ABM Industries Incorporated (ABM) on Q2 2021 Results - Earnings Call Transcript
Operator: Greetings and welcome to ABM Industries Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. David Gold, Investor Relations for ABM Industries. Thank you. You may begin. David Gold: Thank you for joining us this morning. With us today are Scott Salmirs, our President and Chief Executive Officer; and Earl Ellis, our Executive Vice President and Chief Financial Officer. Scott Salmirs: Thanks, David. Good morning and thank you all for joining us today to discuss our second quarter results. As detailed in yesterday's press release, ABM reported strong second quarter financial results, building on the progress we achieved in our first quarter. Second quarter adjusted income from continuing operations per diluted share increased to $0.82, up nearly 37% from the year ago quarter. We generated significant operating leverage with adjusted EBITDA improving 17% year-over-year to $106.6 million and adjusted EBITDA margin increasing 100 basis points to 7.1% on slightly higher revenues. We're pleased to note that for the first time in five quarters growth in four of our key segments B&I, T&M, Education and Technical Solutions more than offset the softness in aviation, which while improved on a sequential basis, continued to reflect the impact of the pandemic. In short, our second quarter performance reflected a consistently high level of operational execution by our team amid gradually improving business conditions in sync with the reopening of the economy. This strong showing in our current visibility have enabled us to increase our full year guidance for adjusted earnings per share, while we continue to invest to support future growth. Consistent with what we have discussed over the past several quarters, our customers continue to prioritize protecting their people and spaces, driving strong demand for our higher margin virus disinfection work orders. EnhancedClean, our proprietary and trusted protocol for cleaning and disinfecting spaces, was an important contributor to our second quarter results as well. Earl Ellis: Thanks, Scott, and good morning, everyone. Second quarter revenue was $1.5 billion, up 0.1% from last year. As Scott mentioned, revenue in four of our segments grew on a year-over-year basis, offsetting the continued pandemic related softness we've experienced in the aviation segments. Key revenue growth drivers in the quarter included higher disinfection related work orders and continued strong demand for our EnhancedClean services. Operator: Our first question comes from the line of Tim Mulrooney with William Blair. Please proceed with your question. Tim Mulrooney: Good morning, Scott. Good morning, Earl. Earl Ellis: Good morning. Scott Salmirs: Good morning. Tim Mulrooney: Thank you guys for taking my questions. So a couple questions on labor first, labor cost and then labor availability. On the labor cost side, in the last quarter you said that you anticipated retaining most of your labor arbitrage through year and that is a big part of your margin expansion coming from labor savings. But here we are a couple months later and inflation is on the rise and on the forefront of everyone's mind, do you think the piece of your margin expansion that came from labor savings over the last 12 months, is that your expectation that eventually gets inflated away in the coming period? Scott Salmirs: Yes, that's a good question. So I mean, the answer is yes and we've consistently said that. But I think it's important Tim to level set this. And just as a reminder, 50% of our revenues come from unionized labor, which is above market wage and having benefits. So we never really see pressure there. So it's really on the other 50%. So we have the mitigation right there. And for us as we think about labor and what we're doing, we put together a pod for this, just like we did during COVID when we talked about how we created these task forces. So we have kind of a multi discipline taskforce just focused on recruiting and labor efficiencies right now. And we're hyper targeting certain areas, because not every area is built the same, right? There are places like Orlando and Dallas and Houston, which have a little bit more pressure than other areas. And again, we're only -- really mostly focused on the non-union areas. So I think it's something that's top of mind for us. But I always point people back to 2018 and 2019, when there were labor pressures as well in and how we navigated there, and it is what we do, right. So eventually we'll see some of the efficiencies trail off, which is what we said because people will return to work and will be re-staffing the buildings. But we are going to maintain some of those savings because of efficiencies of re-staffing. So we feel good about that. And then, the last thing I'll say about the labor pressures is, we do ultimately get this back from our customers. It's not exactly elastic, but we pass through and we shown in '18 and '19, that as labor costs rise, we're really good at recapturing those from customers because they get it, because they're facing the same