Please note that earlier this morning, we issued our press release announcing our second quarter 2026 financial results and outlook. Organic revenue growth came in at 6.1%, and I'm especially pleased to report that our first half new sales bookings reached $1.2 billion, a new record for ABM. Margins improved sequentially, and free cash flow was up significantly in the first half compared to last year, which I'm very pleased with. We expect volume to ramp meaningfully in both ATS and M&D, and service mix within ATS in particular should improve as the project pipeline matures and our backlog execution ramps sequentially.

Taken together, we expect these drivers to produce a significant step up in both earnings and margin as we move through the back half of the year. When taken together with the strong operating culture we have in place, ABM is well-positioned to capture the long-term growth opportunities ahead. New supply remains extremely limited, with the construction pipeline nearly 90% below its 2020 peak. Turning to M&D, the semiconductor build-out may turn out to be one of the most compelling growth stories in American manufacturing in 21st century.

The WGNSTAR acquisition has significantly strengthened our presence in semiconductor fabrication environments, and the benefits are already becoming evident. During the second quarter, we secured tens of millions of dollars in new business and delivered high double-digit organic revenue growth across our semiconductor market. Beyond semiconductors, e-commerce growth and US manufacturing reshoring continue to support healthy demand across the segment, which will continue to benefit us. TSA throughput is running close to 3 million passengers per day, and leisure demand remains robust.

What went well
  • ABM delivered 6.1% organic revenue growth, the strongest since the third quarter of 2022, with total revenue up 8.4% to a second-quarter record of $2.3 billion.
  • First-half new sales bookings reached a record $1.2 billion for ABM.
  • Technical Solutions revenue grew 27% (22% organic) to $267.3 million, Aviation grew 20% to $310.8 million, and M&D grew 17% to $463.8 million.
  • The WGNSTAR acquisition is performing well and contributing meaningfully right out of the gate, helping drive high double-digit organic growth in the semiconductor market.
  • Free cash flow improved significantly, with first-half free cash flow of $71.2 million versus negative $107.8 million in the prior-year period, and segment operating margin rose 20 basis points sequentially to 7.3%.
  • Education grew operating profit 19% to $16.4 million with margin expanding 100 basis points to 7%, driven by labor efficiency and escalation management, and won a $25 million Detroit Public Schools contract.
What went wrong
  • B&I revenue was essentially flat at $1 billion, pressured by the mid-quarter exit of a large U.K. (Transport for London) client and other client exits, particularly on the West Coast.
  • B&I operating profit fell to $76.7 million with margin declining to 7.6% from 8.2% last year on contract mix shifts and increased sales investments.
  • Aviation operating margin declined to 5.3% from 6.3%, pressured by weather-related costs, certain contract scope changes, TSA-driven operational disruptions, and Heathrow ramp-up costs.
  • Segment operating margin decreased 60 basis points year-over-year, reflecting contracts that came online last year in M&D and B&I plus higher WGNSTAR amortization expense.
  • M&D margin declined to 8.8% from 10% (9.6% excluding $4 million incremental WGNSTAR amortization), and Technical Solutions margin was 6.3% versus 6.4% due to a service mix weighted toward equipment-intensive work.

Guidance Changes

MetricPeriodCurrent guidance
Organic revenue growthFY2026Raised toward high end of 3%-4% (Raised slightly)
B&I full-year growthFY2026Flat to slightly positive (New)
Adjusted EPS guidance treatment of self-insuranceFY2026Now includes prior-year self-insurance adjustments within $3.85-$4.15 guide (Changed; Q4 de-risked)
Normalized free cash flowFY2026~$250M (excludes ~$65M of one-time items) (Maintained)
LeverageEnd of FY20263.2x currently; expect below 3x by year-end (Reiterated)

