ABM Industries Inc (ABM) 2021 Q3 法說會逐字稿

Greetings, and welcome to the ABM Industries, Inc.

Third Quarter 2021 Earnings Call.

(Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce David Gold, Investor and Media Relations.

Thank you.

You may begin.

Thank you for joining us this morning.

With us today are Scott Salmirs, our President and Chief Executive Officer; and Earl Ellis, our Executive Vice President and Chief Financial Officer.

We issued our press release yesterday afternoon announcing our third quarter fiscal 2021 financial results.

A copy of this release and an accompanying slide presentation can be found on our corporate website.

Before we begin, I would like to remind you that our call and presentation today contain predictions, estimates and other forward-looking statements.

Our use of the words estimate, expect and similar expressions are intended to identify these statements.

Statements represent our current judgment of what the future holds.

While we believe them to be reasonable, these statements are subject to risks and uncertainties that could cause our actual results to differ materially.

These factors are described in a slide that accompanies our presentation as well as our filings with the SEC.

During the course of this call, certain non-GAAP financial information will be presented.

A reconciliation of historical non-GAAP numbers to GAAP financial measures is available at the end of the presentation and on the company's website under the Investor tab.

I would now like to turn the call over to Scott.

Thanks, David.

Good morning, and thank you all for joining us today to discuss our third quarter results.

As detailed in yesterday's release, ABM generated strong third quarter results, featuring double-digit growth in revenue, continued solid cash generation and a 20% gain in adjusted earnings per share.

Revenue growth was broad-based as each of our 5 business segments achieved year-over-year gains in revenue, aided by an improving business environment and the gradual reopening of the economy.

Our team members once again executed well and continued to provide exceptional service to our clients.

Overall, demand for ABM's higher-margin virus protection services remained elevated in the quarter, underscoring ongoing client concerns regarding cleaning and disinfection of their facilities.

As anticipated, demand for virus protection eased slightly in the third quarter compared to the second quarter of fiscal 2021, but remained well above pre-pandemic levels.

The emergence of the Delta variant and rising COVID-19 cases nationally have gained heightened interest in the need for disinfection prevention measures, particularly in high-traffic areas.

As we look forward to 2022 and beyond, we believe that virus protection services will remain a contributor to our overall revenue as disinfection becomes a standard service protocol in facility maintenance programs.

During the third quarter, we continued to benefit from efficient management of labor as office occupancy levels remain relatively low nationwide and began to trend downward slightly as the third quarter progressed due to the spread of the Delta variant.

In this evolving environment, our flexible labor model enabled us to capitalize on staffing efficiencies and the associated benefit to our margins.

In light of the current pause and the return-to-the-office trend, we anticipate a more gradual ramp in office occupancy levels during 2022, providing an opportunity for a longer tailwind arising from labor efficiencies.

At the same time, we're proactively addressing current dynamics in the labor market, which include heightened competition for available talent.

As I noted in last quarter's conference call, ABM has developed a task force model that leverages our substantial internal resources and cross-functional expertise to identify and implement solutions rapidly and effectively.

Earlier this year, we established a human resources task force with a specific focus on recruiting and retention.

And this task force has been instrumental in helping us to manage our staffing needs and ensure our resources are allocated efficiently and cost effectively.

As a reminder, roughly half of our revenue is generated from union labor accounts, which mitigates concerns around labor inflation and availability.

Revenue growth in the third quarter was led by performance of our Aviation segment, where revenues increased 51% compared to the prior year period, and the segment operated profitably.

Our strong performance in Aviation reflected a seasonal improvement in air travel as well as our strategic shift towards securing high margin and more stable service contracts with airports and related facilities.

While revenue in our Aviation segment remains below pre-pandemic levels, we expect to see continued growth driven in part by new airport transportation and janitorial contracts.

Our Technical Solutions segment continued to perform strongly, generating nearly 23% revenue growth in the third quarter as our broad capabilities address key client needs for energy efficiency, productivity and mechanical performance throughout their facilities.

Revenue growth benefited from improved access to client sites, enabling us to execute on a large number of projects.

Technical Solutions ended the third quarter with a record backlog level, and the long-term outlook for this segment is particularly favorable given our position as a leading provider of electrical vehicle charging infrastructure.

