ABM Industries' Bookings Hit a Record in Its Fiscal First Half

ABM Industries (ABM -9.11%) reported its fiscal 2025 second-quarter results on June 5, 2025, achieving 3.8% organic revenue growth, $2.1 billion in revenue, and adjusted EPS of $0.86. The company, which provides a range of services to commercial properties, including custodial, facilities engineering, grounds-keeping, and mechanical and electrical, delivered record bookings of $1.1 billion in the first half, which ended April 30, and reaffirmed its full-year guidance, highlighting its strategic momentum in prime office markets, technical solutions, and M&D (manufacturing & distribution).

Record Bookings and Prime Office Market Recovery Drive Revenue Momentum

New bookings accelerated 11% year over year in the first half of fiscal 2025, supported by an approximately $190 million microgrid contract with a large retailer and high-profile client wins across multiple industry segments. Management noted that according to JLL, a giant real estate and investment management firm, in the first quarter, U.S. office leasing activity grew 15.3% year over year to 89% of pre-pandemic levels. It also pointed out that real estate services leader CBRE said that prime commercial vacancy rates were just 14.8%, compared to the overall office market average of 19%.

"We achieved several important milestones this quarter. Notably, we returned to organic growth in both B&I [business & industry] and M&D, significantly improved our cash flow compared to the first quarter, and generated $1.1 billion in new bookings during the first half, marking a new record for ABM Industries Incorporated. Overall, we posted 3.8% organic revenue growth highlighted by continued recovery in our core commercial office markets, new contract wins, and a diminished impact from prior-year client exits in M&D."
— Scott Salmirs, President and Chief Executive Officer

This breadth of contract momentum and sector recovery positions ABM Industries to expand its market share in the premium office segment, while reduced client churn and new wins mitigated recent volatility in its manufacturing and distribution verticals.

Strategic Expansion of Services Unlocks Higher-Value Client Relationships in Manufacturing & Distribution

Revenue in the M&D segment reached $398.1 million (about 20% of total company revenue), driven by new projects for semiconductor and technology clients, and the introduction of ancillary services such as materials handling and test/balance work within client fabrication facilities. Investments in technical sales personnel, capacity enhancements, and "strategic pricing on new select contracts" led to a 120 basis-point year-over-year margin contraction to 10.0%, as ABM Industries aims to capture more resilient, higher-margin opportunities within complex manufacturing settings.

"The work that we're starting to do is to get into the fabrication facility and do some more of the mechanical work do more of the cleaning inside. And that's kind of the pathways that we're talking about when we talk about materials handling and testing and balancing. It's like breaching that core of that bull's eye. So we love that because it's it's more strategic. It's more sticky with the client. So you're gonna see us talking more and more about leaning into those areas from a service line perspective where we feel like we'll get more stickiness, and those are also higher margin. And so we think there's just a lot more opportunity."
— Scott Salmirs, President and Chief Executive Officer

This service line evolution is strengthening ABM Industries' competitive positioning by elevating its role from commodity services provider to value-added partner for manufacturers.

Operational Resilience Evidenced by ERP-Driven Cash Flow Recovery and Financial Discipline

Free cash flow, which was starkly negative in Q1, rebounded by $138 million sequentially to a total of $15 million as enterprise resource planning implementation challenges eased. As a result, management lifted its normalized full-year free cash flow guidance to a range of $250 million to $290 million, excluding $30 million to $40 million in costs related to its Elevate strategy and integration expenses and a $30 million projected earn-out for the RavenBolt acquisition. Net leverage stood at 2.9 times pro forma adjusted EBITDA, interest expense rose $3.3 million year over year to $23.9 million, and liquidity reached $657.8 million.

"[I]f you actually back out kind of, like, what we would call, like, one-time you know, things, which really would include our Elevate investments as well as integration expenses. Normalized free cash flow projection for the full fiscal year is between $250 million to $290 million, excluding Elevate and integration costs and a projected earn-out for the RavenBolt acquisition."
— Earl Ellis, Executive Vice President and Chief Financial Officer

Looking Ahead

ABM reaffirmed its full-year adjusted EPS guidance of $3.65 to $3.80 and adjusted EBITDA margin of 6.3% to 6.5%, with normalized free cash flow targeted at $250 million to $290 million and sequential improvements expected in Q3 and Q4. Management expects previously delayed technical projects to resume in Q3, restoring historical segment margins (notably 9% to 10% in technical solutions). Capital allocation will continue to prioritize internal growth, but M&A activity is set to accelerate given an expanding pipeline and attractive acquisition targets aligned with the company's sector strategy.