ABM (NYSE: ABM), a leading provider of facility solutions, today
announced financial results for the fourth quarter and full year
ended October 31, 2023.
“Our team executed well in the fourth quarter,
delivering 4.1% revenue growth and strong margins, resulting in
double-digit growth in net income, adjusted EBITDA and adjusted
EPS. Our broad-based organic revenue growth and improved adjusted
EBITDA margin was bolstered by strong operating performances in our
Aviation and Technical Solutions segments," said Scott Salmirs,
ABM's President and Chief Executive Officer. "We also benefited
from continued solid performances in our Manufacturing &
Distribution ("M&D") and Education segments. Despite ongoing
headwinds in the commercial real estate market, Business &
Industry ("B&I") posted modest organic revenue growth, which is
a testament to our positioning in the Class A market and the
overall resilience of the business."
"For full year fiscal 2023, ABM delivered solid
performance in what was an unusually difficult operating
environment, marked by labor shortages, wage inflation, rising
interest rates and softness in commercial real estate. Our team
successfully navigated these challenges, and our results highlight
the advantages of our end market diversification and relentless
focus on our clients," continued Mr. Salmirs. "We continued to
progress on our ELEVATE initiatives, which included the completion
of the first deployment phase of our cloud-based enterprise
resource planning system, including multiple connected
applications. Additionally, we expanded the use of tools for
workforce management, productivity and optimization, all of which
contributed to our financial results."
"Looking to fiscal 2024, we expect generally
healthy market conditions for our Technical Solutions, Aviation,
Education and M&D segments. We also anticipate that the
commercial real estate markets served by B&I will remain
challenged, and that we will be impacted by the reallocation of
some business by a large client in M&D. Combined, we expect
that these factors, along with protracted labor inflation, will
likely keep our enterprise-wide revenue growth rate modest and
adjusted EBITDA margin in the range of 6.2% to 6.5% (1)."
"Our team is focused on winning new business,
continuing to expand our services with existing clients, and
driving operational efficiency through our ELEVATE program, while
carefully managing costs. Supported by our leading market position
and solid free cash flow, we will continue to invest in our growth
and strategic initiatives, strengthening ABM for the long-term
while also returning capital to our stockholders."
(1) When the company provides expectations for
adjusted EPS and adjusted EBITDA margin on a forward-looking basis,
a reconciliation of the differences between these non-GAAP
expectations and the corresponding GAAP measures generally is not
available without unreasonable effort. See “Outlook” and “Use of
Non-GAAP Financial Information” below for additional
information.
Fourth Quarter Fiscal 2023 Results
For the fourth quarter of fiscal 2023, the
Company reported revenue of $2.1 billion, up 4.1% over the prior
year period, including organic growth of 3.8% and growth from
acquisitions of 0.3%. Organic revenue growth was led by a 15.8%
increase in Aviation on robust consumer and business travel,
followed by 5.8% growth in Education and 5.4% growth in M&D.
Technical Solutions grew total revenue 6.2%, including organic
growth of 2.9%, principally driven by several legacy project
closeouts and progress on certain microgrid projects in the
quarter. B&I grew revenue by 0.4% largely reflecting strong
demand from sports and entertainment markets, partially offset by
soft commercial real estate markets.
GAAP net income was $62.8 million, or $0.96 per
diluted share, compared to $48.9 million, or $0.73 per diluted
share last year, representing increases of 29% and 32%,
respectively. The increases in net income and diluted EPS were
primarily attributable to higher segment earnings on higher volume,
the benefits of prior-year insurance adjustments and lower ELEVATE
transformation costs. These gains were partially offset by higher
interest expense. Net income margin was 3.0% compared to 2.4% last
year.
Adjusted net income was $66.2 million, or $1.01
per diluted share, compared to $59.4 million, or $0.89 per diluted
share, in the prior year period, representing increases of 11% and
13%, respectively. These increases primarily reflected higher
segment earnings, partially offset in part by higher interest
expense. Adjusted results exclude items impacting comparability and
a description of items impacting comparability can be found in the
"Reconciliation of Non-GAAP Financial Measures" table.
Adjusted EBITDA grew 10% to $144.2 million,
compared to $130.7 million in the prior year period. Adjusted
EBITDA margin for the quarter was 7.2%, up 40 basis points versus
the prior year. This improvement was largely driven by project
completions in Technical Solutions and normalized performance in
Aviation as compared to the prior year, which was impacted by
adverse project timing. Adjusted results exclude items impacting
comparability. A description of items impacting comparability can
be found in the "Reconciliation of Non-GAAP Financial Measures"
table.
Full Year Fiscal 2023 Results
For fiscal 2023, the Company reported revenue of
$8.1 billion, an increase of 3.7% over the prior year, comprised of
2.4% organic growth and 1.3% from acquisitions. Organic growth
largely reflected strong results in Aviation, M&D and
Education; partially offset by soft commercial real estate and
bundled energy solutions markets served by B&I and Technical
Solutions, respectively.
On a GAAP basis, net income was $251.3 million,
or $3.79 per diluted share, compared to net income of $230.4
million, or $3.41 per diluted share last year. These increases
primarily reflected gains from adjustments to the fair value of
contingent consideration of $45.6 million related to the RavenVolt
acquisition, receipt of an Employee Retention Credit of $24.0
million, and the benefit of cost controls and price increases.
These gains were partially offset by higher interest expense and
labor costs, and lower prior-year insurance adjustments. Net income
margin was 3.1% compared to 3.0% last year.
