Exchange: NYSE | Sector: Industrials | Industry: Specialty Business Services
Q1 2025
Published: Mar 12, 2025
Earnings Highlights
Revenue of $2.11B up 2.2% year-over-year
EPS of $0.69 increased by 0% from previous year
Gross margin of 12.3%
Net income of 43.60M
""We posted 2% organic revenue growth, and delivered adjusted EPS of $0.87. So, we're off to a great start and we're firmly on track to hit our full year financial goals."" - Scott Salmirs
ABM’s QQ1 2025 results reflect a diversified portfolio across five reportable segments, with 2% reported organic revenue growth and a robust backlog in Technical Solutions (ATS) that frames a constructive multi-year growth trajectory. Adjusted EPS of $0.87 and Adjusted EBITDA of $120.6 million underscored operating leverage across segments, particularly ATS and Aviation, even as the company advanced a large ERP transition that temporarily pressured cash flow. Management reaffirmed and raised the lower bound of full-year guidance to $3.65–$3.80 per share, while reiterating a normalized free cash flow target of $250–$290 million, excluding integration costs and earnouts. The quarter also featured strategic investments in technology (ABM Connect, AI-enabled deal desk) and governance actions (credit facility upsizing to $2.2 billion), positioning ABM to capitalize on secular demand for power resilience, data-driven facilities management and onshore manufacturing support. However, near-term cash flow volatility remains a theme due to ERP-related working capital timing and the ongoing labor-market dynamics amid immigration policy considerations. The following analysis integrates segment results, liquidity dynamics, and management commentary to present a balanced view for investors.
Key Performance Indicators
Revenue
2.11B
QoQ: -2.87% | YoY:2.19%
Gross Profit
259.80M
12.28% margin
QoQ: -26.59% | YoY:6.78%
Operating Income
77.60M
QoQ: 304.17% | YoY:4.72%
Net Income
43.60M
QoQ: 472.65% | YoY:-2.46%
EPS
0.70
QoQ: 468.42% | YoY:0.00%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $2.1149 billion, up 2.2% year over year; organic growth 1.6%, with the remainder from the prior-year Quality Uptime Services acquisition.
Gross margin: 12.28% (0.1228), reflecting segment mix and project-related profitability dynamics; gross profit of $259.8 million.
Net income: $43.6 million, net margin 2.06% (0.0206); adjusted net income $55.3 million, adjusted EPS $0.87; GAAP EPS $0.69.
Financial Highlights
Overview of QQ1 2025 performance with YoY and QoQ context. Highlights include:
- Revenue: $2.1149 billion, up 2.2% year over year; organic growth 1.6%, with the remainder from the prior-year Quality Uptime Services acquisition.
- Gross margin: 12.28% (0.1228), reflecting segment mix and project-related profitability dynamics; gross profit of $259.8 million.
- Operating income: $77.6 million; operating margin 3.67% (0.0367).
- EBITDA: Adjusted EBITDA $120.6 million, margin 5.9% (0.059).
- Net income: $43.6 million, net margin 2.06% (0.0206); adjusted net income $55.3 million, adjusted EPS $0.87; GAAP EPS $0.69.
- Cash flow and liquidity: Net cash from operating activities negative $106.2 million; free cash flow negative $122.9 million, driven by ERP-related working capital. Cash at period-end $59.0 million; total liquidity including undrawn facilities ~$296.9 million.
- Leverage and capital structure: Total debt $1.600B; total indebtedness $1.6B; debt to pro forma adjusted EBITDA 2.9x; new upsized facility: $2.2B (revolver $1.6B + $600M term loan) as of after-quarter actions.
- Guidance: Adjusted EPS guidance raised to $3.65–$3.80 for 2025; normalized FCF target $250–$290 million.
- Backlog and growth signals: ATS backlog at $490 million; strong demand in Aviation and Enterprise Solutions; pipeline supported by AI-enabled capabilities and a focus on data-driven operations.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.11B
2.19%
-2.87%
Gross Profit
259.80M
6.78%
-26.59%
Operating Income
77.60M
4.72%
304.17%
Net Income
43.60M
-2.46%
472.65%
EPS
0.70
0.00%
468.42%
Key Financial Ratios
currentRatio
1.52
grossProfitMargin
12.3%
operatingProfitMargin
3.67%
netProfitMargin
2.06%
returnOnAssets
0.84%
returnOnEquity
2.45%
debtEquityRatio
0.93
operatingCashFlowPerShare
$-1.69
freeCashFlowPerShare
$-1.96
dividendPayoutRatio
37.6%
priceToBookRatio
1.88
priceEarningsRatio
19.18
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management conveyed a constructive operating backdrop with several strategic levers in motion. Key themes and quotes:
- Growth and profitability trajectory: “We posted 2% organic revenue growth, and delivered adjusted EPS of $0.87. So, we're off to a great start and we're firmly on track to hit our full year financial goals.” This confirms early momentum and adherence to guidance. (Scott Salmirs)
- Market dynamics and end-market momentum: Scott emphasized a continuing trend of improved office activity and hybrid return-to-work, reinforcing B&I upside: “This is a continuing trend that has to do with optimism out there and return to work. Hybrid is incrementally better, feels like quarter-after-quarter.” (Scott Salmirs)
- Strategic investments and ERP/tech enablement: The call highlighted ERP rollout as a multigroup initiative designed to drive long-term efficiencies, with near-term cash flow impacts disclosed and mitigated by controlled invoicing reviews: “the ERP implementation… will drive cost efficiencies, improve synergy capture and provide real-time analytics” and “invoicing-by-invoice reviews… expect things to normalize in coming months.” (Scott Salmirs); Earl Ellis added color on cash flow timing, stating: “we anticipate that Q2 will actually have a significant increase in cash flow versus Q1.”
