Did flat Q2 B&I growth reflect the full impact of the client exits, or will the segment decelerate further?

Most of the pressure is the TfL exit plus West Coast softness (vacancy 2-3x worse than NYC), which management characterized as episodic and unsustainable. B&I will decelerate further in the back half — TfL alone is ~300bps of back-half growth impact — but exits are expected to flex operating margins up, and full-year B&I is seen flat to slightly positive. “The TfL exits accounts for about 300 basis points of growth impact for B&I in the back half.”

Did ABM change how it treats prior-year self-insurance adjustments this quarter, and is there an EPS impact?

After 2025 SEC guidance to record prior-year self-insurance adjustments above the line, ABM previously excluded them from guidance. Following operational investments (return-to-work, claims closing, driver-behavior programs) that reduce volatility, it now includes the expected full-year impact within the $3.85–$4.15 guide. Management framed this as de-risking Q4, which took a $0.20+ EPS hit last year, without changing the EPS range. “we just de-risked Q4 because... prior to this, we didn't have it in the guidance... last year is we had this $0.20 plus hit to EPS in Q4”

Update on WGNSTAR — competitive environment and whether growth is new business or existing-customer expansion.

Integration has gone very well and WGNSTAR is contributing meaningfully. It complements ABM's outside-the-fab presence with inside-the-fab capability, making ABM a seamless provider. Semiconductor revenue doubled YoY; ABM has 60+ clients, 300+ sites, is in 75% of U.S./European fab makers and works with 7 of ~10 big OEMs, with double-digit growth expected to continue. “We have over 60 clients. We're over 300 sites right now... we're in 75% of those clients right now. And when you look at the OEMs... We're doing work with seven of them”

ABM

ABM Industries (ABM) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Apr 2026 (Q2 FY26)· Industrials· Jun 5, 2026

Source: earnings call transcript

Executive summary

ABM Industries Q2 FY26 — record $1.2B first-half bookings and strongest organic growth since 2022

ABM delivered an unusually strong top line this quarter, led by Technical Solutions and semiconductor-driven M&D, while margin lagged because ATS mix skewed toward lower-margin, equipment-heavy 'turning-the-wrenches' project work and WGNSTAR amortization weighed on M&D — both of which management frames as timing that reverses as design/engineering mix and volume ramp in the back half. The offset to the growth story is B&I, where deliberate client exits (notably TfL) and West Coast office weakness will keep the segment flat-to-slightly-positive for the year even as its margins flex up. Management's forward stance is deleveraging-first (below 3x by year-end) with M&A sequenced into late FY26/early FY27, and it kept full-year adjusted EPS unchanged while absorbing higher interest costs and, notably, folding volatile prior-year self-insurance adjustments into guidance to 'de-risk' Q4. The setup rests on a back-half margin step-up that has not yet been demonstrated.

Highlights

Organic revenue growth of 6.1% — the strongest since Q3 2022 — drove total revenue up 8.4% YoY to a Q2-record $2.3B (2.3% from the WGNSTAR acquisition)
Record first-half new sales bookings of $1.2B
Technical Solutions revenue +27% (22% organic), Aviation +20%, and M&D +17% (7% organic + 9% WGNSTAR)
Adjusted EPS of $0.90 (vs $0.86) and adjusted EBITDA of $131.7M, up $5.8M YoY
First-half free cash flow of $71.2M versus negative $107.8M a year ago — a ~$180M improvement — and segment operating margin up 20bps sequentially to 7.3%

Concerns

Segment operating margin fell 60bps YoY to 7.3% and adjusted net income slipped to $52.9M from $54.1M
B&I was flat organically; the TfL (large U.K.) client exit is a ~300bps growth drag on B&I in the back half amid West Coast CRE softness
Aviation operating margin dropped to 5.3% from 6.3% on weather costs, TSA-driven disruptions, contract scope changes and Heathrow ramp-up costs
Leverage rose to 3.2x (above 3x) after WGNSTAR, and the FY26 interest-expense forecast was raised to ~$110M on higher rates
FY26 adjusted EPS guidance was only maintained at $3.85–$4.15 despite the strong first half