thing. So it's not anything that's kind of just segmented to our industry. So, again, it's top of mind, but we feel like we got this. Tim Mulrooney: Okay. That's very reassuring. Thanks, Scott. Any of the investments that you've made recently, is there anything there that would help you pass on this cost in a different way, new capabilities that you have -- that you hadn't had before? Or is that not really related to this piece of the business? Scott Salmirs: It's not necessarily related to this piece of business. But I will tell you the first tranche of our technology path was a couple of years ago, when we upgraded our HR system and then went to the cloud and got a -- again, much better capability. So it helps us have insight and information that we never had a couple of years ago. And in this kind of labor game, the key is having information knowing where the pressure points are, knowing how to articulate and dynamically staff. So I'd say, the newer investments are not necessarily exactly related to labor, because fortunately we got ahead of that, fortuitously. Tim Mulrooney: Understood. If I could just squeeze one more, and I wanted to ask about labor availability. I mean, you guys had a 114,000 employees towards the year-end. And I know this is down from 2019, but still more employees and pretty much every other company on my coverage list. So my question here is not about labor costs, it's about labor availability. Most companies, I talked to list labor availability as the prevailing issue right now even more so than inflation. So is labor availability a major issue for you right now? And if so, has this affected service levels in any material way? Scott Salmirs: Yes. So funny, I would say, probably for our 112-year history, labor availability is always top of mind, right, because of what we do, right. But what I would say is this. I'd say, it's still a little early in the game, right? There's a federal stimulus out there of $300 a week, which we all know about over and above unemployment. And we do the math on that, you think about a $15,000 a year bump for people who are unemployment -- on unemployment. So that's something that keeps people at home. And we're starting to see some of the states rolling off, starting this month and in September, the Federal program rolls off. So I think it's a little early to see about what the labor availability will be in the fall when people return to work, because that's when we're really going to need it. Like, we don't have this massive need right now because generally speaking, Tim, right now it's still very muted occupancy and office buildings, right and travel still only at 60% of where it was. So I think we'll have more to say, and other companies are going to have more to say, after the Federal stimulus wears off, and how many people reenter the workforce. So for now, we're navigating it well. But, again, we'll acknowledge it's definitely at muted levels right now of need, right? So I think September is going to be the time where everybody is going to really understand what the availability pressures are. But I think anything before that is just speculation in our mind. Tim Mulrooney: Okay. Scott Salmirs: Is that helpful? Tim Mulrooney: Thank you very much. Scott Salmirs: That make sense? Tim Mulrooney: Yes, that's very helpful. Understood. Thanks for taking my questions. Scott Salmirs: You got it, Tim. Operator: Thank you. Our next question comes from the line of Sean Eastman with KeyBanc Capital Markets. Please proceed with your question. Sean Eastman: Hi, guys. Thanks for taking my questions and nice job again this quarter. Scott Salmirs: Thank you. Sean Eastman: I guess just going back to the margin discussion, the different moving parts there, I mean, we have an updated second half outlook. But it seems like the dynamic in the business doesn't really change too much until the fall, September, October. So it's kind of right at the end of the fiscal year. I'm just wondering how much we can extrapolate from this second half updated margin guidance, as we think about what's sustainable going into next year. And then, I could just go round and round in circles around the different moving parts between labor efficiencies and how these IT investments trend. ATS, coming back and being a growth driver again. I mean, is this implied second half run rate sustainable? What are the big moving parts we really need to consider on our models going into next year relative to that run rate? Scott Salmirs: Sure. So let's -- and obviously we're not ready to guide yet for '22. So, I'm going to -- I have limited to say about that. But I could tell you, look, we feel super confident about the second half of this fiscal year for us. That's why we are able to raise guidance. And a lot of that, honestly, Sean, has to do with having better line of sight. We've been really consistent about the fact that we want to be responsible. And until we have line of sight, we're not going to get over our skis, right? So I think we have at this point in time, we feel like we have really good line of sight to the rest of this year. And the dynamics look really