Although EV charging infrastructure services currently represent a limited portion of Technical Solutions revenue, electrical vehicle adoption continues to rise, aided by the current administration's target to make half of all vehicles sold in 2030 zero emissions vehicles.

As a result, we see a long runway of growth for our e-mobility EV charging infrastructure business, as we look out over the next several years.

Turning to Education segment,school districts have accelerated the return to in-person learning as we estimate that 95% plus of K-12 and higher Education institutions will resume in-school classes this fall.

With the reopening of schools and educational facilities, Education segment revenue grew solidly from the prior year period, driven by increased demand for our services.

we believe the heightened concerns amid the prevalence of the Delta variant may lead to incremental opportunities for disinfecting services in the fourth quarter and into 2022, but we do expect our labor savings from hybrid environment will wane quickly with a return to full-time in-person learning this fall.

Overall, our scale, end-market diversity and breadth of service keep us well positioned for growth in the fourth quarter and beyond.

Given the strength of our year-to-date performance and our positive outlook for the fourth quarter, we are increasing our full year adjusted EPS guidance to $3.45 to $3.55, up from $3.30 to $3.50 previously.

On the acquisition front, a few weeks ago, we announced a definitive agreement to acquire Able Services in a strategic transaction that we believe will create significant value for all of our stakeholders.

We're excited to join with Able's talented team, and we look forward to working together to better serve our clients with a broad array of services and solutions that address their evolving needs.

The combination of ABM and Able expands our core engineering and janitorial capabilities in attractive geographies.

This acquisition is expected to be accretive to adjusted EPS from day 1, aided by an estimated $30 million to $40 million in cost saving synergies.

As a larger company with enhanced scale, we will be better positioned to provide our clients with service offerings that will not only enhance our growth in margins but will add significant value for our clients.

We also see the potential for revenue synergies over time as we deepen our client relationships and realize cross-selling opportunities.

We are progressing on the close of this acquisition, which we expect will occur by the end of September.

As a reminder, we have not included any contribution from Able in our updated guidance forecast.

In closing, the past 9 months have been exciting, productive and successful for ABM.

We have executed well on our strategic growth objectives while generating strong financial results, and we are very much looking forward to the addition of Able Services to ABM.

In the next few months, we plan to share with you our strategic plan for the next 5 years, which I'm extremely excited about.

I'll now turn the call over to Earl for a financial review of the third quarter.

Thanks, Scott, and good morning, everyone.

Third quarter revenue was $1.54 billion, an increase of 10.7% from last year.

This improvement was driven by revenue growth in each of our 5 business segments, reflecting an improving business environment and continued demand for our virus protection services.

On a GAAP basis, the loss from continuing operations was $13.7 million or $0.20 per diluted share compared to $56 million or $0.83 per diluted share in last year's third quarter.

The GAAP loss from continuing operations in this year's third quarter is attributable to a reserve of $112.9 million, equivalent to $1.24 per diluted share, to fully resolve previously announced outstanding litigation.

You will find additional information related to this legal settlement in our Form 10-Q, which will be filed later today.

Excluding the impact of reserve taken in the third quarter as well as other onetime factors, including a favorable prior year self-insurance adjustment of $26.1 million, our adjusted income from continuing operations was $61.3 million or $0.90 per diluted share in the third quarter of fiscal 2021 compared to $50.1 million or $0.75 per diluted share in the third quarter of last year.

The increase in adjusted income from continuing operations was primarily the result of strong operational performance, including growth in our higher-margin services.

Additionally, our results benefited from several other factors, including efficient labor management, 1 less workday compared to the third quarter of fiscal 2020 and lower bad debt expense.

Corporate expense for the third quarter increased by $27.5 million year-over-year.

The majority of this increase reflects a more normalized expense level in this year's third quarter, as furloughs and other cost-saving measures taken at the beginning of the pandemic reduced corporate expenses in the same period a year ago.

The increase in corporate expense this quarter also reflects planned investments of approximately $9 million as we continue to execute on our technology transformation initiatives.

On a year-to-date basis, we have invested $29 million in information technology and other strategic initiatives relative to our previously disclosed target of $40 million for the full fiscal 2021 year.

Now turning to our segment results.

