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ABM Industries Inc (ABM) Q1 2021 Earnings Call Transcript

By Motley Fool Transcribers - Mar 10, 2021 at 1:30PM

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ABM earnings call for the period ending January 31, 2021.

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ABM Industries Inc (ABM -2.85%)
Q1 2021 Earnings Call
Mar 10, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to ABM Industries First Quarter 2021 Earnings Call.

[Operator Instructions]

I will now turn the conference over to Susie Kim, Vice President of Investor Relations and Treasurer. Thank you. You may begin.

Susie Kim -- Treasurer & Vice President of Investor Relations

Thank you all 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. We issued our press release yesterday afternoon, announcing our first quarter fiscal 2021 financial results. A copy of this release and an accompanying slide presentation can be found on our corporate website.

Before we begin, I would like to remind you that our call and presentation today contain predictions, estimates and other forward-looking statements. Our use of the words estimate, expect and similar expressions are intended to identify these statements. These statements represent our current judgment of what the future holds. While we believe them to be reasonable, these statements are subject to risks and uncertainties that could cause our actual results to differ materially. These factors are described in a slide that accompanies our presentation as well as our filings with the SEC. During the course of this call, certain non-GAAP financial information will be presented. A reconciliation of those numbers to GAAP financial measures is available at the end of the presentation and on the company's website under the Investor tab.

I would now like to turn the call over to Scott.

Scott Salmirs -- President and Chief Executive Officer

Thanks, Susie. Good morning and thank you all for joining us today to discuss our first quarter results. As you read in yesterday's press release, 2021 is off to a tremendous start. Total revenue was approximately $1.5 billion, representing a 7.5% decline versus last year, which exceeded our expectation and reflects continued sequential improvement. As anticipated, our Aviation segment remains the primary driver behind the revenue decrease. On both the GAAP and an adjusted basis, earnings grew by a 160% or more year-over-year. GAAP continuing EPS grew to a $1.10 per share or $1.01 per share on an adjusted basis.

Adjusted EBITDA margins expanded more than 400 basis points to 8.3% compared to last year. Anchoring these results was elevated demand for higher margin Work Orders for virus protection as well as our EnhancedClean services which are longer term in nature. Effective labor management continued to be a lever for profitability. As you may remember, the majority of our contracts are performance based, so any efficiencies we find in staffing as occupancy drops or schools are in a hybrid situation [Phonetic] in order to our benefit. This is the advantage of having a flexible labor model. Earl, will discuss our segments in more detail, but overall, our industry group drivers are similar to what we saw during the balance of last year.

Not surprisingly our Aviation and Technical Solutions segments were challenged by the pandemic due to decreased global travel and limited site access for retrofit projects and educational facilities. Education as the segment though grew top and bottom line during the quarter, which shows how well our team has adapted operationally to the hybrid learning system and Business & Industry and Technology & Manufacturing are still strong outperformers. We've been able to offset COVID related revenue compression with higher margin Work Orders, EnhancedClean contracts and labor management.

We're now almost at the one-year mark since the start of the pandemic and I've just summarized our fourth consecutive quarter of strong results. This sustained performance suggests that we have reached a level of consistency in our results and stabilization across our client portfolio. Let me now provide some thoughts on where we believe the operating environment is headed, especially in light of our full year guidance. Before I dive into what momentum to normalcy looks like in 2021, I want to underscore that normalcy does not imply less vigilance around virus protection. Over the past several months, there have been countless news and scientific journals reminding us that COVID-19 and its after effects will continue to linger over the foreseeable future. Many believe it will be a permanent fact of life with people getting regularly vaccinated similar to how we handle flu vaccinations. We are so enthusiastic that vaccine rollouts are under way across the country. Most importantly, the vaccines will save lives, but the rollouts will also lead to momentum back to work, school, travel and attending entertainment venues. However vaccine rollouts have not been uniformed on a state by state basis nor have stayed policies on masking, public gatherings and other factors that impact infections and new cases.

These factors as well as the ongoing discovery of new variants highlight how societies need to respond to COVID-19 on an elevated level, will not end in the near-term. This is why it's so critical for us to partner with our clients and assess their evolving needs and engage our expert advisory panel. In B&I, the vaccines will spur momentum back to work, which for us means a return of more traditional janitorial work as well as the continuation of disinfecting given higher occupancy. Currently, average occupancy across the country is approximately 15%. We anticipate this could increase to 25% by Labor Day and grow to 50% plus through calendar year-end. As clients begin to plan their returns, they are focusing on building trust in their facilities through health and safety protocols, rigor around cleaning, disinfecting and especially physical spacing will be incorporated into their plans. For this reason, we do not anticipate a near-term reduction space utilization across commercial real estate, especially with Class A buildings and blue-chip clients.