good. Between EnhancedClean and our work orders in the second half, they maintained at the levels of the first half. And we feel like it's going to be strong for the rest of this year. We believe there's going to be a return to work. Is it going to be 100% of office occupancy? Absolutely not. But we are probably seeing somewhere around 25% average across the country, and probably more in the range of 40% in the southern states and 16% on the coast. So we think that's going to tick up and return to work is going to be more revenues for us. It's going to be more disinfection services. We will give a little bit of that back from the labor efficiencies, because we'll have to re-staff the building. But that's really a positive trend for us. And then the last thing, and you mentioned it is Technical Solutions, we have a backlog of over $250 million in business, our strongest ever. And more importantly, our churn rate is up. We typically -- our churn rates for the second quarter was somewhere in the range of 12% and -- but sequentially through the quarter got stronger and stronger. And so we're excited about that to actually turn the workflow. I think you're going to see -- you're going to see revenues go up in the second half, you're going to see disinfection strong. You'll see, again, the mitigation on the labor side, but you're also going to see ATS churn up as well. So I think we feel really good about that. And we'll see where it goes into '22 as we get closer to that. And, again, November 1, starts our '22 and I think that's still going to be at the time where people are returning to work. And so I think we'll have a good start to '22 as well. But again, it's early to start guiding. Does that makes sense? Sean Eastman: Yes. Yes, it does. Okay. And, obviously, the balance sheet primed for some capital deployment here. It seems like you kind of stepped up your M&A commentary a little bit in your communications here this quarter. I mean, could you just talk -- speak to the velocity in the acquisition pipeline? I'm hearing from a lot of companies that sort of sell in decision making is really accelerating here. Scott Salmirs: Yes. So, yes, there's definitely more activity. And remember for us, we were pretty consistent last year that until we get through this pandemic, and until we feel like there's stabilized liquidity and what have you, we weren't going to start thinking about it. So we've only been in the game for a very short period of time, but we have our teams out there. There is activity. We'd like to think there's going to be opportunity for us. And the nice thing for us is -- and you -- I'm not going to tell you anything, you haven't heard about private equity and having access to capital, but the nice thing for us is that we as a strategic buyer have synergies, both operating and revenue. That helps make us competitive if there's an attractive asset out there. So it's definitely a priority for us, M&A, because we’re -- growth is so important. So we're excited about what we're starting to see. Sean Eastman: Okay, excellent. I'll turn it over there. Thanks so much, Scott. Scott Salmirs: Thanks, Sean. Operator: Thank you. Our next question comes from the line of Andy Wittmann with Robert W. Baird. Please proceed with your question. Andy Wittmann: Great. Good morning. Thanks for taking my question. Scott, in your prepared remarks you mentioned that your B&I customers and some of your manufacturing customers, they're going to keep cleaning, you think that some of the enhanced cleaning services might become part of the contract. And so I just wanted to understand that mechanism a little bit more. Do you expect that those would be negotiated contracts, or as they look to increase the size? Do you think generally speaking that your customers as they look to increase the amount of cleaning that they do that they go out to rebid with that? And what do you think as these things become part of the base contract and less tag worker or work order work? What, if any, implications are there to the margins? What are your thoughts on that one? Scott Salmirs: Yes that's a great question. Andy I think -- you know what Andy I think we've been really consistent for the past few quarters, saying that the natural gravitation of this work will be to be embedded in scope. Because I mean, look, I was the former facility manager, that's what I would do, right. And so I think, as clients start thinking about retendering contracts, which will probably happen over the next year or two, I do see them incorporating in, it's a smart thing to do. And I think we've talked about 30% margins on this work, we'll see that trail down a little bit. I don't know where it'll end up landing. Will it land at 20%, will it land at 25%, but the reality is for us, there is -- it's a higher value service, and you can build in a higher margin for a higher value service. There's training, there's equipment, there's all these protocols. So I think we'll be able to retain a good amount of the margin. But absolutely, the expectation is that it will gravitate into the base contracts. For the bigger clients, for the smaller