Revenue in our largest segment, Business & Industry, grew 6.7% year-over-year to $807.7 million, benefiting from increased office occupancy in the quarter as well as continued elevated demand for virus detection services.

In addition, we saw improved demand for sports venue as spectator attendance levels increased significantly from the prior year period.

Operating profit in this segment grew 18.2% year-over-year to $84.7 million, reflecting efficient labor management, reduced bad debt expense and ongoing client demand for higher-margin buyer protection services.

Our Technology & Manufacturing segment generated revenue growth of 1.2% year-over-year to $246.1 million, and operating profit margin improved to 10.4%, up from 10.1% last year.

Since most of our clients in the T&M segment are considered essential service providers, this segment has been least impacted by COVID-19 disruption.

As a result, segment revenue grew modestly on a year-over-year basis.

However, the segment operating profit margin increased 30 basis points from the prior year period, reflecting lower bad debt expense.

Education revenue grew 10.5% year-over-year to $208.4 million, driven by the reopening of schools and other educational institutions amid a return to in-person learning.

Education operating profit totaled $17.7 million, down 3.3% from the same period last year.

Although the return-to-school trend increased demand for virus detection services, the resumption of more normalized staffing levels reduced overall margins compared to the prior year, which benefited from minimal staffing requirements.

Aviation revenue increased 51% in the third quarter to $175.7 million, marking the first period of year-over-year revenue growth in the Aviation segment since the third quarter of fiscal 2019.

Revenue growth was fueled by a rebound in U.S. passenger levels amid significantly busier summer travel season compared to the same period last year as well as our increased focus on securing more business with airports and related facilities.

Aviation operating profit improved to $10.3 million compared to an operating loss of $8.2 million last year.

Aviation segment margins continued to improve on a sequential basis, rising to 5.9% in the third quarter from 3.9% in the second quarter of fiscal 2021.

The improvement in operating margin is attributable to a favorable shift in business mix as we emphasize higher-margin airport facility contracts and from stronger client demand for virus protection services compared to the prior year period.

Technical Solutions revenue increased 22.7% year-over-year to $146.1 million, highlighting continued strong market demand for our energy efficiency solutions as well as improved access to client sites.

Segment operating margin was 9.9% in the third quarter compared to 11.1% in last year's third quarter, reflecting a higher personnel cost compared to last year's third quarter, which benefited from pandemic-related cost-saving actions.

I'll now discuss our cash and liquidity.

We ended the third quarter with $505.4 million in cash and cash equivalents compared to $394.2 million at the end of fiscal 2020.

With total debt of $811.6 million as of July 31, 2021, our total debt to pro forma adjusted EBITDA, including standby letters of credit, was 1.4x at the end of the third quarter of fiscal 2021.

In June, we announced an expansion of our credit agreement to $1.95 billion.

The benefits of this revised and expanded credit facility include enhanced financial flexibility as well as increased liquidity to fund strategic growth initiatives.

Additionally, the revised agreement has more favorable credit terms on both the revolving credit facility and the term loan.

As you know, we recently announced the pending acquisition of Able Services for $830 million, which we plan to pay using a mix of cash on hand and borrowings from our credit facility.

Following the close, we expect to have very manageable bank leverage ratio of approximately 3x.

Supported by strong cash flow of the combined company, we intend to reduce this leverage ratio in a timely manner.

Third quarter operating cash flow from continuing operations was $87.6 million compared to $130.9 million in the third quarter of last year.

The decrease in cash flow from continuing operations during the third quarter was primarily due to a deferral in payroll taxes last year under the CARES Act.

For the 9-month period ending July 31, 2021, operating cash flow from continuing operations totaled $258.8 million, unchanged from the same period last year.

Free cash flow from continuing operations was $79.2 million in the third quarter of fiscal 2021, down from $121.1 million in the third quarter of fiscal 2020.

The decrease in free cash flow reflected the CARES Act payroll tax deferral I mentioned.

During the third quarter, we were pleased to pay our 221st consecutive quarterly dividend of $0.19 per common share, returning an additional $12.8 million to our shareholders.

Our Board also declared our 222nd consecutive quarterly dividend, which will be payable November 1, 2021, to shareholders of record on October 7, 2021.