For a sector like education, we believe the hybrid models will be in effect for at least the rest of the school year. Soon, if not already, institutions will start planning for the fall 2021 semester with a push for more in-person learning in the K through 12 segment and higher ed. How this unfolds could vary by region. We should have a better line of sight when we speak to you after Q2 earnings. And I'm sure as vaccine adoption continues to expand, there's probably no sector more poised for a robust volume recovery than Aviation. We are definitely hearing about pent-up demand for personal travel and minimally a modest return of business travel. For ABM, our business portfolio consists of both airlines and airports. As airports were opened during the pandemic, operations in areas like terminal cleaning, transportation and shuttle service enabled us to mitigate reduced volumes on the airline side. And ultimately, this diversification helped us breakeven last year, which was a major achievement.

On the airline side, current travel volumes are approximately 50% of pre-COVID levels. Assuming vaccine rollouts gain traction, we believe we could see that grow moderately by year-end. As both airlines and airports see increased traffic, the need for disinfection, virus protection and EnhancedClean will grow.

On an enterprise level, we conducted a Pulse Survey of approximately 200 clients last month that largely aligned to our own full year expectations. Most respondents are expecting their facilities to more fully reopen and their companies to be endorsing reoccupancy in varying forms by September and they plan to continue taking multiple measures to protect spaces against COVID-19 as they reopen primarily in the areas of surface and air disinfection. And even with the increase in flexible work schedules and work from home protocols, the vast majority of our clients say that they expect the total amount of space utilization to remain largely the same. Now, the size of our survey, it's just a subset of our client base, but it supports what we are hearing more broadly as we communicate with our customers on their future plans. It also speaks to our confidence in providing full year guidance today. For fiscal 2021, we are introducing full year guidance of earnings per diluted share of $2.85 to $3.10 or $3.00 to $3.25 on an adjusted basis. Our outlook for adjusted EBITDA margins is 6.6% to 7%, which compares to 6% last year. We also expect to return to growth by the second half of this year and consistent demand for high margin Work Orders and EnhancedClean services through year-end. We also anticipate retaining most of our labor arbitrage through year-end.

Our success will not translate to complacency. Based on how the pandemic has changed our trajectory, we have been capitalizing on our momentum to elevate our brand and business. At the end of February, we launched ABM's first national TV commercial. It was a celebratory moment for the entire firm and we could not be proud of. If you've not seen it on CNBC or Bloomberg TV, you can find it on our IR website today.

As we discussed last year, we are going to be investing in our clients, team members, and infrastructure. We're focused on providing technology and data analytics capabilities to enhance client and team member experiences. We are also prioritizing areas like talent development to further empower our people and create even more consequential relationships with our clients. We are committed to building upon our strong culture and fostering a community of belonging where team members feel connected, valued, and inspired. This reinforces our mission and vision as an organization and will have significant long-term commercial outcomes for us. Internal initiatives such as our culture and inclusion council are dedicated to driving meaningful social change and cultivating an inclusive environment for everyone at ABM and we are taking active steps to turn this vision into reality. I'm excited to share that we have entered into partnerships with organizations that are focused on building a more equitable society. ABM has made a commitment to support the NAACP Legal Defense and Educational Funds, the Hispanic Scholarship Fund, the Afterschool Alliance, and the Thurgood Marshall College Fund. We are partnering with these organizations in an effort to make a difference in the areas of advocacy and civil rights, basic human needs, education, and workforce development.

Before I turn the call over to Earl, I wanted to look back at this time last year during our first quarter earnings call of 2020. We were just starting to discuss the coronavirus and its impact on the economy. At that time I reiterated how our diversified portfolio coupled with our nimble operating model or hallmarks of our long-term success over the past 110 years. Our results over the past 12 months has proven this beyond a doubt and with our solid liquidity and leverage, we are better positioned than ever to pursue growth and profitability that will unlock even greater shareholder value. I want to thank our employees for another quarter of absolutely incredible execution, particularly those who were impacted by the recent winter storms in the South.

The dedication of the ABM team continues to fuel our performance quarter-after-quarter. We have a culture like no other in our industry. In addition to our team members, I'd like to thank our Board of Directors, including our newest Director, Quincy Allen for their guidance and encouragement. I also thank you, our analysts and shareholders, for your support during a time when the environment was particularly opaque. I'm proud that our results have been the greatest proof point of our resilience, agility and excellence.

I'll now turn the call over to Earl.

Earl Ellis -- Executive Vice President and Chief Financial Officer

Thanks Scott, and good morning, everyone. Let me start by thanking all of my fellow ABM team members for the warm welcome I've experienced since joining the organization. Today marks my 100th day at ABM and my early impressions about the organization's drive to collaborate and execute have only grown. As I continue to evaluate and assess our business needs, my main area of focus will be on helping to determine the appropriate enablers for both strategic growth and continuous improvement. As I will discuss in more detail shortly, our strong results over the past several quarters coupled with our leadership position in the marketplace provides us with great opportunity to invest in our future growth potential. I look forward to finalizing our thoughts on areas such as our internal investment strategy and sharing with all of you over the course of the year.

Now onto the results. Revenue for the quarter was $1.5 billion, a decrease of 7.5% compared to last year. The decrease in revenue reflects the continued impact COVID-19 has had across our business segments. As a reminder, the pandemic had not yet impacted operations significantly until our second quarter last year and as such this quarter reflects the full year-over-year impact. Partially offsetting this revenue decline was the ongoing demand for higher margin disinfection related Work Orders and EnhancedClean services.