Adjusted net income for fiscal 2023 was $231.9
million, or $3.50 per diluted share, compared to $247.1 million, or
$3.66 per diluted share, for fiscal 2022. The decline primarily
reflected higher interest expense and labor costs, partially offset
by the benefit of cost controls and price increases. Adjusted
results exclude items impacting comparability. A description of
items impacting comparability can be found in the "Reconciliation
of Non-GAAP Financial Measures" table.
Adjusted EBITDA for fiscal 2023 was $529.1
million compared to $498.1 million in fiscal 2022. Adjusted EBITDA
margin was 6.8% versus 6.6% last year. Adjusted results exclude
items impacting comparability. A description of items impacting
comparability can be found in the "Reconciliation of Non-GAAP
Financial Measures" table.
ABM also released its 2022 Environmental, Social
and Governance ("ESG") Impact Report in the fourth quarter. The
report highlights progress on the Company's long-term commitments
and solutions that enable clients to address ESG risks and
opportunities.
Liquidity, Capital Structure & Share
Repurchases
The Company ended the quarter with total
indebtedness of $1,385.7 million, including $58.2 million in
standby letters of credit, resulting in a total leverage ratio, as
defined by the Company's credit facility of 2.3x. The Company had
available liquidity of $552.5 million, inclusive of cash and cash
equivalents of $69.5 million.
Net cash provided by operating activities for
the fourth quarter and full year of fiscal 2023, was $139.1 million
and $243.3 million, respectively. Free cash flow for the fourth
quarter and full year of fiscal 2023, was $121.2 million, and
$190.7 million, respectively. A reconciliation of net cash provided
by operating activities to free cash flow can be found in the
"Reconciliation of Non-GAAP Financial Measures" table.
During the fourth quarter, the Company
repurchased 2.7 million shares of common stock at an average share
price of $40.82, with a total cost of $110.0 million. For the full
fiscal year, the Company repurchased 3.3 million shares at a total
cost of $137.1 million, reducing its outstanding share count by
approximately 5%.
Subsequent to the end of the fourth quarter,
ABM's Board of Directors approved a $150 million expansion of the
Company's existing share repurchase authorization. The total
current authorization now stands at approximately $210 million. The
Company intends to repurchase its common shares periodically in
open market purchases or privately negotiated transactions and may
make all or part of the repurchases pursuant to Rule 10b5-1 plans.
The timing of repurchases will depend upon several factors,
including market and business conditions, share price and
availability and other factors at the Company's discretion, and the
share repurchase program may be suspended or discontinued at any
time without prior notice.
Quarterly Cash Dividend
Subsequent to the end of the fourth quarter,
ABM's Board of Directors approved a quarterly cash dividend of
$0.225 per common share, which is a 2.3% increase from the prior
quarterly cash dividend, payable on February 5, 2024, to
shareholders of record on January 4, 2024. This increase advances
ABM’s objective to grow its dividend payout ratio to a range of 30%
to 35% of adjusted net income over the long term. This will be the
Company’s 231st consecutive quarterly cash dividend.
Outlook
For fiscal 2024, ABM expects adjusted EPS of
$3.20 to $3.40. Adjusted EBITDA margin is anticipated to be in the
range of 6.2% to 6.5%. Interest expense is expected to be in the
range of $82 million to $86 million and the tax rate, excluding
discrete items and non-taxable items, is anticipated to be 29% to
30%.
The Company cannot provide a reconciliation of
the differences between the non-GAAP expectations and corresponding
GAAP measures for Adjusted EPS and adjusted EBITDA margin in 2024
without unreasonable effort due to the uncertainty of timing of any
gains or losses related to, but not limited to, items such as
prior-year self-insurance adjustments, acquisition and integration
related costs, legal costs and other settlements, as well as
transformation initiative costs. Although we have attempted to
estimate the amount of gains and losses of such items for the
purpose of explaining the probable significance of these
components, this calculation involves a number of unknown
variables, resulting in a GAAP range that we believe is too large
and variable to be meaningful.
Conference Call Information
ABM will host its quarterly conference call for
all interested parties on Wednesday, December 13, 2023, at 8:30 AM
(ET). The live conference call can be accessed via audio webcast at
the “Investors” section of the Company's website, located at
www.abm.com, or by dialing (877) 451-6152 (domestic) or (201)
389-0879 (international) approximately 15 minutes prior to the
scheduled time.
A supplemental presentation will accompany the
webcast on the Company's website.
A replay will be available approximately two
hours after the webcast through December 27, 2023, and can be
accessed by dialing (844) 512-2921 and then entering ID #13742043.
A replay link of the webcast will also be archived on the ABM
website for 90 days.
ABOUT ABM
ABM (NYSE: ABM) is one of the world’s largest
providers of integrated facility services. A driving force for a
cleaner, healthier, and more sustainable world, ABM provides
essential services and forward-looking solutions that improve the
spaces and places that matter most. ABM’s comprehensive services
include janitorial, engineering, parking, electrical and lighting,
energy and electric vehicle charging infrastructure, HVAC and
mechanical, landscape and turf, and mission critical solutions. ABM
serves a wide range of industries—from commercial office buildings
to universities, airports, hospitals, data centers, manufacturing
plants and distribution centers, entertainment venues and more.
Founded in 1909, ABM serves over 20,000 clients, with annualized
revenue exceeding $8 billion and more than 100,000 team members in
350+ offices throughout the United States, United Kingdom, Republic
of Ireland, and other international locations. For more
information, visit www.abm.com.