Now I'll discuss our outlook.

As Scott mentioned, our increased guidance for full year fiscal 2021 adjusted income from continuing operations is now a range of $3.45 to $3.55 per diluted share compared to $3.30 to $3.50 per diluted share previously.

The increase in our adjusted earnings forecast is due to our strong financial performance over the first 9 months of fiscal 2021 as well as our favorable outlook for the fourth quarter of the year.

Please note that this guidance excludes any impact from our pending acquisition of Able Services.

At this time, we are not providing guidance for full year 2021 GAAP income from continuing operations since we are unable to provide an accurate estimate and timing of the items impacting comparability relating to the Able Services acquisition, such as acquisition-related contingency advisory fees and integration costs.

We continue to expect a 30% tax rate for fiscal 2021, excluding discrete items such as the work opportunity tax credits and the tax impact of stock-based compensation awards.

Operator, we are now ready for questions.

(Operator Instructions) Our first question come from the line of Tim Mulrooney with William Blair.

A couple of margin-related questions for me.

So EBITDA margins are still very strong, given the strong demand for higher-margin work and some labor savings, I think.

So last year, the margin expansion split was about 50-50 between those 2 factors.

I'm curious how that split broke down.

How that looked for the third quarter?

And as the economy continues to reopen, how you're thinking about those 2 factors based on the implied guidance that you gave for the fourth quarter?

Well, thanks for the question, Tim.

It's Earl.

I'll start by saying that this year, in Q3, we're now lapping a full quarter of the pandemic that started last year.

So it's now lapping year-over-year.

Now having said that, out of the 50 basis points that we actually lost year-over-year, our gross profit margin was actually up about 40 basis points.

And a lot of that is actually driven by the continued labor efficiencies that we've gained as well as positive business mix really driven by our Aviation business.

And then we've actually been able to maintain the level of disinfection margin that we actually had last year.

So again, if you think about it, lapping year-over-year, we've maintained the margins from disinfection, and we're actually still maintaining the labor margins.

And just to your second question, as far as how that translates to the future, again, as we look at the return to office, we've now seen a return to in-class learning.

We anticipate that we'll actually start to lose some of the labor efficiencies.

However, in the long term, we still plan on maintaining a fair portion of that.

Okay.

I think maybe a good way to continue this discussion would be to actually dig into 1 of the segments.

So your Aviation business, not only did it recover in margin, but it actually -- the EBIT margin expanded beyond what the business had done historically.

How much of that increase do you think is structural due to changes that you guys have made within the segment, whether it's to focus on different areas of the business or whether it's becoming more efficient in your operation post -- as you move to the pandemic.

Has the EBIT margin structurally improved in Aviation?

Or is it just kind of elevated right now from all the higher-margin creating work and travel increasing, that kind of thing?

Tim, this is Scott.

Yes, I do think there is a structural improvement here.

And well, first, I think the good performance is volume related.

There's certainly more airline traffic.

We're at about 74% of where we were pre-COVID.

And that may ease off a little bit after the summer travel, but certainly much more heightened levels, which we were excited about.

But there's also been a shift in us moving from an airline to airport.

It used to be about 50-50.

Now we're more like 60-40 airports to airlines.

And we kind of like that shift mix.

We think there's going to be a lot of investment in airports.

We also like the Parking segment in that area.

So I think there will be a structural change in -- and structural stability, more importantly, when we gravitate more towards airport.

So -- but I think when you look at the results today, it's a combination of that shift in mix but also volume related.

Our next questions come from the line of Sean Eastman with KeyBanc Capital Markets.

I just wanted to continue on the margin discussion.

I mean Earl, you did walk through the moving parts there.

That was really helpful.

But it's just interesting to see B&I revenue essentially back at fiscal '19 run rates, yet margins holding in the double-digit territory.

I mean we're all just wondering where these margins are going to settle out.

I mean, just any more color you can provide, maybe within the footprint.

Clearly, some geographies have seen occupancy trends improve, maybe others not so much.

But maybe just based on what you're seeing in areas where occupancy has improved.

Just any kind of thoughts on where the sustainable B&I margin run rate settles out would be really helpful as we think about the go forward.

Sure, Sean.

Look, I think this is still evolving, right?