Work Orders were particularly strong within our Business & Industry and Technology & Manufacturing industry groups. On a GAAP basis, our income from continuing operations was $74.6 million or $1.10 per diluted share compared to $27.9 million or $0.41 last year. In addition to our strong operational performance, the increase versus last year was driven by favorable development in prior year self-insurance adjustments. We saw an $11.4 million benefit this year compared to $6.6 million in the first quarter of fiscal 2020. Additionally, we saw our second consecutive quarter of current year positive insurance trend recording a benefit of approximately $3 million. On an adjusted basis, income from continuing operations for the quarter increased to $68.3 million or $1.01 per diluted share compared to $26.2 million or $0.39 last year.

Our GAAP and adjusted earnings growth versus last year continued to be driven by significant increases in higher margin Work Orders and EnhancedClean services. As our clients have incorporated health and hygiene services such as disinfection into their operation at higher levels, we continue to experience higher margin as a result of direct labor efficiencies, as our operators proactively manage the deployment of labor commensurate with COVID-19 related revenue decline. Additionally, results also reflect one less working day, which amounted to labor expense savings of approximately $6 million. Other items such as corporate discretionary expense, amortization, and interest were also lower compared to last year. These results were partially offset by our planned infrastructure and organizational investment in areas such as IT. However, I want to note that our investment spend for the quarter was approximately $4 million, which was lower than originally anticipated. During the quarter, we generated adjusted EBITDA of approximately $124 million for a margin rate of 8.3% compared to $68.8 million or 4.3% last year.

I will now discuss our segment results. As I referenced earlier, these results reflect the ongoing impact of COVID-19, which has resulted in revenue compression across our services. As Scott discussed, our diversified segment structure has been a strength for us during the pandemic and each segment has been impacted by the pandemic in different ways, both positively and negatively.

In most cases though with perhaps the exception of Technical Solutions, our segment results reflect some combination of a mix shift toward higher Work Orders and EnhancedClean services. Labor modulation on lower service demand as well as operational investments in areas such as EnhancedClean. B&I revenue was $809.4 million, which was down just $11.5 million or 1.4% versus last year. The parking and sports and entertainment businesses were the predominant drivers of the revenue decline due to the ongoing pandemic. Almost entirely offsetting this decline was increased demand for higher margin Work Orders and EnhancedClean services at our national accounts and certain client in corporate sectors such as financial institutions. Operating profit for the quarter reflected this more favorable mix of business resulting an $85.7 million or a margin of 10.6% compared to last year's $38.2 million and 4.7% respectively.

Technology & Manufacturing remains one of our most resilient segments. T&M produced solid results for the quarter as it has since the beginning of the pandemic. The segment reported revenue of $249.2 million, an increase of 6.5% versus last year with an operating profit of $26.9 million or a margin rate of 10.8%. Work orders and EnhancedClean services drove demand for T&M particularly within the industrial manufacturing, pharmaceuticals, and high-tech sectors. We also experienced growth with our logistic clients as we supported them during the peak holiday season. Our Education segment grew revenues of $209.4 million with operating profit of $21.5 million or 10.2% margin. We believe these results reflect some stabilization as schools have continued the hybrid learning model that has been in effect since the back half of last year. Performance was primarily attributable to direct labor management due to modified staffing levels and other expense savings as well as demand for disinfection and COVID related Work Orders. Looking ahead, we anticipate some reinstitution of a traditional selling season in 2021, which did not really exist last year due to the pandemic. We continue to monitor how schools are going to evolve their approach to teaching in the current environment particularly as vaccination rollouts progress.

Aviation reported revenue of approximately $143 million with operating profit of $3.2 million. As anticipated, this segment remain most impacted by COVID-19 and its effect on global travel. The quarter saw a modest sequential increase in travel due to the holiday, but also reverted quickly due to lockdowns in areas such as the UK. We continue to operate according to flight and passenger demand, providing higher tech services such as electrostatic spraying as we managed variable costs and expenses on a real time basis to match demand. Finally, Technical Solutions reported revenue of $113 million versus $142 million last year. This decline was driven by site access issues as clients such as an education continue to limit traffic into their facilities in order to protect administrative staff, teachers and students. However backlog remains healthy above $150 million and we remain focused on churning through these projects as soon as possible. Operating profit was $6 million or 5.3% on a margin basis.

Turning to cash and liquidity. We reported positive cash flow during the first quarter despite this traditionally being a cash flow negative period. This even includes the deferral of approximately $31 million in payroll taxes from the CARES Act. We generated more than $45 million in cash flow from operations and free cash flow of approximately $39 million for the quarter.