Cautionary Statement under the Private Securities
Litigation Reform Act of 1995
This press release contains both historical and
forward-looking statements about ABM Industries Incorporated
(“ABM”) and its subsidiaries (collectively referred to as “ABM,”
“we,” “us,” “our,” or the “Company”). We make forward-looking
statements related to future expectations, estimates and
projections that are uncertain, and often contain words such as
“anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,”
“intend,” “likely,” “may,” “outlook,” “plan,” “predict,” “should,”
“target,” or other similar words or phrases. These statements are
not guarantees of future performance and are subject to known and
unknown risks, uncertainties, and assumptions that are difficult to
predict. For us, particular uncertainties that could cause our
actual results to be materially different from those expressed in
our forward-looking statements include: our success depends on our
ability to gain profitable business despite competitive market
pressures; our results of operations can be adversely affected by
labor shortages, turnover, and labor cost increases; we may not be
able to attract and retain qualified personnel and senior
management we need to support our business; investments in and
changes to our businesses, operating structure, or personnel
relating to our ELEVATE strategy, including the implementation of
strategic transformations, enhanced business processes, and
technology initiatives may not have the desired effects on our
financial condition and results of operations; our ability to
preserve long-term client relationships is essential to our
continued success; our use of subcontractors or joint venture
partners to perform work under customer contracts exposes us to
liability and financial risk; our international business involves
risks different from those we face in the United States that could
have an effect on our results of operations and financial
condition; decreases in commercial office space utilization due to
hybrid work models could adversely affect our financial condition;
negative changes in general economic conditions, such as
recessionary pressures, durable and non-durable goods pricing,
changes in energy prices, or changes in consumer goods pricing
could reduce the demand for facility services and, as a result,
reduce our earnings and adversely affect our financial condition;
acquisitions, divestitures, and other strategic transactions could
fail to achieve financial or strategic objectives, disrupt our
ongoing business, and adversely impact our results of operations;
we may experience breaches of, or disruptions to, our information
technology systems or those of our third-party providers or
clients, or other compromises of our data that could adversely
affect our business; our ongoing implementation of new enterprise
resource planning and related boundary systems could adversely
impact our ability to operate our business and report our financial
results; we manage our insurable risks through a combination of
third-party purchased policies and self-insurance, and we retain a
substantial portion of the risk associated with expected losses
under these programs, which exposes us to volatility associated
with those risks, including the possibility that changes in
estimates to our ultimate insurance loss reserves could result in
material charges against our earnings; our risk management and
safety programs may not have the intended effect of reducing our
liability for personal injury or property loss; unfavorable
developments in our class and representative actions and other
lawsuits alleging various claims could cause us to incur
substantial liabilities; we are subject to extensive legal and
regulatory requirements, which could limit our profitability by
increasing the costs of legal and regulatory compliance; a
significant number of our employees are covered by collective
bargaining agreements that could expose us to potential liabilities
in relation to our participation in multiemployer pension plans,
requirements to make contributions to other benefit plans, and the
potential for strikes, work slowdowns or similar activities, and
union organizing drives; our business may be materially affected by
changes to fiscal and tax policies; negative or unexpected tax
consequences could adversely affect our results of operations;
future increases in the level of our borrowings or in interest
rates could affect our results of operations; impairment of
goodwill and long-lived assets could have a material adverse effect
on our financial condition and results of operations; if we fail to
maintain proper and effective internal control over financial
reporting in the future, our ability to produce accurate and timely
financial statements could be negatively impacted, which could harm
our operating results and investor perceptions of our Company and
as a result may have a material adverse effect on the value of our
common stock; our business may be negatively impacted by adverse
weather conditions; catastrophic events, disasters, pandemics, and
terrorist attacks could disrupt our services; and actions of
activist investors could disrupt our business. For additional
information on these and other risks and uncertainties we face, see
ABM’s risk factors, as they may be amended from time to time, set
forth in our filings with the Securities and Exchange Commission,
including our most recent Annual Report on Form 10-K and subsequent
filings. We urge readers to consider these risks and uncertainties
in evaluating our forward-looking statements. We caution readers
not to place undue reliance upon any such forward-looking
statements, which speak only as of the date made. We undertake no
obligation to publicly update any forward-looking statements,
whether as a result of new information, future events, or
otherwise, except as required by law.
Use of Non-GAAP Financial Information
To supplement ABM’s consolidated financial
information, the Company has presented net income and net income
per diluted share as adjusted for items impacting comparability for
the fourth quarter and full fiscal years 2023 and 2022. These
adjustments have been made with the intent of providing financial
measures that give management and investors a better understanding
of the underlying operational results and trends as well as ABM’s
operational performance. In addition, the Company has presented
earnings before interest, taxes, depreciation and amortization, and
excluding items impacting comparability (adjusted EBITDA) for the
fourth quarter and full fiscal years 2023 and 2022. Adjusted
earnings per share and adjusted EBITDA are among the indicators
management uses as a basis for planning and forecasting future
periods. Adjusted EBITDA margin is defined as adjusted EBITDA
divided by revenue excluding parking management reimbursement
revenue. We cannot provide a reconciliation of forward-looking
non-GAAP adjusted earnings per share and EBITDA margin measures to
GAAP due to the inherent difficulty in forecasting and quantifying
certain amounts that are necessary for such reconciliations. The
Company has also presented Free Cash Flow which is defined as net
cash provided by (used in) operating activities less additions to
property, plant and equipment. The presentation of these non-GAAP
financial measures is not meant to be considered in isolation or as
a substitute for financial statements prepared in accordance with
accounting principles generally accepted in the United States of
America. (See accompanying financial tables for supplemental
financial data and corresponding reconciliations to certain GAAP
financial measures.)