tenants, I think it's still going to be kind of on a work order basis, which would make sense for them as well. Andy Wittmann: That makes sense. But as we sit here today in June, are you seeing those kinds of discussions happening or this is just still, I mean, you've been saying this for a while, like you just said there, but are you seeing anything today that towards this trend here in June? Scott Salmirs: Not yet. You know, why? because people aren't really focused on rebidding contracts right now, right. I think, if you think of the life of a facility manager right now, what's top of mind for them is preparing for return to work for all their workers, right. So they're looking at reoccupancy programs, they are looking at space planning for their offices, all the health and safety stuff. Rebidding a janitorial contract is a pretty big deal. It takes a lot of focus and effort. So my sense is that, that kind of thing is going to happen probably '22, '23 versus the back half of this year, because we just haven't heard about any plans yet on scale to get in the market and rebid. And I think the other part of it, the insight I have, Andy, and maybe this is helpful is when you don't know -- when you’re a facility manager, and you don't know what your ultimate occupancy is going to be or floor layout, you're getting ahead of yourself by bidding the contract, because you can't really drill down on a good scope yet, because you just don't know how it's all going to land. So kind of, if I were in their shoes, I would think it's premature right now to start putting together a formal scoping for what the new ways of work look like, because people haven't really returned yet. Does that make sense? Andy Wittmann: Yes. It makes a lot of sense. Just on Technical Solutions here, you guys put in electric vehicle charging stations, you retrofit schools with all kinds of different systems. Both of these things are talked about as having -- actually some of these have passed the $1.9 trillion thing had money directly for schools. I'm wondering, I wouldn't expect that it's in the backlog yet. But are you bidding projects that you can kind of tie to these monies that have been allocated already? You mentioned the record backlog. I'm just kind of curious as to if that's kind of before the stimulus here or after the stimulus and any comments that you have on that particular. Scott Salmirs: Yes, I think the good news is where we haven't seen yet the direct effect of that because a lot of these programs haven't been formalized. But I can tell you that this kind of bundling of solutions and our energies, we call it BES, which is Bundled Energy Solutions, which is this project retrofit work. We're seeing a lot of activity on that because there are still other government programs out there. And any of the school districts can raise capital, where they're getting the pressures on their operating margins still. So we're just seeing an increase on the pipeline side of clients who are talking about ways to lower operating expenses. And that plays right into the strength of what we do with our, again, our Bundled Energy Solution. And then you take on top of that so the administration's new focus with decarbonization and e-mobility. And our easy charging is probably -- it's still a relatively small segment for us, but it's probably our fastest growing and it's really turning into something that we're putting a lot of focus on. So we think everything that's going on societally and with the administration is going to be a big tailwind for us in '22 and '23. Andy Wittmann: Okay. That's helpful. Then just last question quickly here for Earl. I wanted to talk about the unallocated corporate expense segment results. I mean you guys -- you mentioned in the prepared remarks that kind of $20 million of investments this year over last year that's on track. You guys have been saying it's going to be $40 million for the year. Seems like that's kind of where you are on those investments, but Earl just wanted to make sure that for all of our models here that we're getting this right, look at last year's corporate unallocated expense segment, it's going to be plus $40 million on these investments. But I also think that there's because the years where it is, you mentioned in the press release even that the stock compensation is going to be up in addition to that. So I was just wondering if you could help us a little bit as to how much the stock comp is up year-over-year as well, just so that we can kind of get a sense of what that line is. And then obviously, the implications, we'll be able to back into the implications for the operating segment margins as well. Just be kind of helpful to understand how you're thinking about that unallocated segment line. Earl Ellis: Sure, Andy. I would love to do that. So just to start with, as we mentioned in the last quarter, we're continuing to invest in both our talent to support our future growth opportunities as well as the planning and design phase of our tech solutions rollout -- for the rollout of our tech transformation. And as we mentioned, that investment year-over-year is