Our strong performance enabled us to end this quarter with total debt including standby letters of credit of $851 million and a bank adjusted leverage ratio of 1.8 times. Additionally, we ended the quarter with cash and cash equivalents of $378 million. Given the consistency of our leverage and cash position over the last several quarters, we believe we have reached a point of stability both operationally and financially. As a result, we are evaluating our capital allocation priorities. In addition to organic investments in our business, we are also exploring the M&A market for potential targets to drive growth and build on our current momentum. While remaining cognizant of our reentry into M&A, we will also consider share repurchases opportunistically. We currently have approximately $145 million remaining in our authorized share repurchase program and we'll balance any potential activity with our M&A efforts to ensure maximum flexibility.

During the quarter we paid our 219th consecutive quarterly cash dividend of $0.19 per common share for a total distribution of $12.7 million to shareholders. And as stated in our earnings release, our Board of Directors approved our 220th consecutive quarterly cash dividend.

Now turning to our guidance outlook. We are introducing a fiscal 2021 GAAP guidance outlook range of $2.85 to $3.10 and on an adjusted basis $3.00 to $3.25 per share. Scott shared with you some great context from an operating perspective that supports our guidance. So let me now provide some additional assumptions behind our guidance. Given our performance during the first quarter, we believe revenue will continue to improve sequentially with a return to growth in the back half of the year. And as growth improves and turn positive we will have to staff back up accordingly. Therefore there may be a partial reduction in the level of labor efficiencies we have experienced over the past year, but make no mistake, we do expect to retain a portion of these savings based on new opportunities and labor management practices we have adopted during COVID. And as it relates to higher margin Work Orders and EnhancedClean services, we do not anticipate a material slowdown in demand for the balance of the fiscal year. We expect our investments to pick up throughout the remainder of the year as we support the strategic initiatives namely in our IT transformation. On a year-over-year basis, we do expect an increase in corporate expenses for the year although timing may vary from quarter-to-quarter as you saw in the first quarter.

Additionally, as a reminder, we undertook furlough and expense reduction efforts during the third quarter of last year. And as such, expect to see year-over-year increase in expenses as we have resumed a portion of those expenditures. We are still in the planning and design phase of our technology roadmap and we will update you as we finalize our plans. I'd also like to remind everyone that we will see an extra working day in Q2 and one less working day in Q3. Each working day should represent approximately $6 million of labor expense similar to Q1.

Moving to taxes. We continue to expect an effective tax rate of approximately 30% for 2021. This tax rate does not include discrete tax items such as the work opportunity tax credit and the tax impact of stock-based compensation awards. At the end of December, WOTC was formally extended by Congress through 2025 and current estimate suggest a $5 million or $0.07 impact on 2020. And finally, while we are not guiding to free cash flow, until we can finalize the impact of our tech transformation on capital expenditures. I want to express my enthusiasm for the strong start to the year. Given our strong cash flow performance to-date, we believe we'll be able to achieve a range above our historical $175 million to $200 million and look forward to updating you as we finalize our longer-term plan.

In closing, we're excited about our performance for the quarter as well as our outlook for the year and we look forward to updating you on our continued progress next quarter. Operator, we are now ready for questions.

Questions and Answers:

Operator

[Operator Instructions]

Our first question is from Sean Eastman with KeyBanc Capital Markets. Please proceed.

Sean Eastman -- KeyBanc Capital Markets -- Analyst

Hi, team. Certainly a strong start to the year. Pretty impressive. I guess along those lines. My first question is, if we just look at the annual guidance, you guys are off to a head start here with the first quarter, implying around over 30% of earnings in the first quarter versus kind of a high-teens number on average over the last 10 years in the first quarter. So I'm just curious where you think you might need to have some conservatism in there given this head start, I mean is it really just the labor efficiency dynamic as revenue recovers is it the technology investments ramping up. Any color around that cadence would be helpful?

Earl Ellis -- Executive Vice President and Chief Financial Officer

Yeah, I mean, I think you hit it right on the head and I think predominantly. We have to remember it's early, right. We just finished Q1 and we have some nice line of sight into Q2 but it's early in the year and we want to be responsible, right. So I think we always have an opportunity as we go along to update if we need to Sean. But for now I think we feel real comfortable where we are.

Sean Eastman -- KeyBanc Capital Markets -- Analyst

Okay, got it. And the capital allocation comments are interesting just around the stability and where leverage is. I'm just curious what an acquisition could look like for you guys. Maybe it's early there as well, but just a bit of a flavor for what you guys are looking at what kind of supplement to the organic growth recovery you envision, it would be helpful to understand that?

Earl Ellis -- Executive Vice President and Chief Financial Officer

Sure, I mean, look for us we're looking in two primary areas. First, building into our core, which is janitorial and if anything COVID-19 has really elevated that core. So that's something that we're excited to look at, and then also our ATS group, we love that division. We love where society is heading toward energy efficiency, sustainability, electric vehicle charging. These are all our major work streams there. So we've talked about in the past that we want to build our geographic footprint across the US. So I could see us doing some fill-in acquisitions there as well. So that's kind of where our focus is at the moment, those two areas, core janitorial and ATS.

Sean Eastman -- KeyBanc Capital Markets -- Analyst

Okay. And then one last quick one from me. On ATS I mean you guys have exposure to EV charging, you have exposure to energy efficiency and buildings. Two clear priority areas from the new administration. I mean, have you seen the ATS bid pipeline firm or is that sort of a stay tune too early.

