ABM Industries Q3 Revenue Up 6 Percent

ABM Industries(NYSE:ABM) reported fiscal third quarter 2025 results on September 5, 2025, with revenue of $2.2 billion (up 6.2% year over year), net income of $41.8 million, adjusted EBITDA of $125.8 million (up 5% year over year), and free cash flow of $150 million. Organic revenue growth reached 5%, and management announced a $35 million restructuring to address margin compression and support future profitability. The following highlights provide insight into the company’s strategic execution, margin dynamics, and cost initiatives.

Organic growth at ABM Industries outpaces peers

Bookings for the first nine months of 2025 exceeded $1.5 billion, up 15% year over year, with organic growth achieved across all major segments, including Aviation, Manufacturing & Distribution (M&D), and Technical Solutions. Despite a sluggish recovery in certain U.S. commercial office geographies and margin pressures, the company maintained positive momentum in its core facility solutions businesses.

"It is important to recognize that our strategy is working. While some peers with comparable U.S. cleaning and maintenance exposure have recently reported meaningful organic revenue declines, we delivered mid-single-digit organic growth this quarter."
-- Scott Salmirs, President and Chief Executive Officer

This performance demonstrates ABM Industries’ ability to capture market share and execute its strategy effectively, reinforcing its long-term investment case relative to weaker competitors.

Strategic pricing reduces margin, secures contracts

Pricing concessions and renegotiations in select pressured markets, particularly within Business & Industry (BNI) and M&D, led to short-term margin declines. BNI margin fell from 7.7% to 7.1% year over year, and M&D margin dropped from 10.9% to 8.9% year over year, but these actions secured long-term contract extensions with marquee clients and provided revenue durability during market volatility.

"We really got into it with them, and we ended up forging a longer-term contract and the same thing, walking away with a client that now thinks of us as a strategic partner. In both those cases, we protected our footprint. These were both marquee clients and long-term clients. For us, we look at this as a really positive result. You guys know that have been following us for years, we always rework the margin back up. I think even if it's a little painful right now, we'll talk about this a year from now, and we're going to be really excited about where we are from a margin perspective."
-- Scott Salmirs, President and Chief Executive Officer

By prioritizing long-term client relationships at temporarily lower margins, ABM Industries is building a foundation for future profit expansion as escalations and operational efficiencies are realized.

Restructuring program targets $35 million in annual savings

In August 2025, the company enacted a restructuring program with an upfront $10 million cost, targeting $35 million in annualized cost reductions. The initial focus is on organizational structure, with further expense opportunities under review, in response to elevated interest expense, pressured margins, and ongoing investments.

"The program is designed to more closely align our cost structure and footprint with our growth priorities and is initially focused on organizational structure. The actions we've undertaken are expected to yield annualized savings of $35 million at a cost of approximately $10 million."
-- David Orr, Executive Vice President and Chief Financial Officer

This initiative is expected to strengthen ABM Industries’ competitive and financial positioning, supporting improved margins and long-term shareholder value.

Looking Ahead

Management expects earnings and margins to improve meaningfully in the fourth quarter, driven by restructuring benefits and strong Technical Solutions (ATS) segment performance. Full-year adjusted EPS is projected at the lower end of the $3.65 to $3.80 guidance range, and adjusted EBITDA margin (non-GAAP) is expected at the lower end of the 6.3% to 6.5% range. Capital allocation will continue to prioritize share repurchases, supported by an increased $233 million authorization.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool recommends Abm Industries. The Motley Fool has a disclosure policy.