approximately a $40 million increase. And when we look at the year-to-date, we've actually spent $20 million of that. Although if you recall, Q1 we -- it was actually a little bit of a late start, and that we actually spent probably about $3 million to $5 million of that, but caught up in the second quarter. As we look to the back half of the year, that $10 million clip will continue to spend over Q3 and Q4. Now, having said that, however, when you look at it from a year-over-year perspective, it might look a little lumpy in that if you look at Q3, you have to recall last year where we actually had the benefit of the furlough, you'll actually see as a result of that a pickup. And then when you look to Q4, although we still - we will still be spending that $10 million. That spending actually started last year in Q4 and therefore Q4 year-over-year will look kind of flattish. But we are still on track with the $40 million spend for this year. In addition to that, we are seeing an increase in our share-based compensation. And that's it at the tune of approximately $15 million year-over-year. And that's a product of a number of things, including special grants that came up last year as well as just how we're actually tracking on the grant that will actually come to vesting this year. Again, you're going to see some lumpiness in that, in that year-over-year increase, you'll see the vast majority of that impacting in this past quarter Q2 year-over-year, as last year we took a significant reduction in our reserve as we were anticipating the impacts of the pandemic. We then started to ramp up that investment last year, that accruals last year. So if you look at the back half of this year, we anticipate more of a smoothing year-over-year with regards to share-based compensation. Andy Wittmann: All right. That's very helpful. Thank you very much. Have a great day, guys. Earl Ellis: Thank you. Scott Salmirs: Thank you. Operator: Thank you. Our next question comes from line of David Silver with C.L. King & Associates. Please proceed with your question. David Silver: Yes. Hi, good morning. So maybe if I could just ask, Earl, to follow-up a tiny bit on the stock-based comp discussion that you just finished. It's always a number of moving parts in these programs, but for our understanding purposes going forward, should we be tracking, let's say the closing -- the point-to-point change in your share price. In other words, January 31 to April 30, led to the bulk of that expense this quarter, or is it more of accrual with time or an average share price? In other words, might there be a couple of rules of thumb you could share that might give us a little bit of a heads up going forward to kind of adjust our expectations for that expense item? Thank you. Earl Ellis: Sure. Well, when you look at our share-based compensation, for the most part there are a number of metrics, but the large percentage is really -- metric is really weighted on our financial performance. And that would be both revenue as well as our EBITDA. But one of the things that you can clearly track is how we're actually progressing on those two metrics. And it's clear to say, especially this year with regards to our EBITDA and our earnings that, again, have been driven by the margin expansion that really is the significant benefactor, if you will, to the increased accrual that we're actually seeing in the stock compensation plan. David Silver: Okay. Thank you for that. And then, Scott, I had a question about the project reserve that your companies took a couple of quarters ago. So I think it was $18 million pre-tax. But my understanding was that was kind of tied to the inability of your customer to kind of open or begin operations. With the -- I was just wondering if you could give us an update there on whether you think the current pace of, let's say, the reopening of workplaces and social venues and things. I mean, should we be thinking that reserve might be reversed in coming quarters? And what's your -- maybe just an update on that issue, please? Scott Salmirs: Yes, so look, I'm an eternal optimist, right? So -- but I will tell you, David, like we're in active discussions, and it's something it's really difficult to comment on because we're still -- it's still ongoing. So just like any other kind of reserve we take, we don't give up and then we go after it. And so I think that, suffice to say, active conversations and more to come on that. David Silver: Okay. And then maybe just one more kind of bigger picture question. And this would have to do with branding, I guess, or your marketing strategies and your marketing programs to date. So you've mentioned in the past, you have ramped up marketing efforts on a number of platforms. And I've seen your national commercial on CNBC quite a bit. And two things. I mean, first, I was just wondering if you could point to any tangible results, in particular, product lines or sub sectors that where you think the greater awareness, the greater visibility has made a difference. And then secondly, maybe just a longer term perspective. In other words, your company has been in business for over a