We round amounts to millions but calculate all
percentages and per-share data from the underlying whole-dollar
amounts. As a result, certain amounts may not foot, crossfoot, or
recalculate based on reported numbers due to rounding. Unless
otherwise noted, all references to years are to our fiscal year,
which ends on October 31.
|
|
Contact: |
|
Investor Relations: |
Paul Goldberg |
|
(212) 297-9721 |
|
ir@abm.com |
|
|
|
Financial
SchedulesABM INDUSTRIES INCORPORATED AND
SUBSIDIARIESCONSOLIDATED INCOME STATEMENT
INFORMATION (UNAUDITED) |
|
|
|
|
|
|
|
Three Months Ended October 31, |
|
|
(in millions, except per share
amounts) |
|
2023 |
|
2022 |
|
Increase / (Decrease) |
Revenues |
|
$ |
2,092.9 |
|
|
$ |
2,011.1 |
|
|
4.1 |
% |
Operating expenses |
|
|
1,806.9 |
|
|
|
1,753.1 |
|
|
3.1 |
% |
Selling, general and
administrative expenses |
|
|
161.3 |
|
|
|
159.7 |
|
|
1.0 |
% |
Amortization of intangible
assets |
|
|
18.3 |
|
|
|
19.2 |
|
|
(4.8 |
)% |
Operating
profit |
|
|
106.4 |
|
|
|
79.1 |
|
|
34.5 |
% |
Income from unconsolidated
affiliates |
|
|
0.9 |
|
|
|
0.6 |
|
|
60.1 |
% |
Interest expense |
|
|
(20.5 |
) |
|
|
(16.0 |
) |
|
(28.4 |
)% |
Income before income
taxes |
|
|
86.8 |
|
|
|
63.7 |
|
|
36.3 |
% |
Income tax provision |
|
|
(24.0 |
) |
|
|
(14.9 |
) |
|
(61.7 |
)% |
Net
income |
|
|
62.8 |
|
|
|
48.9 |
|
|
28.5 |
% |
Net income per common
share |
|
|
|
|
|
|
Basic |
|
$ |
0.97 |
|
|
$ |
0.74 |
|
|
31.1 |
% |
Diluted |
|
$ |
0.96 |
|
|
$ |
0.73 |
|
|
31.5 |
% |
Weighted-average
common and common equivalent shares outstanding |
|
|
|
|
|
|
Basic |
|
|
64.8 |
|
|
|
66.4 |
|
|
|
Diluted |
|
|
65.3 |
|
|
|
66.9 |
|
|
|
Dividends declared per
common share |
|
$ |
0.220 |
|
|
$ |
0.195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABM
INDUSTRIES INCORPORATED AND
SUBSIDIARIESCONSOLIDATED INCOME STATEMENT
INFORMATION (UNAUDITED) |
|
|
|
|
|
|
|
Years Ended October 31, |
|
|
(in millions, except per share
amounts) |
|
2023 |
|
2022 |
|
Increase / (Decrease) |
Revenues |
|
$ |
8,096.4 |
|
|
$ |
7,806.6 |
|
|
3.7 |
% |
Operating expenses |
|
|
7,037.6 |
|
|
|
6,757.5 |
|
|
4.1 |
% |
Selling, general and
administrative expenses |
|
|
572.8 |
|
|
|
628.3 |
|
|
(8.8 |
)% |
Amortization of intangible
assets |
|
|
76.5 |
|
|
|
72.1 |
|
|
6.1 |
% |
Operating
profit |
|
|
409.5 |
|
|
|
348.8 |
|
|
17.4 |
% |
Income from unconsolidated
affiliates |
|
|
3.9 |
|
|
|
2.4 |
|
|
60.1 |
% |
Interest expense |
|
|
(82.3 |
) |
|
|
(41.1 |
) |
|
(99.9 |
)% |
Income before income
taxes |
|
|
331.1 |
|
|
|
310.0 |
|
|
6.8 |
% |
Income tax provision |
|
|
(79.7 |
) |
|
|
(79.6 |
) |
|
(0.2 |
)% |
Net
income |
|
|
251.3 |
|
|
|
230.4 |
|
|
9.1 |
% |
Net income per common
share |
|
|
|
|
|
|
Basic |
|
$ |
3.81 |
|
|
$ |
3.44 |
|
|
10.8 |
% |
Diluted |
|
$ |
3.79 |
|
|
$ |
3.41 |
|
|
11.1 |
% |
Weighted-average
common and common equivalent shares outstanding |
|
|
|
|
|
|
Basic |
|
|
66.0 |
|
|
|
67.1 |
|
|
|
Diluted |
|
|
66.3 |
|
|
|
67.5 |
|
|
|
Dividends declared per
common share |
|
$ |
0.880 |
|
|
$ |
0.780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABM
INDUSTRIES INCORPORATED AND SUBSIDIARIESSELECTED
CONSOLIDATED CASH FLOW INFORMATION (UNAUDITED) |
|
|
|
|
|
Three Months Ended October 31, |
(in millions) |
|
2023 |
|
2022 |
Net cash provided by operating activities |
|
$ |
139.1 |
|
|
$ |
117.1 |
|
Additions to property, plant
and equipment |
|
|
(17.9 |
) |
|
|
(13.0 |
) |
Purchase of business, net of
cash acquired |
|
|
— |
|
|
|
(137.9 |
) |
Other |
|
|
0.8 |
|
|
|
2.8 |
|
Net cash used in
investing activities |
|
$ |
(17.1 |
) |
|
$ |
(148.2 |
) |
Proceeds from issuance of
share-based compensations awards, net |
|
|
0.8 |
|
|
|
0.8 |
|
Repurchases of common stock,
including excise taxes |
|
|
(111.0 |
) |
|
|
(23.0 |
) |
Dividends paid |
|
|
(14.0 |
) |
|
|
(12.8 |
) |
Borrowings from debt |
|
|
384.5 |
|
|
|
489.3 |
|
Repayment of borrowings from
debt |
|
|
(397.6 |
) |
|
|
(412.4 |
) |
