Executive Summary
ABM Industries delivered a solid Q3 2025 despite near-term margin pressure from strategic pricing and escalation actions in select contracts. Revenue reached $2.224 billion, up 6.2% year over year, with 5% organic growth and 1.2% contribution from acquisitions, marking the strongest organic growth in ABM since 4Q2022. Management highlighted a disciplined focus on cash collections, delivering free cash flow of $150 million in the quarter and reducing day sales outstanding meaningfully. Through the first three quarters, ABM has secured over $1.5 billion in new business, a 15% YoY increase, underpinning a favorable longer-term revenue and earnings trajectory. The company signaled a robust margin recovery plan—including a restructuring program targeting $35 million in annual run-rate savings at roughly $10 million of one-time costs—and reiterated confidence in a stronger Q4 driven by ATS (Technical Solutions) performance and enrolment gains from pricing and escalation management. ABM remains positioned to benefit from secular trends in tech-enabled manufacturing, aviation/travel, and electrification (microgrids/data centers), while maintaining a people-led, service-intensive core business that AI will augment rather than replace. Key near-term risks include geographic pockets of slower office market recovery and ongoing pricing negotiations that temporarily pressure margins. Management projects Q4 to show meaningful margin and EPS improvement, with full-year adjusted EPS expected to land at the low end of the prior $3.65–$3.80 guidance range.
Key Performance Indicators
QoQ: -0.95% | YoY:789.36%
Key Insights
Revenue: $2.224B in Q3 2025, up 6.20% YoY and 5.32% QoQ; gross profit: $261.0M (gross margin 11.74%); operating income: $83.4M (operating margin 3.75%); EBITDA: $112.2M (EBITDA margin 5.04%); net income: $41.8M ($0.67 per diluted share); adjusted EBITDA: $125.8M (flat margin vs. prior year at 5.9%); diluted EPS: $0.67; weighted average shares: 62.5–62.8M; free cash flow: $150M (up $135M vs. Q2, up $86M YoY); DSOs declined 7% sequentially; total indebtedness: $1.6B; debt/pro forma adjusted EBIT...
Financial Highlights
Revenue: $2.224B in Q3 2025, up 6.20% YoY and 5.32% QoQ; gross profit: $261.0M (gross margin 11.74%); operating income: $83.4M (operating margin 3.75%); EBITDA: $112.2M (EBITDA margin 5.04%); net income: $41.8M ($0.67 per diluted share); adjusted EBITDA: $125.8M (flat margin vs. prior year at 5.9%); diluted EPS: $0.67; weighted average shares: 62.5–62.8M; free cash flow: $150M (up $135M vs. Q2, up $86M YoY); DSOs declined 7% sequentially; total indebtedness: $1.6B; debt/pro forma adjusted EBITDA: 2.8x; liquidity: $691M (cash $69.3M); share repurchases: 555k shares for $27.1M in Q3; YTD repurchases: ~1.5M shares for $71.3M; equity authorization: increased by $150M to $233M; guidance: full-year adjusted EPS toward the low end of $3.65–$3.80; Q4 interest expense ~ $25M; normalized tax rate 29–30%; cash flow from operations improving with ERP progress and ongoing Elevate integration efforts; acquisitions contributed ~1.2% to revenue in the quarter. Segment highlights: BNI revenue >$1.0B (+3% YoY); Aviation revenue $291.8M (+9%); M&D revenue $408.9M (+8%); Education $235.1M (+3%); Technical Solutions $249.5M (+19% with 60% of segment revenue from microgrids/data center/power).