I'll tell you that if you look at -- geographically speaking, if you look at kind of the 2 coasts, you're talking about 20% office occupancy in B&I, give or take.

And then kind of that middle of the country, it's 40% to 50%.

But it hasn't ramped up as fast as we all thought because of the Delta variant.

So I think it's still hard for us to pin down a formal long-term margin.

We're looking forward to giving you full year guidance in the next 3 months, and then that will give you the insight for the next year.

But look, we're going to say what we've continued to say throughout, which is the 2 areas for elevated margins are in disinfecting and labor arbitrage.

And we believe we will permanently keep portions of that.

As we restaff these buildings, we believe we're going to be able to do it more efficiently, and we'll capture some savings.

Again, it's still too early to figure out how much.

And then the disinfecting, we see like maybe 2 quarters ago, there was -- or maybe even a quarter ago, there was no Delta variant, right?

So like I think this is going to continue to evolve.

And we've all just said it even anecdotally.

It's just I don't think facility managers or landlords or principals of schools, I don't think anyone thinks it's responsible to discontinue disinfection services, especially in high-touch areas.

So that's going to continue, too.

So we believe we will continue to be elevated, but give us until next quarter when we do full year guidance to kind of give you that year outlook.

Okay.

Fair enough.

And maybe shifting over to ATS.

Could you just speak to kind of the velocity in new business wins there?

I mean clearly, some of this energy efficiency sort of ESG-related work is a big play with Able.

So just some color on client decision-making there, new wins, backlog trends as we think about the growth potential in that business line.

Yes.

So like it's thumbs-up across the board.

When we look at new sales, we're at record new sales.

Our backlog, I think the number is $250 million plus in backlog, which is a record for us, too, and our churn rate is going up.

So not only is our backlog higher, but we're churning out the work faster because we have more access to sites.

We love -- I made some opening comments about EV charging.

It's amazing.

We've installed nearly half of the EV charging stations in the country to date.

Like I don't think people realize that, right?

So kind of the bandwidth we have there as the world moves to e-mobility is going to be fabulous for us.

So we continue to be excited about that segment.

And then you take Able and you take all the engineering assignments and the ability to cross-sell into that, we think there's just going to be phenomenal ability there.

We think there's going to be phenomenal ability to create an IFS integrated facilities platform.

And as we talked about Able with you all, we didn't put any revenue synergies in, so that's all on the upside that's not factored in.

So couldn't be more enthusiastic about where ATS is going from our core business to our ability to cross-sell to where society is heading.

We think it's just, again, thumbs up across the board.

Our next questions come from the line of Andy Wittmann with Baird.

Maybe, Scott, I wanted to broaden out that last question that was focused on sales for the Technical Solutions segment and just talk about base contractual revenue.

And basically, if you could talk a little bit about net new business in the quarter.

Over the last year or so, certainly early in the pandemic, it was just all about kind of hunkering down, and your retention was up because nobody wanted to change.

Time has progressed.

Things are reopening.

I wanted to get a sense from you about the level of customer discussions for changing providers to you or even from you, I suppose, on the contractual side of your business.

If you could talk about that, please?

Yes.

I think you said ATS.

Did you mean more B&I when...

Yes.

So yes, the prior question was focused in Technical Solutions.

My question is focused on all the other annuity businesses for B&I or T&M, that kind of stuff.

Got you.

Got you.

Yes.

So look, there has not been a lot of activity yet.

I think my remarks would stay consistent with the last couple of quarters, which is facility managers and landlords are still trying to get level-set for what the new reality looks like.

And now, Andy, with -- and you know this probably as well as I do with companies pushing back their opening dates for getting people back, you're still in this mode where you don't want to kind of commit to like bidding out your work and figuring out what the new normal looks like because you just don't know what the occupancy patterns are going to look like.

And so we haven't seen a lot of activity on that side.

And even with schools, right, this is the first time that we would say like probably 95% of the schools, K-12 and higher ed are back in person.

So they're just first level setting on that right now and hoping to get through the semester with in-person.

So I think there hasn't been that activity.

So it's still a little early for that.

Okay.

Good.

I just wanted to check on that.

And then I guess there's -- fundamentally in your comments, there were 2 things that kind of stuck out as slight changes in terms of the demand of -- for your services.