Changes in book cash
overdrafts |
|
|
(9.8 |
) |
|
|
(1.1 |
) |
Financing of energy savings
performance contracts |
|
|
— |
|
|
|
1.2 |
|
Repayment of finance lease
obligations |
|
|
(0.7 |
) |
|
|
(0.7 |
) |
Net cash (used in)/
provided by financing activities |
|
$ |
(147.9 |
) |
|
$ |
41.2 |
|
Effect of exchange
rate changes on cash and cash equivalents |
|
|
(2.3 |
) |
|
|
(1.1 |
) |
|
|
Years Ended October 31, |
(in millions) |
|
2023 |
|
2022 |
Net cash provided by operating
activities(a) |
|
$ |
243.3 |
|
|
$ |
20.4 |
|
Additions to property, plant
and equipment |
|
|
(52.6 |
) |
|
|
(50.8 |
) |
Purchase of business, net of
cash acquired |
|
|
— |
|
|
|
(194.6 |
) |
Other |
|
|
(9.5 |
) |
|
|
3.9 |
|
Net cash used in
investing activities |
|
$ |
(62.1 |
) |
|
$ |
(241.5 |
) |
Taxes withheld from issuance
of share-based compensations awards, net |
|
|
(10.5 |
) |
|
|
(9.9 |
) |
Repurchases of common stock,
including excise taxes |
|
|
(138.1 |
) |
|
|
(97.5 |
) |
Dividends paid |
|
|
(57.5 |
) |
|
|
(51.9 |
) |
Borrowings from debt |
|
|
1,178.5 |
|
|
|
1,479.4 |
|
Repayment of borrowings from
debt |
|
|
(1,136.0 |
) |
|
|
(1,096.9 |
) |
Changes in book cash
overdrafts |
|
|
(20.3 |
) |
|
|
4.3 |
|
Financing of energy savings
performance contracts |
|
|
0.5 |
|
|
|
9.9 |
|
Repayment of finance lease
obligations |
|
|
(3.0 |
) |
|
|
(1.9 |
) |
Net cash (used in)/
provided by financing activities |
|
$ |
(186.3 |
) |
|
$ |
235.5 |
|
Effect of exchange
rate changes on cash and cash equivalents |
|
|
1.6 |
|
|
|
(4.2 |
) |
(a) The year ended October 31, 2023, includes $24.0 million in
Employee Retention Credit (ERC) refunds received from the Internal
Revenue Service. The year ended October 31, 2022, includes a $143.8
million payment made for the Bucio settlement. The years ended
October 31, 2023 and 2022, include a $66 million payment for
deferred payroll taxes under the Coronavirus Aid Relief and
Economic Security Act (“CARES Act”)
|
ABM
INDUSTRIES INCORPORATED AND SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEET INFORMATION (UNAUDITED) |
|
|
|
October 31, |
(in millions) |
2023 |
|
2022 |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
69.5 |
|
|
$ |
73.0 |
|
Trade accounts receivable, net of allowances |
|
1,365.0 |
|
|
|
1,278.7 |
|
Costs incurred in excess of amounts billed |
|
139.2 |
|
|
|
75.8 |
|
Prepaid expenses |
|
78.5 |
|
|
|
82.1 |
|
Other current assets |
|
58.6 |
|
|
|
51.6 |
|
Total current assets |
|
1,710.7 |
|
|
|
1,561.2 |
|
Other investments |
|
28.8 |
|
|
|
14.5 |
|
Property, plant and equipment,
net of accumulated depreciation |
|
131.5 |
|
|
|
125.4 |
|
Right-of-use assets |
|
113.4 |
|
|
|
115.2 |
|
Other intangible assets, net
of accumulated amortization |
|
302.9 |
|
|
|
378.5 |
|
Goodwill |
|
2,491.3 |
|
|
|
2,485.6 |
|
Other noncurrent assets |
|
155.0 |
|
|
|
188.5 |
|
Total assets |
$ |
4,933.7 |
|
|
$ |
4,868.9 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities |
|
|
|
Current portion of debt, net |
$ |
31.5 |
|
|
$ |
181.5 |
|
Trade accounts payable |
|
299.1 |
|
|
|
315.5 |
|
Accrued compensation |
|
249.7 |
|
|
|
246.6 |
|
Accrued taxes—other than income |
|
58.9 |
|
|
|
124.7 |
|
Deferred revenue |
|
90.1 |
|
|
|
46.3 |
|
Insurance claims |
|
177.0 |
|
|
|
171.4 |
|
Income taxes payable |
|
17.9 |
|
|
|
6.6 |
|
Current portion of lease liabilities |
|
32.5 |
|
|
|
30.3 |
|
Other accrued liabilities |
|
261.2 |
|
|
|
230.2 |
|
Total current liabilities |
|
1,217.9 |
|
|
|
1,353.2 |
|
Long-term debt, net |
|
1,279.8 |
|
|
|
1,086.3 |
|
Long-term lease
liabilities |
|
98.8 |
|
|
|
104.5 |
|
Deferred income tax liability,
net |
|
85.0 |
|
|
|
89.7 |
|
Noncurrent insurance
claims |
|
387.5 |
|
|
|
387.7 |
|
Other noncurrent
liabilities |
|
61.1 |
|
|
|
126.0 |
|
Noncurrent income taxes
payable |
|
3.7 |
|
|
|
4.2 |
|
Total liabilities |
|
3,133.8 |
|
|
|
3,151.7 |
|
Total stockholders’ equity |
|
1,799.9 |
|
|
|
1,717.2 |
|
Total liabilities and
stockholders’ equity |