century. You already have a national footprint. And yet you kind of have redoubled your marketing efforts here. Maybe if you could just point to -- maybe from a 1 or 2-year perspective, I mean, where do you think that greater awareness that the branding efforts are going to have the biggest effect? In other words, might it encourage people who had been using maybe a regional player, or a mom-and-pop to step up to a higher level of service that they associate with your name now? Or maybe regionally areas where you hadn't been as -- that you're looking to penetrate, maybe that's a necessary precondition for success there. So just overall, branding success to date, and then where do you think -- where should we look for the greatest impact over the next year or two? Thank you. Scott Salmirs: Sure. Yes. So, look, I think especially with what we're doing with the commercial brand is so important. And what you're trying to do is create differentiation in the market and you hit on it, right, there's like kind of ABM and then there's regionalized competitors. And we're attempting to do, and I think the pandemic has done it is really say like, there's kind of us and our resources and our scale and there's everybody else. And the way that, that manifested itself is on our supply chain. We were never the ones that were without disinfectant or PPE for our people, electrostatic sprayers because of, again, our sourcing capability. And not every client that had a regional player can say that they fared as well. And then we have an advisory council that we put together of outside experts to synthesize what the CDC and the World Health Organization was saying. So our clients could get a better lens on that. All these things the small regional players couldn't do and then you put on top of that commercials on CNBC, it's like -- it's just creating a choice differential that we think is going to be super impactful. Hopefully, that's going to have an impact on our retention over the next couple of years. We've been over 90%, a one percentage point tick up in retention is dramatic in our business. So we're hoping that. We’ve seen last time I checked and my information is a few weeks old, but I think it was something around a 10% increase in hits on our website and our sales team seeing tracking coming through digitally. So I think it's a confluence of things, David. But again, it's just -- it's elevating the brand between how we performed and the exposure now that we're doing on TV and through all the social channels. It's just -- it's going to -- all we're trying to do with ABM is create a separation between our platform and our small regional competitors. David Silver: Okay, great. Thank you very much. Scott Salmirs: Thank you. Operator: Thank you. Our next question comes from the line of Marc Riddick with Sidoti & Company. Please proceed with your question. Marc Riddick: Good morning. Scott Salmirs: Good morning. Earl Ellis: Good morning. Marc Riddick: So I wanted to sort of fill in a few of the blanks that we've had from some of the other questions that you already answered. I wanted to start first with going back to the acquisition commentary in the press release and that you've talked about a little bit more and more recently. I just wonder if you could touch a little bit on whether or not there's any particular areas that you would view as priorities, or things that are kind of top of the list that you'd like to see accomplished, whether it'd be a regional filling, or a service line area. How should we think about your prioritization of potential acquisitions? Scott Salmirs: Sure. So, look, I think for us, we're very intent on sticking to our core, right. And the core of what we do is janitorial stationary engineering, right. And that with the pandemic and what's happened through, or virus protection and our credibility there, we think that's a great accelerator for us. So we'll look for scale there. And you know how much we love the ATS work, right? It's our fastest growing and most profitable segment. So we have a high interest in growing that platform too. So you know what, Marc, I think before we start looking for adjacencies outside of the core of what we do, we're really going to stick within the core. And scale is always better, right. Integrating a small company is as much work as integrating a big company. So, we -- so I think we're going to synthesize those. And then there are certain regions, even with our ATS work, there are certain regions that we'd like to fill in, where we're maybe not as strong as others. So there'll be a little bit of a geographic bent when it comes to ATS. So we have a really good matrix of what we're looking for. And what we said for the past few years is what I'd say now, we are not going to be reactive, we're going to be strategic and planful on how we go after acquisitions. Marc Riddick: Great. And then I want to switch back to talking about some of the segment activity seen during the quarter because one of things that was interesting to me was the strongest segment growth wise was in education. It seems as though of all the areas of your work that