Scott Salmirs
- 'Aviation offers a more comprehensive service solution with ABM Clean; demand supported by capital projects at major hubs' — Scott Salmirs
- 'B&I is expected to return to growth in the back half of 2025, aided by improving CRE metrics and higher office attendance' — Scott Salmirs
- 'ERP upgrades: three IGs completed; next wave over the next 12–18 months, targeting FY26 completion' — Earl Ellis
Market conditions and guidance
- 'North American air traffic expected to grow ~5.6% in 2025 after 9.2% in 2024' — Scott Salmirs
- 'Macro CRE improvement with leasing activity and office footprint normalization supports B&I inflection' — Scott Salmirs
- '2025 guidance: adjusted EPS $3.60–$3.80; Adj EBITDA margin 6.3%–6.5%; normalized FCF $250–$290M' — Earl Ellis
- 'Back half of 2025 expected to be stronger; ATS and APS opportunities support growth' — Scott Salmirs
ABM finished the year on a high note, driven by double-digit revenue growth in Technical Solutions and Aviation in the fourth quarter, and our performance also reflects the continued resilience of our Business & Industry segment.
— Scott Salmirs
Labor as a percent of revenue was down nearly 1% in the fourth quarter; and while there are many factors that contributed to that, the workforce optimization productivity rollout played an important role.
— Scott Salmirs
Forward Guidance
ABM guides to revenue and profitability improvement in 2025, driven by expected inflection in its two largest segments, B&I and M&D, in the second half of the year. Key targets include adjusted EPS of $3.60–$3.80 and Adjusted EBITDA margin of 6.3%–6.5% for the full year, with interest expense of $76–$80M and a normalized tax rate of 29%–30%. Free cash flow is forecast at $250–$290M, normalized for $30–$40M of ELEVATE/integration costs and $16M of the earnout paid from operating cash, with the remainder of the earnout funded via financing. The roadmap includes continuing ERP rollouts (3 IGs completed; 12–18 months to finish the balance), which should unlock operating leverage and higher-margin service delivery.
Industry dynamics underpinning the outlook include sustained demand in data center and semicon end-markets (M&D) and a resilient aviation environment supported by ABM Clean and APS, plus a gradual CRE recovery (B&I). Management also highlights a backlog in Microgrid and energy resiliency with potential for continued expansion in data center and mission-critical infrastructure.
Risks to the guidance include macroeconomic policy shifts under a new administration, potential rate/energy policy changes, slower CRE recovery than anticipated, ERP integration risks, and potential upcharges in ELEVATE-related costs. Investors should monitor: (1) CRE leasing and office attendance trends, (2) effectiveness and pace of ERP rollouts and workforce productivity benefits, (3) ABM Clean and APS adoption rates across Aviation and Education, and (4) evolving capital allocation and M&A opportunities as the ERP program de-risks and earnings power improves.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ABM Focus
16.25%
0.88%
-0.66%
-71.65%
CASS
81.50%
5.10%
2.01%
29.91%
FA
45.10%
-26.30%
-7.68%
-7.59%
RTO
12.50%
8.35%
2.62%
23.06%
CBZ
-13.40%
-23.20%
-5.10%
-11.81%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
ABM’s QQ4 2024 results underscore a diversified growth platform with meaningful secular tailwinds in Technical Solutions (microgrids, energy storage, data center resilience) and Aviation (airport modernization, ABM Clean). The anticipated 2025 back-half growth in B&I and M&D, backed by a backlog-rich Technical Solutions and a healthier labor-cost trajectory, supports a constructive medium-term outlook. The company’s stated targets—adjusted EPS of $3.60–$3.80 and EBITDA margin of 6.3%–6.5% in 2025, and normalized FCF of $250–$290M—are credible given the ongoing ELEVATE initiatives and ERP rollouts, albeit contingent on the pace of CRE recovery and successful ERP integration. The robust dividend policy and a steady buyback program bolster shareholder value, while AI investments offer potential upside in productivity and RFP effectiveness. Investors should monitor CRE recovery signals, progress of ERP implementations (three IGs completed; remaining 12–18 months), and the pace at which ABM translates backlog into realized revenue and margin expansion.
Key Investment Factors
Growth Potential
Strong long-term runway in Technical Solutions (microgrids, data center energy resiliency) and Aviation (airport modernization, ABM Clean). 2025 guidance implies mid-single-digit top-line growth with margin expansion as ELEVATE benefits materialize and ERP platforms scale. ABM’s backlog in Tech Solutions (>$500M) and new orders (> $100M in Q4) provide visible near-term growth support.
Profitability Risk
Macro CRE recovery risk weighing on B&I; ERP/AI investments carry execution risk and near-term cost pressure from ELEVATE/integration costs; RavenVolt earnout adjustments and related contingent considerations can cause volatility in reported results; high goodwill/intangible asset base raises impairment risk if.end-market trends deteriorate.
Financial Position
Moderate leverage with debt-to-EBITDA around 2.6x; solid liquidity with ~$488M available; FCF generation targeted at $250–$290M in 2025; asset-light and flexible model supports capital returns (dividends + buybacks) and M&A optionality once ERP migrations complete.
SWOT Analysis
Strengths
Diversified, multi-segment portfolio with exposure to high-growth end-markets (Technical Solutions, Aviation, APS).
Strong backlog in Technical Solutions (> $500M) and robust airport modernization trend benefiting Aviation.
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