- ATS/Technical Solutions momentum: The transcript underscored a backlogged ATS pipeline (~$490 million) and multiple wins in microgrid and energy storage, with continued data-center activity expected to bolster 2025 results: “$490 million backlog… in microgrid, with a strong pipeline,” and “we booked $18 million in Q1 and $24 million in new infrastructure projects.” (Earl Ellis / Scott Salmirs).
- Capital allocation and balance sheet actions: ABM expanded its credit facility to $2.2 billion, signaling confidence from lenders and capacity to fund growth: “expanded and extended our credit facility to $2.2 billion.” (Scott Salmirs); share repurchases continued to offset dilution and reflect capital discipline: “purchased approximately 415,000 shares in the first quarter.” (Earl Ellis)
"We posted 2% organic revenue growth, and delivered adjusted EPS of $0.87. So, we're off to a great start and we're firmly on track to hit our full year financial goals."
— Scott Salmirs
"The ERP implementation… will drive cost efficiencies, improve synergy capture and provide real-time analytics to uncover commercial growth opportunities."
— Scott Salmirs
Forward Guidance
ABM’s forward-looking view rests on continued backstop from robust end-markets and the execution of major productivity enhancements. Management retained a constructive 2025 outlook with:
- Adjusted EPS guidance raised to $3.65–$3.80 for the year;
- Adjusted EBITDA margin guidance unchanged at 6.3%–6.5%;
- Normalized free cash flow guidance of $250–$290 million, after accounting for approximately $30–$40 million of ELEVATE/ERP integration costs and $16 million of total earnouts;
- Interest expense guidance increased modestly to $80–$84 million reflecting higher debt load;
- Near-term cash flow volatility tied to ERP go-live and working-capital timing, with expected normalization through 2H 2025. Key monitoring factors include ERP cadence completion, labor supply dynamics (particularly immigration policy-related labor availability), ATS backlog evolution, and the pace of demand in Aviation and data-center/industrial turnkey projects. Investors should watch:
• ERP integration progress and associated working-capital effects;
• Backlog progression in ATS and project wins in M&D/Manufacturing & Distribution;
• Price/volume mix and pricing actions in B&I and Education;
• Debt-servicing capacity and free cash flow normalization as ERP stabilizes.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ABM Focus
12.28%
3.67%
2.45%
19.18%
CASS
91.10%
18.10%
3.83%
16.16%
FA
45.70%
2.15%
-3.22%
-14.77%
RTO
0.00%
0.00%
0.00%
0.00%
CBZ
27.20%
23.90%
6.41%
9.86%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
ABM enters 2025 with a diversified, defensible portfolio and a strategically favorable mix of high-growth segments (ATS, Aviation, energy resilience, and data-center-related services). The company’s backlog strength, selective win-rate improvements, and a framework for data-driven operations (ABM Connect, AI-assisted deal desk) support a constructive medium-term outlook. The decision to raise the lower bound of adjusted EPS guidance, along with a robust liquidity position and a refreshed capital structure, reinforces the investment thesis. However, near-term cash flow volatility from ERP transition and potential labor-market dynamics warrant a cautious, but constructive stance. Investors should monitor ERP integration milestones, ATS backlog progression, and the evolution of B&I’s leasing activity as indicators of the trajectory toward the latter half of 2025. Overall recommendation: overweight to ABM given its multi-segment resilience, backlog-driven growth potential, and ongoing technology-enabled efficiency program, tempered by the need to see normalization of FCF as ERP transitions complete.
Key Investment Factors
Growth Potential
Backlog in ATS at $490 million supports a strong 2025–2026 growth trajectory, with continued data-center and energy-storage opportunities driving revenue in Technical Solutions. New bookings in M&D and Aviation (e.g., $40M shuttle contract and $10M DFW contract) demonstrate ABM’s ability to win multi-service line deals and expand share in large, complex facilities.
Profitability Risk
Near-term liquidity pressure from ERP-related working capital; potential volatility in labor costs and immigration policy affecting labor supply; dependence on large, long-cycle projects and customer exits (notably M&D) that could compress near-term revenue visibility; elevated leverage at 2.9x debt-to-EBITDA (pro forma).
Financial Position
Solid liquidity position with a renewed $2.2B secured facility and cash of $59M at quarter-end; undrawn liquidity plus revolver capacity provide a buffer for ERP integration and growth investments; normalized free cash flow target of $250–$290M supports deleveraging and shareholder returns over time.
SWOT Analysis
Strengths
Diverse, multi-segment platform across B&I, Aviation, Education, M&D and Technical Solutions (ATS)
Robust ATS backlog (~$490M) and strong microgrid/data-center opportunity pipeline
ABM Industries Incorporated (ABM) QQ3 2024 Results: Resilient Growth Across Aviation and Technical Solutions with Margin Expansion Through Workforce A...