$ |
4,933.7 |
|
|
$ |
4,868.9 |
|
|
|
|
|
|
|
|
|
|
ABM
INDUSTRIES INCORPORATED AND SUBSIDIARIESREVENUES
AND OPERATING PROFIT BY SEGMENT (UNAUDITED) |
|
|
|
|
|
|
|
Three Months Ended October 31, |
|
|
($ in millions) |
|
2023 |
|
2022 |
|
Increase/(Decrease) |
Revenues |
|
|
|
|
|
|
Business & Industry |
|
$ |
1,033.0 |
|
|
$ |
1,028.9 |
|
|
0.4 |
% |
Manufacturing &
Distribution |
|
|
391.2 |
|
|
|
371.2 |
|
|
5.4 |
% |
Education |
|
|
229.8 |
|
|
|
217.1 |
|
|
5.8 |
% |
Aviation |
|
|
248.2 |
|
|
|
214.4 |
|
|
15.8 |
% |
Technical Solutions |
|
|
190.8 |
|
|
|
179.6 |
|
|
6.2 |
% |
Total
revenues |
|
$ |
2,092.9 |
|
|
$ |
2,011.1 |
|
|
4.1 |
% |
Operating
profit |
|
|
|
|
|
|
Business & Industry |
|
|
84.6 |
|
|
|
92.4 |
|
|
(8.5 |
)% |
Manufacturing &
Distribution |
|
|
42.0 |
|
|
|
41.2 |
|
|
1.9 |
% |
Education |
|
|
10.2 |
|
|
|
8.3 |
|
|
23.0 |
% |
Aviation |
|
|
16.4 |
|
|
|
1.3 |
|
|
NM* |
|
Technical Solutions |
|
|
24.4 |
|
|
|
20.9 |
|
|
16.6 |
% |
Corporate |
|
|
(70.0 |
) |
|
|
(83.8 |
) |
|
16.5 |
% |
Adjustment for income from
unconsolidated affiliates, included in Aviation and Technical
Solutions |
|
|
(0.9 |
) |
|
|
(0.6 |
) |
|
(60.1 |
)% |
Adjustment for tax deductions
for energy efficient government buildings, included in Technical
Solutions |
|
|
(0.2 |
) |
|
|
(0.6 |
) |
|
73.9 |
% |
Total operating
profit |
|
|
106.4 |
|
|
|
79.1 |
|
|
34.5 |
% |
Income from unconsolidated
affiliates |
|
|
0.9 |
|
|
|
0.6 |
|
|
60.1 |
% |
Interest expense |
|
|
(20.5 |
) |
|
|
(16.0 |
) |
|
(28.4 |
)% |
Income before income
taxes |
|
|
86.8 |
|
|
|
63.7 |
|
|
36.3 |
% |
Income tax provision |
|
|
(24.0 |
) |
|
|
(14.9 |
) |
|
(61.7 |
)% |
Net income |
|
$ |
62.8 |
|
|
$ |
48.9 |
|
|
28.5 |
% |
* Not meaningful (due to variance greater than or equal to
+/-100%)
|
ABM
INDUSTRIES INCORPORATED AND SUBSIDIARIESREVENUES
AND OPERATING PROFIT BY SEGMENT (UNAUDITED) |
|
|
|
|
|
|
|
Years Ended October 31, |
|
|
($ in millions) |
|
2023 |
|
2022 |
|
Increase/(Decrease) |
Revenues |
|
|
|
|
|
|
Business & Industry |
|
$ |
4,089.4 |
|
|
$ |
4,095.9 |
|
|
(0.2 |
%) |
Manufacturing &
Distribution |
|
|
1,526.7 |
|
|
|
1,445.2 |
|
|
5.6 |
% |
Education |
|
|
880.4 |
|
|
|
834.7 |
|
|
5.5 |
% |
Aviation |
|
|
925.7 |
|
|
|
804.0 |
|
|
15.1 |
% |
Technical Solutions |
|
|
674.2 |
|
|
|
626.8 |
|
|
7.6 |
% |
Total
revenues |
|
$ |
8,096.4 |
|
|
$ |
7,806.6 |
|
|
3.7 |
% |
Operating
profit |
|
|
|
|
|
|
Business & Industry |
|
$ |
315.6 |
|
|
$ |
334.9 |
|
|
(5.7 |
%) |
Manufacturing &
Distribution |
|
|
161.7 |
|
|
|
161.8 |
|
|
— |
% |
Education |
|
|
49.7 |
|
|
|
47.1 |
|
|
5.5 |
% |
Aviation |
|
|
60.0 |
|
|
|
29.3 |
|
|
NM* |
|
Technical Solutions(1) |
|
|
53.2 |
|
|
|
63.8 |
|
|
(16.5 |
%) |
Government Services |
|
|
— |
|
|
|
(0.3 |
) |
|
NM* |
|
Corporate(2) |
|
|
(226.6 |
) |
|
|
(284.5 |
) |
|
20.3 |
% |
Adjustment for income from
unconsolidated affiliates, included in Aviation and Technical
Solutions |
|
|
(3.9 |
) |
|
|
(2.4 |
) |
|
(60.1 |
%) |
Adjustment for tax deductions
for energy efficient government buildings, included in Technical
Solutions |
|
|
(0.3 |
) |
|
|
(0.9 |
) |
|
66.8 |
% |
Total operating
profit |
|
|
409.5 |
|
|
|
348.8 |
|
|
17.4 |
% |
Income from unconsolidated
affiliates |
|
|
3.9 |
|
|
|
2.4 |
|
|
60.1 |
% |
Interest expense |
|
|
(82.3 |
) |
|
|
(41.1 |
) |
|
(99.9 |
%) |
Income before income
taxes |
|
|
331.1 |
|
|
|
310.0 |
|
|
6.8 |
% |
Income tax provision |
|
|
(79.7 |
) |
|
|
(79.6 |
) |
|
(0.2 |
%) |
Net
income |
|
$ |
251.3 |
|
|
$ |
230.4 |
|
|
9.1 |
% |
*Not meaningful (due to variance greater than or equal to
+/-100%)(1) 2022 includes a $7.6 million gain on the sale of
certain healthcare customer contracts.(2) 2023 includes $24.0
million in Employee Retention Credit (ERC) refunds received from
the Internal Revenue Service and $45.6 million adjustment to the
estimate of the fair value of the contingent consideration
associated with the RavenVolt acquisition.