Performance Breakdown

MetricYoYNote
Total revenue +8.4% to $2.3B (Q2 record) 6.1% organic growth plus 2.3% from acquisitions, primarily WGNSTAR
Net income $43.1M ($0.73/sh) vs $42.2M ($0.67/sh) Higher interest and amortization expense, offset by lower tax expense and corporate costs
Adjusted EPS $0.90 vs $0.86 Boosted by share repurchase activity despite higher interest and amortization
Adjusted EBITDA +$5.8M to $131.7M Volume growth across segments
B&I revenue Essentially flat at $1B U.K. strength offset by mid-quarter TfL exit and West Coast client exits
Aviation revenue +20% to $310.8M Healthy travel demand and ramp of new wins, particularly Heathrow
M&D revenue +17% to $463.8M 7% organic plus 9% from WGNSTAR; technology-sector wins and client expansions
Education revenue +2% to $232.2M Primarily escalations
Technical Solutions revenue +27% to $267.3M 22% organic plus 6% acquisitions; data center, battery storage, and HVAC project activity

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Technical Solutions mixQ1 hit by weather delays and adverse microgrid mixStrong volume but mix weighted to equipment-intensive turn-the-wrench work; design/engineering mix expected to improve in back halfRecovering, margin ramp expected
Semiconductor / WGNSTAR integrationJust-closed acquisitionIntegration going well; doubled semiconductor growth year-over-year; over 60 clients, 300+ sites, in 75% of U.S./European fab capacity clientsStrong momentum
B&I client exits / West CoastTfL roll-off flagged in Q1TfL exit plus West Coast exits (LA, SF, Seattle) where competitor pricing fell below ABM thresholds; ~300 bps back-half growth impact from TfLDisciplined exits, margin accretive
Prior-year self-insuranceExcluded from FY2026 guidanceNow baked into guidance after program investments improved predictability; management says Q4 is de-riskedDe-risked
AI on escalationsEarly AI initiativesAI initiative scans contracts and generates escalation letters, maturing as a margin leverMaturing

Q&A Summary

Were there large projects driving the 22% Technical Solutions organic growth, and what is the margin trajectory?
David Orr cited a couple of large battery energy storage projects that are equipment-heavy and lower margin, with momentum continuing plus a ramp in traditional microgrid switchgear and generator work in the second half; Scott Salmirs framed it as design/engineering (higher margin) versus turn-the-wrench work, with the back half weighted more to design and engineering, lifting margins.
Does the flat Q2 B&I growth reflect the full impact of client exits or will it decelerate further?
Scott Salmirs said the majority of pressure was the significant TfL exit plus West Coast markets where vacancy is two-to-three times worse than New York and competitors are making sub-threshold pricing decisions; he expects it to wane over time and back-half B&I operating margins to flex up. David Orr added the TfL exit accounts for about 300 bps of back-half B&I growth impact.
Did you make a change this quarter to how prior-year self-insurance is treated in guidance?
David Orr explained that after recording adjustments above the line per SEC guidance last year, they had excluded them from the FY2026 guide for visibility, but program investments (return-to-work, claims closing, settlement, driver behavior) now give enough predictability to include them within the $3.85-$4.15 guide; Scott Salmirs said this de-risks Q4 after last year's $0.20+ hit.
What is the update on WGNSTAR now that you have owned it a few months?
Scott Salmirs said they are thrilled and integration has gone really well, with semiconductor growth doubled year-over-year, over 60 clients and 300+ sites, presence in 75% of U.S./European fab capacity clients and 7 of about 10 big OEMs, and expects double-digit semiconductor growth to continue for a while.
What is behind the accelerating pace of new business wins, and is it offense or defense?
Scott Salmirs said it is less defensive and more strategic, driven by hiring business development assets and targeting Sun Belt regions and data center/semiconductor verticals (now 7% of revenue combined), though he acknowledged a nice balance with some defensive measures.
What does the FY2026 free cash flow guidance of $250 million exclude?
David Orr said it excludes roughly $65 million total: about $20 million remaining transformation costs, a ~$30 million final RavenVolt earnout, ~$8-$9 million WGNSTAR acquisition costs, and other restructuring charges; ABM is at about 40% of normalized pacing (~$100 million) with cash flow tilted to the second half.

More on Abm Industries Inc /De/

Reported 2026-06-05 · figures from the Abm Industries Inc /De/ Q2 2026 earnings call.

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