Scott Salmirs -- President and Chief Executive Officer

Look, we have a really strong pipeline and a strong backlog. And I think the new administration's attitudes toward the things I just talked about sustainability and energy management are great and it really goes beyond the administration, right. It really goes to society, right. And it's just -- it's playing into all the right trends and if you remember the ATS group also there's a fair amount of work in educational facilities and you all know how strained budgets are for schools K through 12 and frankly higher ed and so we come in with really good energy saving solutions and you've heard us talk before about proof points of literally saving teachers jobs, saving after school programs. So we think that there is going to be good momentum toward selling energy projects into schools as well. So everything is pointing up for us in ATS. It's just for us right now the impediment has been access to facilities right with COVID and we suspect we'll see a lot more traction in the back half of the year as the vaccines rollout and also as schools close, we'll have a chance to get access and start churning that backlog and turning it into real revenue and the number of backlog have signed contracts. So we're super confident. We have a very strong backlog. We just have to turn it into revenue by actually starting the project.

Sean Eastman -- KeyBanc Capital Markets -- Analyst

Okay. Thanks, Scott. I appreciate it. I'll turn it over.

Scott Salmirs -- President and Chief Executive Officer

Thanks, Sean.

Operator

Our next question is from Andy Wittmann with Robert W. Baird. Please proceed.

Andy Wittmann -- Robert W. Baird -- Analyst

Great, and good morning, everyone. Thank you for taking my questions. I was just hoping to just understand a little bit more again this quarter the driver of the year-over-year margin improvement. Last quarter I guess you said it was kind of roughly half mixed benefit from TEG and EnhancedClean and the other half was the benefit of labor management. Was there any different in the character of that particularly considering that some of those corporate investments also came in and we're going to offset the other way?

Scott Salmirs -- President and Chief Executive Officer

Thanks, Andy for the question. You're spot on. Very similar to what we saw last quarter, this year-over-year uptick that we're seeing in margin is driven by those two components. So firstly the labor efficiencies that we've been receiving as well as the higher margins associated with both Work Orders and EnhancedClean services and that really attributed to 400 basis points of the year-over -year accretion really again split 50-50. In addition to that, we saw the one less working day, which attributed to about 40 basis points, which was offset by incremental investments that you'll see in the corporate expense line.

Andy Wittmann -- Robert W. Baird -- Analyst

Got it. Okay. Well given that and I appreciate the physical occupancy data that you guys shared the 15 going to 25 by Labor Day. I guess you said and then by calendar year-end getting a lot more normal than that. I mean that is a recovery in physical occupancy of the space, but I wouldn't say that's any kind of sharp snapback or major change very quickly and in fact that Labor Day represents most of the rest of your fiscal year. So given that and just doing some math on your guidance here, using your EPS guidance and some of the other known quantities here, it looks like the balance of the year, EBITDA margins are down pretty significantly not down up year-over-year up to historic levels, down sequentially from a great performance in 1Q is what I mean. I'm calculating something in the mid '60s for the balance of the year. So that's a pretty big change. So I was hoping that you could give a little bit more meat on the bone other than kind of what you said or in addition to what you said to get us comfortable with the fact that this is the right margin level to be thinking about for the balance of the year.

Scott Salmirs -- President and Chief Executive Officer

Look again, we want to be responsible, Andy. We are and we look at the remainder of the year and we do think there is going to be momentum back, which will cause us to lose some of the labor efficiencies we get in the hybrid model predominantly in commercial as this momentum back to the office. So that and that's it and then we are going to be starting the corporate investments. We had a slow start at Q1 because we wanted to be super cautious with -- we wanted to be super cautious with the pandemic still remember our quarters like November, December, January right. So we will be starting to build in those investments in our strategy and IT area and it's all for long-term growth. This we are going into a growth mode ABM and we need to support it with those investments.

Andy Wittmann -- Robert W. Baird -- Analyst

Got it. I have just one last question to follow up on kind of on the fundamentals of the business and demand. Last year I think it was defined by very, very low customer loss, very high retention rate, just kind of wanted to hunker down not change anything, make sure that they did this, you guys have talked a lot about how ABM has been well positioned with your processes and your leadership in the industry as the ability to take share. I was wondering, Scott, if you could talk a little bit about the dynamics now that we're starting to think about reopen, are there more customers looking to switch providers going forward now that the world is a little bit more stable and just given that -- as they look to switch are they also looking to bake into the base contract, some of the Work Order that becomes so consistent as part of what their processes, you're offering EnhancedClean is basically the deeper level of cleaning, but our customers looking to switch and if they switch are they looking to bake in more content and what are the implications of that if they do on margins. Thanks. Sorry there's a lot of questions, but you can talk about that. Thanks.