Guidance & targets

Category	Target	Timeline	Confidence
Adjusted EPS	$3.85 to $4.15 high materiality	FY26	High
Organic revenue growth	3% to 4%, toward the higher end high materiality	FY26	High
Total revenue growth	high end of 4% to 5% range medium materiality	FY26	High
Segment operating margin	toward the low end of 7.8% to 8% high materiality	FY26	Medium
Interest expense	approximately $110 million medium materiality	FY26	Medium
Effective tax rate	29% to 30% normalized low materiality	FY26	Medium
Free cash flow	approximately $250 million high materiality	FY26	High
Leverage	below 3x total debt to pro forma adjusted EBITDA high materiality	Q4 FY26	High
B&I revenue growth	flat to maybe slightly positive full year; moderate/decelerate in back half medium materiality	FY26	Medium
Segment outlook — Technical Solutions	strong second half on higher volume and improved (design/engineering) mix high materiality	H2 FY26	Medium
Segment outlook — Aviation	organic growth strong but moderating from Q2 medium materiality	H2 FY26	Medium
Segment outlook — Education	solid; margin to improve in Q3 (seasonally strong) low materiality	Q3 FY26	Medium
Semiconductor market growth	double-digit growth continuing 'for a while' medium materiality	multi-year	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Business & Industry (B&I) Flat revenue reflects U.K. market strength offset by the mid-quarter exit of a large U.K.-based client (TfL) and other client exits, particularly on the West Coast. Margin decline reflects contract-mix shifts and increased sales-resource investment. Sequential margin movement is internally inconsistent in the transcript: prepared remarks state margin 'improved 10 basis points sequentially,' while in Q&A Scott Salmirs said B&I margins 'were up 30 basis points between Q1 and Q2' — both are captured as stated. Full-year B&I guided flat to slightly positive with margins expected to flex up in the back half. Operating margin: 7.6%Back-half growth impact from TfL exit: ~300 bps	$1.0 billion	essentially flat	—	Operating profit $76.7M; margin 7.6% (vs $83M and 8.2% last year)
Aviation Growth supported by healthy travel demand and the ramp of new contract wins, particularly the new Heathrow contract. Profit and margin were pressured by incremental weather-related costs, certain contract scope changes, TSA-driven operational disruptions and Heathrow ramp-up costs. Back-half organic growth to remain strong but moderate as ABM anniversaries large Q3 FY25 contracts; management is watching rising fuel costs' effect on airline clients and softer international volumes. Operating margin: 5.3%	$310.8 million	+20%	—	Operating profit $16.3M; margin 5.3% (vs $16.5M and 6.3% last year)
Manufacturing & Distribution (M&D) Strong organic growth driven by recent contract wins (particularly technology sector) and client expansions, complemented by WGNSTAR. Margin declined YoY on the mix of new contracts secured last year and $4M of incremental WGNSTAR amortization; ex-amortization margin of 9.6% is management's view of underlying earnings power. Margin rose 20bps sequentially as anticipated. Semiconductor is the key driver — revenue doubled YoY with high double-digit organic growth. Organic growth: 7%WGNSTAR (acquisition) growth contribution: 9%Operating margin: 8.8% (9.6% ex-amortization)Incremental WGNSTAR amortization: $4M	$463.8 million	+17%	—	Operating profit $40.6M; margin 8.8% (vs $39.9M and 10% last year); ex-incremental-amortization margin 9.6%
Education Revenue growth primarily driven by escalations. Margin expansion driven by enhanced labor efficiency and effective escalation management. New wins include a large ABM Performance Solutions contract from Detroit Public Schools ($25M, fully online in Q4) and a scope expansion with the University of Miami. Margin expected to improve further in the seasonally strong Q3. Operating margin: 7.0% (+100 bps YoY)Operating profit growth: +19%	$232.2 million	+2%	—	Operating profit $16.4M (+19%); margin 7.0% (+100 bps)
Technical Solutions (ATS) Growth reflected robust data-center activity plus strong battery energy storage and HVAC project work, and significant new microgrid business with a major big-box retailer. Profit rose on volume growth, but margin was flat as service mix skewed toward lower-margin equipment-intensive infrastructure projects rather than higher-margin design/engineering, plus ongoing growth investments. Mix and margin expected to improve in the back half per historical cadence. Organic growth: 22%Acquisition growth contribution: 6%Operating margin: 6.3%	$267.3 million	+27%	—	Operating profit $16.8M; margin 6.3% (vs $13.4M and 6.4% last year)
Total / Consolidated Consolidated organic growth of 6.1% was the strongest since Q3 2022, led by Technical Solutions and Aviation. Segment margin down 60bps YoY on last year's M&D/B&I contract onboarding and WGNSTAR amortization, but up 20bps sequentially; healthy sequential margin improvement expected in Q3 and Q4. Organic growth: 6.1% (strongest since Q3 2022)Segment operating margin: 7.3%Adjusted EBITDA: $131.7M	$2.3 billion	+8.4% (6.1% organic + 2.3% acquisitions)	—	Segment operating margin 7.3% (+20 bps QoQ, -60 bps YoY); adjusted EBITDA $131.7M (+$5.8M)