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
2.22B |
6.20% |
5.32% |
| Gross Profit |
261.00M |
-0.84% |
1.36% |
| Operating Income |
83.40M |
122.99% |
1.34% |
| Net Income |
41.80M |
789.36% |
-0.95% |
| EPS |
0.67 |
799.33% |
0.00% |
Management Commentary
Key management insights from the QQ3 2025 earnings call:
- Revenue momentum and cash generation: Scott Salmirs highlighted 5% organic revenue growth and more than $150 million in free cash flow in Q3, supported by strong cash collection and a meaningful reduction in DSO. He noted, “we delivered 5% organic revenue growth, generated strong free cash flow, and continued to win new business.” Chapter leadership also cited bookings strength with over $1.5 billion in new business through the first three quarters, a 15% YoY increase.
- Margin pressures and strategic pricing: The company acknowledged margin headwinds from selective pricing and escalation decisions, particularly in BNI and M&D. Scott described actions to protect footprint through scope reductions and timing of escalations, while still pursuing long-term extensions. He stated, “these decisions helped drive growth, although they impacted margin in the quarter.” CFO David Orr framed the margin trajectory for Q4: a roughly 100 basis point improvement in overall margin driven by restructuring and strong ATS performance, with ATS historically delivering 11–13% margins in Q4.
- Restructuring and cost discipline: ABM launched a restructuring program in August, targeting at least $35 million in annual run-rate savings at a cost of about $10 million, with further opportunities under review. Orr noted the plan’s broad reach and expected immediate and mid-term impact on margins and cost alignment.
- AI and technology strategy: Management emphasized AI investments to improve RFP responses, HR support, and potential client-facing automation tools, while underscoring that AI will augment, not displace, the core people-led services ABM provides. Salmirs highlighted ABM Connect for Airports and microgrid/data center services as strategic differentiators that position ABM to grow in high-growth markets.
- Segment-by-segment update and outlook: In Aviation, ABM noted continued travel demand strength and ramping new wins; M&D benefited from AI-driven technology investments and reshoring, with semiconductor/pharma wins; Education remained resilient with solid retention; Technical Solutions’ microgrid and data center work now accounts for about 60% of that segment’s revenue. Looking ahead, ABM expects Q4 to show meaningful margin improvements, led by ATS and restructuring benefits, with confidence in a durable multi-year growth trajectory.
"In these areas, we're pushing long-term growth by strategically pricing rebates and extensions and by managing the timing of escalations to protect and expand our footprint."
— Scott Salmirs
"the really big difference in the fourth quarter is our expected performance in Technical Solutions. If you think about historically what this business has done in Q4s past, it's a seasonally very strong quarter... we anticipate that to repeat itself in Q4 of this year. That's a massive part of the margin and EPS improvement."
— David Orr
Forward Guidance
Management’s forward-looking view centers on a meaningful margin and earnings improvement in Q4 2025 relative to Q3 2025, driven by cost reduction and restructuring benefits, and a strong performance from the ATS segment. Key guidance points:
- Full-year adjusted EPS expected toward the low end of the prior range of $3.65–$3.80; Q4 interest expense projected around $25 million; normalized tax rate before discrete items 29–30%; self-insurance adjustments are excluded from the guidance but will be highlighted if material.
- Adjusted EBITDA margin guided to roughly 6.3%–6.5% for the year; Q4 is expected to produce a material sequential margin uplift (approximately 100 bps) with ATS delivering a stronger contribution given historical Q4 margins (11%–13%).
- Free cash flow expected toward the low end of the normalized range of $250–$290 million for the year, excluding $16 million RavenVault and about $40 million Elevate/integration costs year-to-date; ERP conversion progress anticipated to yield further improvements in Q4.
- Near-term catalysts include: (1) the run-rate savings from the restructuring, (2) timing of escalations and better labor efficiencies, (3) ATS order momentum (notably in microgrids, data centers, and power services), and (4) AI-enabled sales and delivery improvements that could unlock new revenue streams and optimize operations.
- Monitoring metrics for investors: Q4 margin progression (target ~100 bps improvement), ATS contribution strength, DSO trajectory, and the rate of realization of restructuring benefits. Risks include continued regional macro weakness in select West Coast/Midwest markets and potential variability in bid/renegotiation cycles across BNI and M&D.