Scott Salmirs -- President and Chief Executive Officer

Yeah, I got the essence of this. Sure, look, Q1 was a great retention for us. We were in that 92%, 93% zone. And I think earlier on, we were more cautious about a lot of rebids happening. I think certainly if there is one area probably the education because the one thing we know there is the school budgets still all constrained right and they'll be looking for opportunities. So we will expect to see a higher level of bids and education, but there's a plus side to that too, right, because all this other work is going to get bit out that we don't have, right, and we do love our platform now with our EnhancedClean. So where we may get a little pressure on retention. We may pick it up on the sales side and with EnhancedClean it's not in the scope of work and we don't as things get rebid for the first couple of years. I'm not so sure how robust the bidding activity is going to be and what makes me think about that Andy is not only we talk to clients, but on top of that so many of our clients have this space needs in flux in terms of how they're going to lay out the floors for distancing and the different use cases that are going to have when people come back.

So I don't think there's going to be this rush to go bid right away until they understand the occupancy. But even still when it does get baked in over the next couple of years, I don't think we're going to have too much of the deterioration on margin because if you think about EnhancedClean, it is the people are better trained because they're using different types of chemicals, they're using expensive equipment. So we believe between that and all the resources we're putting in with our advisory panel that we're going to be able to maintain a good portion of our margins when eventually does get but again. I just don't think it's going to be immediate because there's too many other drivers that are going to inhibit them from having this all out bidding.

Andy Wittmann -- Robert W. Baird -- Analyst

All right. Thank you for the comments. Have a good day.

Scott Salmirs -- President and Chief Executive Officer

You too.

Operator

Our next question is from Sam Kusswurm with William Blair. Please proceed.

Sam Kusswurm -- William Blair -- Analyst

Good morning Scott and Earl. Hope you are both doing well.

Scott Salmirs -- President and Chief Executive Officer

Good morning.

Earl Ellis -- Executive Vice President and Chief Financial Officer

Good morning.

Sam Kusswurm -- William Blair -- Analyst

I'll add another one to the margin side. Do you think that 2021 adjusted EBITDA margin is where profitability kind of peaked out for you guys. I know you mentioned some cost will be coming back throughout the year here. Basically, I'm curious if your long-term margin outlook of 5.5%, 6% is kind of irrelevant now because the business is changing. 6% plus the new normal given customers on this high margin virus protection going forward.

Susie Kim -- Treasurer & Vice President of Investor Relations

Yeah, I mean, that's a good question. So I think for us, if you remember pre-COVID that 5.5% to 6% zone was where we were trying to gravitate to over the next two years or three years. But certainly we believe that COVID and kind of the virus awareness in society has squarely put us into that 5.5% to 6% zone and we're going to be thinking about investing into our business over the next five years. We're going to do the things that we need to do to break out of that zone that is our ultimate goal, we always want to overachieve. But I think for now what we're really comfortable saying is we start we've landed into that zone a couple of years ahead of where we want it to be. And the next phase we're finishing up 2020 vision now. I think the next phase of our five year journey is going to outline the path to get out of that zone.

Sam Kusswurm -- William Blair -- Analyst

Great. That's helpful commentary. Maybe switching gears I have a quick one on B&I that I assume there is a lot of disinfection work that must be done preparation for some of these folks going back to work this fall. I'm kind of wondering as far as early to your guidance, are you contemplating a significant step up in B&I related reopening revenue in your fiscal fourth quarter this year?

Scott Salmirs -- President and Chief Executive Officer

Yes so we do believe there will be increased volume, as there is a return to work and the offsetting factor to that is we're going to have to step up, right. So we look at those two in conjunction with one another, but there will definitely be elevated volumes as people return back. But if you remember like with our fiscal year we end October 31 and we think at that time we're going to be somewhere between that 25% to 50% of occupancy. So it's probably going to be more like '22 when you're going to have a robust return to the office, where those levels will be even elevated past what we'll see in '21.

Sam Kusswurm -- William Blair -- Analyst

Got you. Thanks for the answer guys.

Scott Salmirs -- President and Chief Executive Officer

Have a great day.

Operator

Our next question is from David Silver with CL King. Please proceed.

David Silver -- CL King -- Analyst

Yeah, hi, good morning. Thanks. Scott I wanted to follow-up maybe on one of your answers here regarding retention rates. So I mean historically you've been very clear about pursuing high retention rates on your annual contracts. I'm just wondering if you have any early data thus far like on a couple of things. First off, the six month EnhancedClean contracts. My sense is, a lot of those are coming up for renewal. And I'm just wondering if you have some early read on retention rates there and then maybe a more qualitative comment regarding the tag work or the Work Orders that you're seeing. So I mean very hard to generalize, but is there seemingly a customer strategy evolving where maybe they have a work order every couple of weeks or so or once a month to supplement the standard annual contract. So just some idea of the cadence there on EnhancedClean and the Work Orders? Thank you.