One was that you actually saw occupancy trend down.

Obviously, Delta have an effect.

If we had to point to something, that would be it.

So occupancy kind of trending down in the quarter.

And then the other thing you kind of mentioned was slightly softer deep cleaning demand?

I don't know, but just given that there was a slight change in both of those, I thought maybe you could elaborate on those.

Yes.

I think those -- that's a good call out, Andy.

And I think those were all probably temporary.

So occupancy trending down was really when Delta hit.

And it goes to what I said a couple of minutes ago, which is people -- if you remember, right, it was going to be like, "Oh, first, the people were talking about July 4, then they were talking about Labor Day.

Now there's a lot of people saying November 1 and January." So it's -- the tail is just getting longer and longer on occupancy, which, as you know in ores to our benefit, right, because we keep that labor arbitrage.

So that's a good tailwind for us.

And then the softening on kind of disinfecting.

So I would say 2 things.

One, clearly expected.

I think we've had that narrative at least a year, if not longer, that it's never going to stay at these levels.

And if you think about it -- so if you think about work orders, kind of pre-pandemic, we were in that 5% range, right?

That was our tag work order revenue.

And we got as high as like 10-plus percent.

So now we're at like, I think it was 9.3% for the quarter.

So you'll see that start kind of tailing down, but we've always projected that.

And I think also, remember, this was -- we had June and July in this quarter, which was summer months.

So even less occupancy and probably a more extreme ramping down of the disinfecting work.

So I think some of it is temporary.

But again, I think the stuff really -- the elongation of occupancy is good for us.

Yes.

That's a very helpful answer.

My last question, Earl, I guess, is for you.

And I just wanted to understand and interpret the guidance a little bit.

I look at the quarter.

You beat by, what, I think, $0.11 on consensus.

The midpoint goes up by 10.

It feels like the guidance change is mostly due to the third quarter's outperformance rather than some change on your view for the fourth quarter specifically.

Is that the right way of thinking about the guidance range?

Was it really more about year-to-date performance than a change in your outlook for the fourth quarter?

Yes, I think that's correct in that when we do the guidance, we look at, obviously, what's happened year-to-date and how we think that's going to continue to trend into Q4.

And as such, based on our performance in Q3, we felt comfortable raising both the top end as well as the bottom end of the guidance.

Our next questions come from the line of David Silver with CL King.

Okay.

I'll just apologize in advance.

I've had to step away at a couple of points here.

My first question, Scott, would be kind of to try to get your perspective on something -- a couple of things you talked about maybe a couple of quarters ago, and it would be related to the demand for office space as you see it; and then secondarily, the appetite for property managers to embed or include elements of your enhanced disinfection routines in the basic service contracts.

So I think it was a couple of quarters ago, but you had mentioned that there was an active discussion between yourselves and the property managers.

And you -- I think you characterized it as "like too early" for many of the property managers to really decisively kind of reach conclusions about, a, the demand for office space; and b, what types of facility services would be used in the post-pandemic environment.

Yes, that's right.

That's right.

I was just wondering if you could just update us on your thinking in those 2 areas.

Yes.

Sure, David.

So look, in terms of demand for office space and how that's going to work out, if you remember, it was probably like a year ago, everyone was predicting this massive flood of subleasing and people rationalizing their space.

And we said we weren't seeing it.

We said it was too early.

And I think we also said that we believe, based on kind of our knowledge of the space, that people are going to wait till tenants got back into the space, saw how they were using it before they were going to make these longer-term decisions about the demand for office space.

So I think that's still in play.

That still hasn't happened yet because as I said a couple of minutes ago, we haven't seen that return to office yet.

So nothing new to report on the demand side.

And then in terms of EnhancedClean and embedding in the contracts, I think it's the same thing where people haven't gotten back yet.

They haven't figured out how to rationalize their cleaning specs, how it's going to work.

And that's something that we suspect is going to be more of a 2022 event, frankly, than a '21 event.

Okay.

Great.

I'd like to follow up with maybe a question related to Able Services and in particular, their technical solutions capabilities.

So one, this is a question about how that group will look following the completion of the acquisition.