|
ABM
INDUSTRIES INCORPORATED AND
SUBSIDIARIESRECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES (UNAUDITED) |
|
|
|
|
|
($ in millions, except per
share amounts) |
|
Three Months Ended October 31, |
|
Years Ended October 31, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Reconciliation of Net
Income to Adjusted Net Income |
|
|
|
|
|
|
|
|
Net income |
|
$ |
62.8 |
|
|
$ |
48.9 |
|
|
$ |
251.3 |
|
|
$ |
230.4 |
|
Items impacting
comparability(a) |
|
|
|
|
|
|
|
|
Prior year self-insurance adjustment(b) |
|
|
(9.5 |
) |
|
|
(0.7 |
) |
|
|
(11.3 |
) |
|
|
(37.9 |
) |
Legal costs and other settlements |
|
|
0.1 |
|
|
|
(0.6 |
) |
|
|
0.1 |
|
|
|
0.3 |
|
Acquisition and integration related costs(c) |
|
|
3.1 |
|
|
|
4.0 |
|
|
|
14.3 |
|
|
|
16.6 |
|
Transformation initiative costs(d) |
|
|
10.6 |
|
|
|
18.3 |
|
|
|
56.5 |
|
|
|
63.1 |
|
Sale of healthcare customer contracts(e) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7.6 |
) |
Change in fair value of contingent consideration(f) |
|
|
— |
|
|
|
— |
|
|
|
(45.6 |
) |
|
|
— |
|
Employee Retention Credit(g) |
|
|
(1.7 |
) |
|
|
— |
|
|
|
(24.0 |
) |
|
|
— |
|
Union Benefits(h) |
|
|
0.5 |
|
|
|
— |
|
|
|
0.5 |
|
|
|
— |
|
Other(i) |
|
|
4.3 |
|
|
|
— |
|
|
|
4.8 |
|
|
|
— |
|
Total items impacting
comparability |
|
|
7.5 |
|
|
|
21.0 |
|
|
|
(4.9 |
) |
|
|
34.5 |
|
Income tax benefit(j) (k) |
|
|
(4.0 |
) |
|
|
(10.4 |
) |
|
|
(14.6 |
) |
|
|
(17.8 |
) |
Items impacting comparability,
net of taxes |
|
|
3.4 |
|
|
|
10.6 |
|
|
|
(19.5 |
) |
|
|
16.7 |
|
Adjusted net income |
|
$ |
66.2 |
|
|
$ |
59.4 |
|
|
$ |
231.9 |
|
|
$ |
247.1 |
|
|
|
Three Months Ended October 31, |
|
Years Ended October 31, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Reconciliation of Net
Income to Adjusted EBITDA |
|
|
|
|
|
|
|
|
Net income |
|
$ |
62.8 |
|
|
$ |
48.9 |
|
|
$ |
251.3 |
|
|
$ |
230.4 |
|
Items impacting comparability |
|
|
7.5 |
|
|
|
21.0 |
|
|
|
(4.9 |
) |
|
|
34.5 |
|
Income tax provision |
|
|
24.0 |
|
|
|
14.9 |
|
|
|
79.7 |
|
|
|
79.6 |
|
Interest expense |
|
|
20.5 |
|
|
|
16.0 |
|
|
|
82.3 |
|
|
|
41.1 |
|
Depreciation and amortization |
|
|
29.3 |
|
|
|
30.0 |
|
|
|
120.7 |
|
|
|
112.4 |
|
Adjusted EBITDA |
|
$ |
144.2 |
|
|
$ |
130.7 |
|
|
$ |
529.1 |
|
|
$ |
498.1 |
|
|
|
|
|
|
|
|
|
|
Net income margin as a %
of revenues |
|
|
3.0 |
% |
|
|
2.4 |
% |
|
|
3.1 |
% |
|
|
3.0 |
% |
|
|
Three Months Ended October 31, |
|
Years Ended October 31, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Revenues Excluding
Management Reimbursement |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
2,092.9 |
|
|
$ |
2,011.1 |
|
|
$ |
8,096.4 |
|
|
$ |
7,806.6 |
|
Management reimbursement |
|
|
(78.5 |
) |
|
|
(76.5 |
) |
|
|
(302.3 |
) |
|
|
(280.6 |
) |
Revenues excluding management
reimbursement |
|
$ |
2,014.4 |
|
|
$ |
1,934.6 |
|
|
$ |
7,794.0 |
|
|
$ |
7,526.0 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin as
a % of revenues excluding management reimbursement |
|
|
7.2 |
% |
|
|
6.8 |
% |
|
|
6.8 |
% |
|
|
6.6 |
% |
|
|
Three Months Ended October 31, |
|
Years Ended October 31, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Reconciliation of Net
Income per Diluted Share to Adjusted Net Income per Diluted
Share |
|
|
|
|
|
|
|
|
Net Income per diluted share |
|
$ |
0.96 |
|
|
$ |
0.73 |
|
|
$ |
3.79 |
|
|
$ |
3.41 |
|
Items impacting comparability, net of taxes |
|
|
0.05 |
|
|
|
0.16 |
|
|
|
(0.29 |
) |
|
|
0.25 |
|
Adjusted Net Income per diluted
share |
|
$ |
1.01 |
|
|
$ |
0.89 |
|
|
$ |
3.50 |
|
|
$ |
3.66 |
|
Diluted shares |
|
|
65.3 |
|
|
|
66.9 |
|
|
|
66.3 |
|
|
|
67.5 |
|
|
|
Three Months Ended October 31, |
|
Years Ended October 31, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Reconciliation of Net
Cash Provided by Operating Activities to Free Cash
Flow |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
139.1 |
|
|
$ |
117.1 |
|
|
$ |
243.3 |
|
|
$ |
20.4 |
|
Additions to property, plant and equipment |
|
|
(17.9 |
) |
|
|
(13.0 |
) |
|
|
(52.6 |
) |
|
|
(50.8 |
) |
Free Cash Flow |
|
$ |
121.2 |
|
|
$ |
104.1 |
|
|
$ |
190.7 |
|
|
$ |
(30.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The Company adjusts net income to exclude
the impact of certain items that are unusual, non-recurring, or
otherwise do not reflect management's views of the underlying
operational results and trends of the Company.
(b) Represents the net adjustments to our
self-insurance reserve for general liability, workers’