Scott Salmirs -- President and Chief Executive Officer

Yeah sure no problem. So look I think for us again it's been sustained, right and if you look at our Work Orders and EnhancedClean we did $150 million of that in the first quarter as compared to 300 million all of last year. So we're excited about that and then our renewals have been very strong on EnhancedClean so far, which is a really good time. But I think what was even more powerful for us is when we surveyed our clients, 90% of our clients said on reopening they're going to do the same, if not more virus-protection, which is pretty incredible and then take that to the next level 85% of our clients said when they look out two years past the pandemic or more, they're going to continue to be doing virus protection. So it kind of proves the thesis that we've been saying all along that on some in some extent pandora's box has been opened around virus protection and awareness and then confirm and not only through the survey results but as you can imagine we're constantly communicating with our clients about reopen plans and it just confirms what we're hearing in the survey. So really optimistic. Is that helpful?

David Silver -- CL King -- Analyst

Yeah, that's great. Just one quick one and then one strategic question, but the quick one would be on the CARES Act and I believe last year the CARES Act will allowed you to differ roughly I think 100 million or so of employment taxes. Can you just maybe remind me what, can you update us on how that is going, how that went in the first quarter and then maybe from a fiscal year '21 basis. Will any of that accumulated kind of deferral need to be repaid. So maybe the fiscal year '21 cash flow impact puts and takes on the CARES Act will be great. Thank you.

Earl Ellis -- Executive Vice President and Chief Financial Officer

Yeah, David, it's Earl. Let me address that. So if we start, if you look at the cash flow operations this quarter we landed at about $40 million, which if you think about Q1, this is probably the first time in recent history that Q1 is actually generated positive cash as opposed to actually being a net draw on cash. $31 million of that cash flow came from the CARES Act so if you look at what we did last year 130 and 131 this year, it's about $161 million that will be repaid in two half -- the first-half being next fiscal, which is really December at the end of December 2021 and then the following fiscal or the following fiscal, the balance of that amount.

David Silver -- CL King -- Analyst

Okay, all right, great. I appreciate that. And then last question would be more I guess just to it's a multi-tasking, question for you, Scott. But when I think in your company here. I think you have this big new opportunity or newish opportunity that you're moving aggressively to invest in and to exploit regarding the post-pandemic business environment and then are you also would say that within the last year, you've also initiated another significant kind of longer term strategic effort regarding your transformation programs. And I'm just wondering as you kind of steer the ship here, can those two very significant high priority efforts can they continue on without interruption is there some competition internally for resources, how does human resources view filling senior openings on one project or one effort versus the other? Just and of course your time to management attention. So how do you kind of manage I guess those parallel tracks on two high priority and frankly newer efforts relative to how your company has been positioned over the past several years. Thank you.

Scott Salmirs -- President and Chief Executive Officer

That's a good question I don't think they're out of line, to be honest, I think they all are online together into kind of one vision going forward. And the way I think about this we're going to have this work stream and investing into the business organically and that's the EnhancedClean enhanced facilities and continuing to build excellence around that. So you can have that but at on a parallel path that we're going to be investing in our tech, right, and part of the tech is infrastructure and that's kind of table stakes right getting your data right forming a framework around new technology, but that's really to accelerate and grow the business through client-facing technology, right. So we get stickier with clients and that client-facing technology can intersect with EnhancedClean, right in terms of tracking systems and dashboard. So I think that's really important and then also to accelerate the business, the technology is going to work toward workforce management getting our people more efficient, getting our people more data more touch points with our clients because we're informing them and enriching them with the data that we're capturing.

So I think it really aligns well and we will lay out in detail the next five years in the coming months. But we're really excited about our ability to invest in our people and to invest in technology and again it's just going to come together beautifully in online. So we're really excited to talk about it over the next couple of months.

David Silver -- CL King -- Analyst

All right. Just one final comment, but I did want to call out. I thought the slide deck that you put together for this call was exceptionally useful and helpful and the opportunity to go through at last night was an added plus. So thanks for the extra effort. I appreciate it.

Scott Salmirs -- President and Chief Executive Officer

That's great. Thanks.

Operator

And we do you have time for one more question. Our final question will be from Marc Riddick with Sidoti & Company. Please proceed.

Marc Riddick -- Sidoti & Company -- Analyst

Hi. Good morning, everyone.

Scott Salmirs -- President and Chief Executive Officer

Good morning, Marc.

Marc Riddick -- Sidoti & Company -- Analyst

So let me also echo the last comments the slide deck for those who haven't had a chance to see it so far. I thought was exceptional and had a lot of great detail on that. Really appreciate that. Really appreciate all the commentary that you've already given. But I wanted to touch a little bit on the investment commentary because in addition to the investments that you've talked about. I want to circle back to the idea that you've begun a national commercial campaign and I don't think that's a small thing for a company that's a century old for the first time have a commercial. So I was wondering if you can sort of talk a little bit about that thought process, what the branding opportunity that you see is and what it kind of means for ABM as well as what it means for EnhancedClean in general?

Scott Salmirs -- President and Chief Executive Officer

Sure. I mean, look, we were you can imagine the pride we had right to have a national TV commercial for a company like us and it was so well done and we get such great comments on it and I think it's multipurpose, right, Marc. Part of it is just the commercial side of it meaning the commercial business side of it and we're already seeing web traffic up over 10% just from the commercial, which is so that the payback is incredible. And just from a branding standpoint, it's just repositions our brand and elevates our brand and especially what we're doing with EnhancedClean and making sure people understand Marc that like we're in essential service with first responders and we even say like with healthcare professionals, they can even -- hospital can open till we've cleaned it right. So I think it's just so much for us on so many different levels, but it doesn't hurt when you get a pure financial payback and you start seeing web traffic up and that turning into actual business.