seemed to have been the biggest beneficiary of the strength of the rollout of vaccines and what have you. I was wondering if you could talk a little bit more about some of the conversations that you're having with -- within the education space, and maybe some of the commentary there, or maybe what you're seeing from the benefits of funding that kind of gives you -- it seems as though it gives you greater confidence for the upcoming school year. But certainly the vaccine seems to have accelerated activity at the very end of this school year. But it also seems to maybe have accelerated the timing of some of those conversations. So I just wonder if you could a little bit more about that. Scott Salmirs: Yes, it's a good question. From the educators we've been talking to within our client base and stuff we hear in the industry. It seems to be this very binary shift towards in-person learning, and the whole remote when it comes to the fall, right, because that's really the next really piece of the puzzle right now that school is generally out right now. We're talking about in-person, which is great from a revenue standpoint for us. Again, we'll give some of the back of the labor efficiency, but all the educators we talked to healthy, clean, safe buildings is top of mind, and it's for them and the parents, right. Parents are very vocal about this. So we're excited about the potential in education because we suspect if you look at our different segments, right, our technology and manufacturing, which is really focused on as much on manufacturing side, they’ve never stopped and our revenues always remain strong. And then you had our B&I, which is office occupancy reduction, right. I think aviation is one that's going to lag, probably more than any other segment. But education, I think it's going to have a strong comeback in the fall whereas when you look at B&I, I don't think anyone thinks that office is going to be 100% occupied in the fall, whereas it could be close to that for education. So I think you're going to see a pretty strong rebound. Marc Riddick: Right, right. And then the last thing for me totally different area, but I was wondering if you could give updated thoughts around -- given the strength of free cash flow generation, debt reduction, which was faster than we were expecting. Certainly nice to see there. I wanted to talk a little bit about the views of future share repurchase, and how we should think about sort of given the strength of the business versus where your stock price is now kind of how your thoughts are evolving there. Thanks. Earl Ellis: Yes, it's Earl, Marc. Thanks for the question. I would say that we're really pleased with the amount of cash that we're currently sitting on as well as our low leverage, which really gives us the opportunity now really to deploy that capital for the purposes of supporting our long-term growth strategy. And as such, we're going to be looking to invest in both organic as well as inorganic growth. Now, having said that, we're going to remain our flexibility with regards to capital allocation. As you know, we currently have authorization upwards of about $145 million from the Board to actually pursue share buybacks. So we'll keep that flexibility as time proceeds. But at this point in time, the focus really is around allocating capital for growth purposes for long-term growth. Marc Riddick: Thank you very much. Scott Salmirs: Thank you, Marc. Operator: Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Salmirs for any final comments. Scott Salmirs: Yes. So, I just want to take a moment to thank everyone for supporting us through this period. So proud of what our team members have done and appreciate the interest from our investor base and analysts base on what we're doing. And you can tell that there's a strong level of enthusiasm about the future for ABM between the brand elevation, between our margin elevation and about societal reflections on virus protection going forward. We think we're just in a super good spot to continue to invest in and accelerate the platform. And the most important thing is just we're not out of this yet. And I would just urge everybody to not let their guard down and stay safe through this, and we have good things coming. So, thank you all for the time today. Really appreciate it. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.ABM Ratings Summary
ABM Quant Ranking
Related Analysis
ABM Industries Upcoming Q4 Results Preview
Deutsche Bank provided its outlook on ABM Industries Incorporated (NYSE:ABM) ahead of the upcoming Q4 results, expected to be announced on Dec 13.
Key focus areas are likely to be around top-line business momentum across segments, labor dynamics including supply constraints and wage inflation, and expected free cash flow conversion.
The company had already noted that due to wage pressures and a tight labor market, margin expansion in fiscal 2023 will be limited, indicating that margin expectations are sufficiently low. The analysts continue to view the company as an undervalued stock in light of significant opportunities to gain market share and improve free cash flow.
