Abm Industries Revenue Jumps 6% in Q3

Key Points

• Revenue rose 6.2% to $2.22 billion, with all segments delivering organic growth and Technical Solutions revenue rose 19% year over year.

• Free cash flow (non-GAAP) surged 134% to $150.2 million, reflecting improved collections and ERP system stabilization.

• Adjusted EPS declined 2.4% to $0.82, with profitability pressured.

• These 10 stocks could mint the next wave of millionaires ›

ABM Industries (NYSE:ABM), a leader in facility management and integrated building solutions, released its earnings for the third quarter of fiscal 2025 on Sept. 5, 2025. The biggest headline from this report was a solid 6.2% rise in revenue, and a dramatic recovery in cash flow, offset by a slight dip in adjusted earnings per share due to margin pressure. Adjusted EPS landed at the lower end of expectations, and the company expects full-year adjusted EPS at the low end of its prior range of $3.65 to $3.80.

Overall, the quarter was a story of growth across all business segments, strong cash generation, but ongoing pressure on profitability.

Source: ABM Industries.

Business overview and strategic focus

ABM Industries specializes in providing a range of services for buildings and facilities, including cleaning, building engineering, energy solutions, and technical support. Its clients span industries like aviation, manufacturing, education, and commercial real estate. The company divides operations into business segments: Business & Industry, Manufacturing & Distribution, Education, Aviation, and Technical Solutions.

Recently, ABM Industries has focused on growth through strategic acquisitions and investments in technology. It has expanded energy and sustainability offerings, particularly through acquisitions like RavenVolt, which brought in electric vehicle (EV) charging and microgrid capabilities. Key success factors for the business now include winning new contracts, expanding tailored service lines across industries, and controlling labor costs. The company’s ability to deliver consistent client retention while adapting contract structures to specific industry requirements remains central to its competitive position.

Quarter highlights: Growth, margin pressure, and cash flow turnaround

During the quarter ended July 31, 2025, revenue increased to $2.22 billion as all major segments showed organic growth. Technical Solutions, which delivers specialized energy and technology services such as microgrid projects and EV infrastructure, led growth with a 19% year-over-year gain, supported by recent acquisitions and demand for energy solutions. The Aviation business, offering facility services for airports, saw sales climb 8.7%, and Manufacturing & Distribution reported an 8.4% improvement in revenue as new client wins and expanded contracts offset regional market weakness. Business & Industry grew 2.8%, with management noting slow recovery in some office geographies, while the Education segment posted a 3.0% rise in revenue, maintaining steady performance.

Despite broad growth, profitability lagged. Adjusted net income fell to $51.7 million from $53.6 million, and adjusted EPS dropped 2.4% to $0.82 from $0.84 in the third quarter of fiscal 2024. Management cited margin pressure and strategic pricing for contract renewals in the Business & Industry and Manufacturing & Distribution divisions. These margin headwinds prompted a cost-reduction program in August, with a restructuring charge of $10 million expected in the fourth quarter, aiming for $35 million in annual savings beginning late in the fourth quarter and ramping through fiscal 2026.

Cash flow was a standout in the results. Operating cash flow jumped 120.1% year over year, while free cash flow (non-GAAP) rose 134.3%, reaching $150.2 million. This improvement followed the stabilization of the company’s enterprise resource planning (ERP) system, which had hurt collections and cash flow in earlier quarters. Improved collections and the absence of prior-year one-time items contributed to this recovery.

Non-recurring events also affected results. Last year’s quarter included a $36.0 million unfavorable adjustment related to contingent consideration, depressing profits in that period. This quarter’s net income margin of 1.9% represents a recovery from a much lower margin last year, but underlying profitability, as measured by adjusted EPS and adjusted EBITDA, was essentially flat or down. The dividend was raised to $0.265 per share, up from $0.225 per share in the third quarter of fiscal 2024, and 1.1 million shares were repurchased, totaling $50.1 million during the third quarter and following quarter end. The remaining board-authorized share repurchase capacity was expanded to $233 million.

Business lines and strategic initiatives

ABM Industries structures its offerings by customer industry. The Business & Industry segment provides integrated facility services to office buildings and commercial properties, offering customized solutions such as janitorial, mechanical, and electrical services. Manufacturing & Distribution focuses on manufacturing and distribution facilities, delivering specialized maintenance and cleaning services. In Aviation, ABM delivers cleaning, passenger and ramp services, as well as other airport operations support. Its Education arm specializes in custodial, energy, and grounds services for schools and universities. Technical Solutions manages high-tech services, notably microgrids -- small-scale power grids that can operate independently for energy resilience -- and EV charging system installations.

One of the company’s most significant growth strategies has involved acquisitions that have expanded its energy and technology footprint, particularly through recent deals like RavenVolt. Management continued to report robust new contract bookings, with $1.5 billion in new wins year to date for the first three quarters, a 15% rise from last year. This pipeline builds on key sector targets like prime office, semiconductors, and aviation, with a continued emphasis on integrating new technology and sustainable solutions into service offerings. Cost control and restructuring are a new focus due to margin pressures and the need to improve labor efficiency as wage costs rise. The announced restructuring is projected to bring a positive impact to margins beginning in the fourth quarter and continuing into fiscal 2026.

Looking ahead: Guidance and investor watch items

Management now expects adjusted EPS (non-GAAP) at the lower end of its guided range of $3.65–$3.80. The adjusted EBITDA margin is likewise forecast to end at the low end of the 6.3%–6.5% outlook, reflecting expectations for continued margin pressure from labor and interest expense. The company said: “These decisions modestly pressured margin and adjusted EPS, but are expected to yield meaningful benefits over time.” Management highlighted that fourth quarter performance is expected to improve “meaningfully” as the initial cost savings from restructuring are realized.

In summary, the main watch items for the coming quarter involve the progress of cost-cutting actions and restructuring efforts, as well as any improvement in segment margins and overall profitability. Investors may want to follow developments in technical services, where microgrid and EV infrastructure demand continue to provide growth opportunities, while also monitoring performance in core Business & Industry and Manufacturing & Distribution segments, which face the brunt of labor and margin pressure. The quarterly dividend was raised 17.8% to $0.265 per share, up from $0.225 in the third quarter of fiscal 2024.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,065%* — a market-crushing outperformance compared to 186% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of August 25, 2025

Motley Fool Markets Team is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. The Motley Fool takes ultimate responsibility for the content of these articles. Motley Fool Markets Team cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends Abm Industries. The Motley Fool has a disclosure policy.