ABM operating KPIs by quarter

ABM operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Apr 2026 Q2 FY26	Jul 2026 Q3 FY26	Change vs prior quarter
Employees	100K+ More than 100,000 people show up every day and deliver for our clients, and their commitment is what makes ABM's long-term story possible. Source: earnings call transcript	100K+ More than 100,000 people show up every day and deliver for our clients. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

New sales bookings (first half FY26) $1.2 billion first half FY26 (through Apr 30, 2026)

a new record for ABM

Majority characterized as strategic (vs defensive) wins across Sunbelt, data centers and semiconductors; ABM historically updates first-half bookings in Q2.

Deals & partnerships

WGNSTAR acquisition ~$8-9M acquisition costs (purchase price not stated)

Semiconductor fabrication-services acquisition; integration described as going 'really, really well' and contributing meaningfully; combined with ABM's outside-the-fab presence to create a seamless provider.

RavenVolt acquisition (prior) — final earn-out ~$30M final earn-out payment

The final RavenVolt earn-out payment of roughly $30M is one of the items excluded from the free cash flow outlook.

Detroit Public Schools customer contract $25M

Large ABM Performance Solutions contract; cited as proof point of Education's win momentum.

University of Miami customer contract (scope expansion)

Expanded scope with a long-standing and important Education client.

Heathrow Airport customer contract

New Aviation contract driving segment growth alongside broad travel demand.

Nation's largest bank (unnamed) — NYC customer contract

Selected last year to service the bank's new New York City headquarters; a B&I flight-to-quality win.

Another leading commercial bank (unnamed) customer contract

Recently signed a significant new facilities contract; cited as evidence of the office recovery and client confidence.

Major big-box retailer (unnamed) customer contract

New microgrid business booked in Q2; a second large retailer relationship on top of a legacy multi-year microgrid customer, with expected multi-phase runway.

Orlando International, Miami International, LaGuardia Terminal B customer contract (aviation wins)

Recent Aviation wins cited as reflecting the airport-modernization pipeline.

Risks & headwinds

B&I client exits and West Coast commercial real estate softness back half of FY26 (full run-rate impact)

TfL exit ~300 bps of B&I back-half growth impact; West Coast vacancy rates 2-3x worse than NYC

Mitigation:Deliberate exits of sub-threshold accounts; operating margins expected to flex up; management views the pressure as episodic and unsustainable

Rising fuel costs pressuring airline clients / softer international aviation volumes near-term, being monitored

not quantified ('hasn't been incredibly material yet')

Mitigation:Flexible labor model and largely non-discretionary services allow ABM to ride through cycles

Higher interest rates raising interest expense FY26

FY26 interest expense forecast raised to ~$110M; Q2 interest expense $28.1M (+$4.2M YoY)

Mitigation:Additional cost actions planned to offset; deleveraging below 3x by year-end

Aviation margin pressure from weather, TSA disruptions, scope changes and Heathrow ramp Q2 FY26

Aviation margin fell to 5.3% from 6.3% YoY; operating profit $16.3M vs $16.5M

Mitigation:Ramp costs expected to normalize; strong underlying travel demand

WGNSTAR amortization drag on M&D margin ongoing

$4M incremental amortization; M&D margin 8.8% vs 9.6% ex-amortization (vs 10% prior year)

Mitigation:Ex-amortization margin of 9.6% cited as underlying earnings power; strong semiconductor growth

Elevated leverage post-WGNSTAR through end of FY26

3.2x total debt to pro forma adjusted EBITDA (above 3x); total indebtedness $1.9B

Mitigation:Near-term priority on debt repayment using back-half cash flow to reach below 3x by year-end

Prior-year self-insurance adjustment volatility FY26 (now baked into guidance)

$23M unfavorable prior-year adjustment last year; ~$0.20+ EPS hit in Q4 FY25

Mitigation:Operational investments (return-to-work, timely claims closing, aggressive settlement, driver-behavior programs) to improve predictability; impact now contemplated within the $3.85–$4.15 guide

Broader macroeconomic and geopolitical uncertainty ongoing

not quantified

Mitigation:Diversified, largely non-discretionary end markets; flexible labor model; disciplined capital allocation

Q&A highlights

Were there large battery-storage projects driving the 22% ATS organic growth, and what explains the margin trajectory?

