ABM Industries (NYSE:ABM) reported stronger second-quarter fiscal 2026 revenue growth and record first-half new sales bookings, while management maintained its full-year adjusted earnings outlook and said it expects a stronger margin performance in the second half of the year.
President and Chief Executive Officer Scott Salmirs said ABM had “a strong quarter,” citing 6.1% organic revenue growth and first-half new sales bookings of $1.2 billion, which he called a new record for the company. Growth was led by ABM Technical Solutions and Aviation, while Manufacturing and Distribution benefited from both underlying demand and the WGNSTAR acquisition.
Revenue rises to second-quarter record
Executive Vice President and Chief Financial Officer David Orr said revenue increased 8.4% year over year to a second-quarter record of $2.3 billion. That included 6.1% organic growth and a 2.3% contribution from acquisitions, primarily WGNSTAR.
Orr said consolidated organic growth was the strongest ABM has delivered since the third quarter of 2022. By segment, Technical Solutions revenue grew 27%, Aviation rose 20%, Manufacturing and Distribution increased 17%, Education grew 2%, and Business & Industry was essentially flat.
Net income for the quarter was $43.1 million, or $0.73 per diluted share, compared with $42.2 million, or $0.67 per diluted share, in the prior-year period. Adjusted net income was $52.9 million, or $0.90 per diluted share, compared with $54.1 million, or $0.86 per diluted share, last year. Orr said the year-over-year changes primarily reflected higher interest and amortization expense, offset by lower tax expense and corporate costs, while per-share results were helped by recent share repurchases.
Adjusted EBITDA increased $5.8 million from the prior year to $131.7 million. Segment operating margin improved 20 basis points sequentially to 7.3%, but was down 60 basis points from a year earlier. Orr attributed the year-over-year decline mainly to the impact of contracts that came online last year in Manufacturing and Distribution and Business & Industry, as well as higher amortization expense tied to WGNSTAR.
Segment trends show strength in Technical Solutions, Aviation and M&D
In Business & Industry, revenue was essentially flat at $1 billion. Orr said strength in ABM’s U.K. markets was partially offset by the mid-quarter exit of a large U.K.-based client and other client exits, particularly on the West Coast. Operating profit was $76.7 million and margin was 7.6%, down from $83 million and 8.2% a year earlier.
During the question-and-answer portion of the call, Salmirs said West Coast office markets remain pressured, particularly in technology-heavy cities such as Los Angeles, San Francisco and Seattle. He said competitors have made pricing and margin decisions that do not meet ABM’s thresholds. Orr said the exit of the large U.K. client would account for about 300 basis points of growth impact for Business & Industry in the second half.
Aviation revenue increased 20% to $310.8 million, supported by healthy travel demand and new contract wins, particularly a Heathrow contract. Operating profit was $16.3 million, with a margin of 5.3%, compared with $16.5 million and 6.3% last year. Orr cited weather-related costs, contract scope changes, TSA-driven operational disruptions and ramp-up costs for Heathrow as pressures on profit and margin.
Manufacturing and Distribution revenue rose 17% to $463.8 million, including 7% organic growth and 9% growth from WGNSTAR. Operating profit was $40.6 million and margin was 8.8%, compared with $39.9 million and 10% last year. Orr said margin was affected by the mix of newer contracts and $4 million of incremental amortization expense related to WGNSTAR. Excluding that incremental amortization, he said margin was 9.6%.
Education revenue grew 2% to $232.2 million, primarily from escalations. Operating profit increased 19% to $16.4 million, and margin expanded 100 basis points to 7%, driven by labor efficiency and escalation management.
Technical Solutions revenue grew 27% to $267.3 million, including 22% organic growth. Orr said the segment benefited from data center activity, battery energy storage system work and HVAC projects. Operating profit was $16.8 million, with margin of 6.3%, compared with $13.4 million and 6.4% last year.
WGNSTAR expands semiconductor reach
Salmirs said the WGNSTAR acquisition has strengthened ABM’s position in semiconductor fabrication environments and is “performing well.” He said ABM secured tens of millions of dollars in new business during the quarter and delivered high double-digit organic revenue growth across its semiconductor market.
Responding to an analyst question, Salmirs said ABM previously had a strong presence in semiconductor facilities outside the fabrication area, while WGNSTAR operates inside the fabrication environment. He described the combination as making ABM a more seamless provider for semiconductor clients.
Salmirs said ABM has more than 60 semiconductor clients and operates at more than 300 sites. He added that ABM is working with 75% of U.S. and European fab makers by capacity and with seven of the 10 major OEMs. “We see in semiconductor space, double-digit growth continuing for a while,” he said.
Cash flow improves, leverage reduction remains priority
ABM ended the quarter with total indebtedness of $1.9 billion, including $23 million in standby letters of credit. Total debt to pro forma adjusted EBITDA was 3.2 times. Available liquidity was $614 million, including $95 million in cash and cash equivalents.
Orr said the WGNSTAR acquisition pushed leverage above three times, as expected, and ABM expects to reduce leverage below three times by the end of the fiscal year. He said near-term capital allocation priority is debt repayment, though the company will remain flexible if value-creation opportunities arise.
Second-quarter cash flow from operations was $66.2 million, and free cash flow was $22.4 million. For the first six months, cash flow from operations was $128.2 million and free cash flow was $71.2 million, compared with a use of cash of $73.9 million and negative free cash flow of $107.8 million in the prior-year period. Orr said the approximately $180 million year-over-year improvement reflected working capital management and progress on ERP stabilization.
Full-year outlook maintained
ABM maintained its fiscal 2026 adjusted earnings per share outlook of $3.85 to $4.15. Orr said ABM now expects organic revenue growth to be toward the high end of its 3% to 4% range. The WGNSTAR acquisition is expected to add about one additional point of revenue growth, bringing total growth to the high end of ABM’s 4% to 5% range.
Segment operating margin is expected to be toward the low end of the company’s 7.8% to 8% range, with margin expansion weighted toward the second half of the year. Orr said the improvement is expected to be driven primarily by better mix and volume in Technical Solutions.
Interest expense is now forecast at approximately $110 million because of higher-than-expected interest rates, which Orr said ABM plans to offset with additional cost actions. The company continues to expect free cash flow of about $250 million in 2026 before transformation and integration costs, the final RavenVolt earn-out and any incremental restructuring.
Salmirs said ABM’s end markets remain “largely constructive,” though the company is monitoring macroeconomic uncertainty and the potential impact of rising fuel costs on airline clients. He said ABM remains focused on deleveraging, disciplined capital allocation and margin improvement in the second half.
About ABM Industries (NYSE:ABM)
ABM Industries Incorporated is a leading provider of integrated facility services, offering a comprehensive suite of solutions designed to support the operation, maintenance and enhancement of commercial properties. The company’s core services include janitorial and custodial maintenance, HVAC and mechanical systems support, electrical and lighting solutions, and energy optimization. Additional offerings span parking management, security services, landscaping, and specialized support such as technical solutions and sustainability consulting.
Serving a diverse range of markets, ABM caters to clients in commercial real estate, aviation, healthcare, manufacturing, education, government entities, and technology campuses.