Marc Riddick -- Sidoti & Company -- Analyst

And then just to be clear the commercial hasn't been out for very long right, right, I mean when did that hit the air?

Scott Salmirs -- President and Chief Executive Officer

It was just been out for like two weeks, yeah.

Marc Riddick -- Sidoti & Company -- Analyst

I was sort of thinking about on top of the investment commentary that you've made. So as you sort of thinking through the technology investments or what have you. From a timing perspective I would imagine that some of that we'll see later this year and then flowing into next year and obviously you still got some big decisions to make around that, but is that a reasonable way to think about the technology spend that you have in front of you?

Earl Ellis -- Executive Vice President and Chief Financial Officer

Yes. So, Marc, just let me address that. So when we look at the technology spend -- part of it is that planning and design that we currently are investing against our future IT infrastructure, which again will start with a rollout of the ERP system across the enterprise. Again the decision right now we're not going to do that in kind of like a big bang approach, but rather will be a series of rollout. So presumably you could see some deployment at the end of this year and then flowing into FY'22.

Marc Riddick -- Sidoti & Company -- Analyst

Okay, that's helpful. And so the -- so one of the surprises I guess of the follow-ups the commentary around the acquisitions and looking at acquisitions as a more maybe more near-term potential use of cash and there may be some sort of thinking about and I appreciate you including the commentary on the prioritization of what you might be looking at with from an acquisition pipeline perspective. Is it too early to have begun to look at sort of what that pricing for those types of assets might look like or how should we think about that the potential range of opportunities that might be in front of you?

Scott Salmirs -- President and Chief Executive Officer

Yeah, it's probably a little early and different assets have different ranges right like the ATS stuff is a little bit more prizy than janitorial and it's because it's higher growth, higher margin, right. So I think we have to synthesize all that and there is other things that we take into consideration just besides multiple and pure financials, it's like, is there a strategic component to it like with ATS where I talked about expanding our footprint and filling in gaps that we don't have or that we do have rather around the country. So we put all those together and bake it into our analysis, but it's kind of early right now for us. But hopefully, we'll have more to report on soon.

Marc Riddick -- Sidoti & Company -- Analyst

Okay and then the last thing for me is a year ago EnhancedClean didn't exist and we were obviously in a different place, right. So I wanted to sort of get a sense of whether we begin to sort of look at longer term, what EnhancedClean to be and it seems as though there is a certain this going to be a certain flow based on the types of customers that you have, but it certainly seems to be encouraging from the survey data that you had in your slides and the like. I wanted to get a sense of that survey work and the feedback that you're getting how recent was that and do you get a sense that maybe some of the bigger picture issues like the stimulus plan like has -- is that beginning to be reflected back in the commentary that you're getting from customers. Thanks.

Scott Salmirs -- President and Chief Executive Officer

Yeah, I think that one of the biggest knock-on effects to this Marc has been the elevation of our brand, right, because you know what our competitors are doing a lot of the same stuff that we're doing, but they're basically coming in and saying we can electrostatic spray, right. Well, we could do that too, but when you take on the EnhancedClean program, you get a different level of training, you get signage with it, right, you get a different level of the way you communicate to clients, you can even have evidence based testing when we're done to show whether or not we've been successful in eradicating the COVID in the space. So and it all ends with kind of the proverbial seal in the window that says this facility has been EnhancedClean certified because you remember we talked about the fact that we put together an advisory panel. So it's like I think the biggest push about this Marc is that it kind of it separates us from the pack. It really differentiates us as we've talked about before, a lot of our competitors are small and regional companies, they don't have the resources that we have with the scale that we have with the supply chain. All those things are coming to floor now that we're in this pandemic and as really in order to our benefit.

Marc Riddick -- Sidoti & Company -- Analyst

Appreciate all the time. Thank you.

Scott Salmirs -- President and Chief Executive Officer

Thanks, Marc.

Operator

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Scott Salmirs -- President and Chief Executive Officer

Yeah. Thank you. I just want to thank everybody sort of being on the call and all the support and again want to thank our teammates for this incredible performance. And again culture like no other really enthusiastic and we look forward to being back in Q2 to update you. And in the meantime just stay safe and don't let your guard down, we're getting out of this. So let's continue on everybody. Thank you.

Earl Ellis -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]

Duration: 59 minutes

Call participants:

Susie Kim -- Treasurer & Vice President of Investor Relations

Scott Salmirs -- President and Chief Executive Officer

Earl Ellis -- Executive Vice President and Chief Financial Officer

Sean Eastman -- KeyBanc Capital Markets -- Analyst

Andy Wittmann -- Robert W. Baird -- Analyst

Sam Kusswurm -- William Blair -- Analyst

David Silver -- CL King -- Analyst

Marc Riddick -- Sidoti & Company -- Analyst

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