A couple of large battery energy storage projects contributed; they are equipment- and infrastructure-heavy, carrying lower margins. Management explained ATS work has two phases — higher-margin design/engineering versus lower-margin 'turning the wrenches' execution — and Q2 was heavily weighted to execution, with margins expected to ramp in the back half as design/engineering mix returns.

“when you look at the mix for this quarter when you look at margin, we were heavily weighted towards the turning of the wrenches part. And we think in the back half... you'll see the margins ramp”

asked by Timothy Mulrooney · answered by Scott Salmirs / David Orr

3 min read 5 chapters

Detailed narrative

Financial Results & Profitability

Revenue grew 8.4% YoY to a Q2-record $2.3B, comprising 6.1% organic growth and 2.3% from acquisitions (primarily WGNSTAR). GAAP net income was $43.1M, or $0.73 per diluted share, up from $42.2M and $0.67 a year ago, with per-share results boosted by recent share repurchases.

Adjusted net income was $52.9M ($0.90 per diluted share) versus $54.1M ($0.86) last year, the decline reflecting higher interest and amortization expense partly offset by lower tax and corporate costs. Adjusted EBITDA rose $5.8M to $131.7M. Segment operating margin was 7.3%, up 20bps sequentially but down 60bps YoY, pressured by contracts that came online last year in M&D and B&I and by WGNSTAR-related amortization.

Business & Industry and the West Coast / Office Recovery

B&I revenue was essentially flat at $1.0B, with U.K. strength offset by the mid-quarter exit of a large U.K.-based client (TfL) and other client exits, particularly on the West Coast. Management framed the West Coast weakness — vacancy rates in L.A., San Francisco and Seattle running '2 or 3x worse than New York City' — as episodic and tied to competitors making uneconomic pricing decisions ABM won't match.

Nationally, U.S. office leasing is approaching 2019 levels, net absorption turned significantly positive (strongest since 2020), and the construction pipeline is nearly 90% below its 2020 peak, favoring the prime assets where ABM concentrates. Recent wins include the new headquarters of the nation's largest bank and a facilities contract with another leading commercial bank.

Semiconductor / M&D and the WGNSTAR Integration

M&D grew 17% to $463.8M (7% organic plus 9% from WGNSTAR), driven by technology-sector wins and client expansions. Management cited over $645B of announced U.S. semiconductor investment across 140-plus projects since 2020. WGNSTAR extends ABM from outside-the-fab services into inside-the-fab work; combined, semiconductor revenue doubled YoY with high double-digit organic growth in Q2 and tens of millions of dollars of new business secured.

ABM now serves 60+ semiconductor clients across 300+ sites, is in 75% of U.S./European fab makers, and works with 7 of the ~10 large OEMs. Semiconductors plus data centers together represent about 7% of total ABM revenue.

Technical Solutions — Energy, Microgrids and Data Centers

ATS revenue rose 27% to $267.3M (22% organic, 6% acquisitions), on robust data-center activity and strong battery energy storage and HVAC project work; U.S. battery-storage installations were up 52% in 2025 and AI is accelerating data-center construction at a double-digit pace.

Q2 mix skewed toward equipment-intensive infrastructure projects (the lower-margin 'turning the wrenches' phase) rather than higher-margin design/engineering, holding margin at 6.3% versus 6.4% despite profit rising to $16.8M from $13.4M. A significant new microgrid contract with a major big-box retailer supports a stronger, better-mixed second half, and management sees a multiyear growth cycle across energy resiliency, electrification and AI infrastructure.

Aviation, Education and Cash / Balance Sheet

Aviation revenue grew 20% to $310.8M on healthy travel demand (TSA throughput near 3M passengers/day) and the new Heathrow contract, though margin fell to 5.3% from 6.3% on weather costs, TSA-driven disruptions, scope changes and Heathrow ramp costs; wins at Orlando, Miami and LaGuardia Terminal B build the pipeline.

Education rose 2% to $232.2M with operating profit up 19% and margin up 100bps to 7% on labor efficiency and escalation management, aided by a $25M Detroit Public Schools ABM Performance Solutions contract (fully online in Q4) and a University of Miami expansion.

The balance sheet showed total indebtedness of $1.9B (including $23M standby letters of credit), 3.2x leverage, and $614M liquidity (including $95M cash); H1 free cash flow swung to positive $71.2M from negative $107.8M, a ~$180M improvement on working-capital management and ERP stabilization.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.