[Management View]
ABM Industries reported a record $1.1 billion in new bookings for the first half of 2025, driven by major contract wins in microgrids, aviation, technology, and commercial office clients. Management highlighted investments in talent and technical capabilities, supporting expansion into value-added services in Manufacturing & Distribution and cross-segment contract bundling in Education. The Technical Solutions segment backlog reached a record $700 million, despite project delays that temporarily reduced margins.

[Outlook]
The company reaffirmed full-year adjusted EPS guidance of $3.65 to $3.80 and adjusted EBITDA margin guidance of 6.3%-6.5%. Management expects sequential improvements in cash flow and normalization of billing and collections processes in the second half of the year. The normalized free cash flow forecast is $250 million to $290 million for the full year, excluding specific costs.

[Financial Performance]
- Revenue: $2.1 billion, up 4.6% YoY
- Adjusted EPS: 86¢, up from 82¢ in the prior year period
- Net Income: $42.2 million, or 67¢ per diluted share, compared to $43.8 million, or 69¢ per diluted share, in the prior year (GAAP)
- Adjusted EBITDA: $125.9 million, with margin flat at 6.2%
- Free Cash Flow: $15 million, a $138 million sequential improvement over the first quarter

[Q&A Highlights]
Question 1: Can you remind me what the earn-out on Raven Bold is expected to be?
Answer: The total earn-out for this year is expected to be about $30 million. The majority of the Ravenloft payout is more about financial cash flow or investment cash flow as opposed to operational. Normalized cash flow projection for the year is between $250 million to $290 million, excluding one-time investments and integration expenses.

Question 2: How are you thinking about organic growth in the B&I business in the second half of the fiscal year?
Answer: We believe we are now in positive organic growth territory for B&I from here on out. While it could be a little choppy, we are excited to have bridged the chasm and achieved positive growth.

Question 3: Can you provide more color on offering more solutions to M&D customers, such as material handling and test and balancing?
Answer: This strategy is evolving and involves more than just one client. For example, in semiconductor facilities, we are moving from traditional janitorial roles to more strategic services like mechanical work and cleaning inside fabrication facilities. This approach is more strategic, sticky with clients, and offers higher margins.

Question 4: Is there an incremental change in the competitiveness of the M&D market?
Answer: We are investing in more sales assets and have tightened pricing as part of client rebalancing. While there are no massive overall trends towards margin decline due to competitiveness, these investments will pay dividends over the next few years.

Question 5: Can you help us understand the decomposition of the $1.1 billion in new awards between annuity business and project business?
Answer: The $190 million from a major big-box retailer is a significant portion, but the remaining $900 million is evenly paced across our normal business percentages.

Question 6: What is driving the project delays in ATS, and when do you expect things to normalize?
Answer: Delays are due to customer approvals and natural timing shifts. We expect margins to return to the 9-10% range as mix and timing normalize in the second half.

Question 7: What are you seeing from the underlying market in the education segment?
Answer: The education segment is stable with good growth and a strong pipeline. We are focusing on larger contracts and integrated offerings, which provide more value and are gaining traction.

Question 8: How should we think about the trend in total organic revenue growth for the second half?
Answer: While we do not guide towards revenue, we are enthusiastic about all industry groups returning to organic growth. Trends in each industry group are solid.

Question 9: Can you provide more detail on the battery energy storage contract win within ATS?
Answer: The $700 million backlog is a historic high, and we are seeing green lights from clients to move forward on projects despite tariff discussions and potential tax credit repeals.

Question 10: How are you positioned to win in prime office markets?
Answer: Our execution ability, relationships, and resume give us a competitive edge. Investments in technology and our scale also contribute to our success in winning prime office markets.

[Sentiment Analysis]
The tone of the management was confident and optimistic, highlighting strategic investments and positive growth trends. Analysts' questions focused on understanding the details of financial performance and strategic initiatives, indicating a positive reception to the company's progress.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 |
|----------------------------|---------------|---------------|
| Revenue | $2.1 billion | $2.0 billion |
| Adjusted EPS | 86¢ | 82¢ |
| Net Income (GAAP) | $42.2 million | $43.8 million |
| Adjusted EBITDA | $125.9 million| $121 million |
| Free Cash Flow | $15 million | -$123 million |

[Risks and Concerns]
- Project delays in the Technical Solutions segment impacting margins.
- Macroeconomic uncertainties affecting core markets.
- Potential impacts from tariff discussions and tax credit repeals on energy projects.

[Final Takeaway]
ABM Industries demonstrated strong performance in Q2 2025, with record new bookings and strategic expansion into high-growth areas. The company is well-positioned for continued growth, supported by investments in talent and technology. Management's reaffirmation of full-year guidance and positive outlook on cash flow normalization indicate confidence in achieving long-term value for shareholders. However, project delays and macroeconomic uncertainties remain areas to monitor.