compensation, automobile and medical and dental insurance claims
related to prior period accident years. Management
believes these prior period reserve changes do not illustrate
the performance of the Company’s normal ongoing operations given
the current year's insurance expense is estimated by management in
conjunction with the Company's outside actuary to take into
consideration past history and current costs and regulatory trends.
Once the Company develops its best estimate of insurance expense
premiums for the year, the Company fully allocates such costs out
to the business leaders to hold them accountable for the current
year costs within operations. However, since these prior period
reserve changes relate to claims that could date back many years,
current management has limited ability to influence the
ultimate development of the prior year changes. Accordingly,
including the prior period reserve changes in the Company's current
operational results would not depict how the business is run as the
Company holds its management accountable for the current year’s
operational performance. The Company believes the exclusion of the
self-insurance adjustment from net income is useful to investors by
enabling them to better assess our operating performance in the
context of current year profitability. For the three months ended
October 31, 2023 and 2022, our self-insurance general liability,
workers’ compensation and automobile insurance claims related to
prior period accident years was decreased by $9.5M and by $0.7M,
respectively. For the years ended October 31, 2023 and 2022, our
self-insurance general liability, workers’ compensation, automobile
and medical and dental insurance claims related to prior period
accident years was decreased by $11.3M and by $37.9M,
respectively.
(c) Represents acquisition and integration
related costs primarily associated with Able acquisition.
(d) Represents discrete transformational costs
that primarily consists of general and administrative costs for
developing technological needs and alternatives, project
management, testing, training and data conversion inclusive of
internal costs, consulting and professional fees for i) new
enterprise resource planning system, ii) client facing technology,
iii) workforce management tools and iv) data analytics. These costs
are not expected to recur beyond the deployment of these
initiatives.
(e) Represents a $7.6 million gain on the sale
of certain healthcare customer contracts.
(f) Represents an adjustment to the estimate of
the fair value of the contingent consideration associated with the
RavenVolt acquisition.
(g) Represents Employee Retention Credit (ERC)
refunds received from the Internal Revenue Service.
(h) Includes a $4.4 million accrual related to certain prior
years' union benefits' audit. Also includes a $3.9 million accrual
reversal for an abated withdrawal liability, which was initially
accrued in FY 2019. The accrual was related to a lost client
account where ABM employees assigned to the account participated in
a defined-benefit multiemployer pension fund where contributions to
the pension fund by ABM were limited to that single client
account.
(i) Represents primarily severance and related costs associated
with the Company's reorganization that impacted approximately 150
people.
(j) The Company's tax impact is calculated using the federal and
state statutory rate of 28.11% for US and 22.5% for UK for FY 2023,
and 28.11% for US and 19% for UK for FY 2022. For purposes of
calculating the tax impact, the change in the fair value of the
contingent consideration related to RavenVolt acquisition is deemed
to be an non-taxable item.We calculate tax from the underlying
whole-dollar amounts, as a result, certain amounts may not
recalculate based on reported numbers due to rounding.
(k) The Company’s tax impact also includes the following
discrete items:
- For the three months ended October 31, 2023
- a tax benefit of $1.8 million related to expiring statue of
limitations
- $0.4 million charge related to ERC refunds received from
IRS
- For the year ended October 31, 2023
- a tax benefit of $1.8 million related to expiring statue of
limitations
- $5.4 million charge related to ERC refunds received from
IRS
- For the three months and the year ended October 31, 2022
- a tax benefit of $4.5 million and $8.1 million, respectively,
related to expiring statue of limitations.
ABM Industries (NYSE:ABM)
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