So your existing Technical Solutions unit certainly has a number of strengths, energy efficiency and I think a very strong positioning in the Education segment.

And I'm just wondering if you could maybe compare and contrast what the Able Services' Technical Solutions unit brings either in terms of breadth to capabilities, scale in certain areas.

In other words, you've talked about cross-selling, but is the cross-selling opportunities more of the traditional opportunities that you've been working on with your legacy Technical Solutions unit?

Or how will it broaden and extend your ability to cross-sell?

Yes.

So Able Services doesn't have a technical solutions unit the way we have, which is, remember, our Technical Solutions is mostly project work, right?

So we're retrofitting electrical and mechanical systems.

Their engineering capabilities are on the stationary engineering, which are the engineers that are located on-site in a building, operating the equipment.

And we have a segment as large as theirs on that.

So if you look at that, the opportunity is for our Technical Solutions group to cross-sell into those engineering assignments and for us to bring a broader set of capabilities because they also have somewhere in the neighborhood of $400 million in janitorial assignments that we'll be able to cross-sell as well.

So we look at our -- as our Technical Solutions as a catalyst for that.

But again, I'll repeat what I said earlier, which is we have not factored that in to any of the economics.

That's all upside for us, all those revenue synergies, which should be well received by someone like you.

Our next questions come from the line of Marc Riddick with Sidoti.

So I was wondering if we could start with the Education segment for a moment.

I was wondering if you could spend a little time delving into maybe what you've seen so far?

And particularly, I was somewhat curious as to the ramp-up going into school reopenings.

Have you seen any meaningful difference in ordering or preparation for the younger grades, I suppose, to college age, particularly those that are too young to be vaccinated.

I was wondering if there's any difference in what clients were asking you to do?

Or is it somewhat similar across the board?

Yes.

Generally speaking, it's similar across the board.

I think for -- if you are a president of a college or if you're a principal of a school, you're just trying to protect the kids as best you can, right?

And so we don't see a real distinction between maybe doing more disinfection in K-12 than higher ed.

It's similar across the board.

Okay.

And then I was thinking about the sort of some of the commentary that you had in the press release around some of the return to normalcy.

You've talked about travel.

So I will leave aviation to the side for a moment.

That certainly was clear.

You did talk a little bit about things like sporting events and the like.

And then I was wondering if you could talk a little bit about those kind of other leisure activities that are not necessarily travel, because it does seem as though we're seeing full stadiums again with football and some level of concert activity.

Though, that's been a little bit spotty.

So I just wonder if you could touch a little bit about what you're seeing there.

Sure.

And just as a reminder, Sports & Entertainment, we love that segment.

It's just -- it's just great to be in, but it's a very small piece of our revenue.

But it's been encouraging, right?

Because it's been almost like a binary event, whereas last quarter, it was like no activity.

And now we're having activity again, where people are getting back to events and stadiums are becoming full or hybrid full, if you will.

And so it's a path to normalcy, which we really like.

And that's been 1 of our fastest-growing segments, albeit it's a smaller one, but it's a fast-growing one.

So we're just pleased that it's getting back to normal.

Okay.

And then I wanted to also switch gears a bit and go into the sort of where you are on the branding efforts and the exercises there.

I mean it's been a little bit of time now since you started with the commercials, but also sort of just sort of putting the ABM brand upfront.

I was wondering if you could sort of give some thoughts as to maybe what you're seeing there?

And then what type of commitment we should be thinking about as far as sort of keeping the ABM brand in front of people and making that part of the -- I guess, the structure of your go-to-market strategy?

Yes.

So look, it's been important to us through 2021, and we renewed our engagements with folks like CNBC.

You've probably seen our ads continue to run, and we have those engagements throughout the rest of the fiscal year.

It remains to be seen what we're going to do in 2022, but we will certainly address that with you when we do our guidance.

But we've enjoyed the up-branding, and it's just going to be a cost-benefit analysis that we continue to iterate on.

But definitely more color on that when we give guidance.

Okay.

Great.

And then one last thing for me.

I was wondering going -- switching back to the hiring and what you're seeing there.

Is there any difference as to -- any regional differences as to labor availability, hiring and the like?

And I was sort of thinking about the -- what we've seen in certain areas and certain states that ended the unemployment support earlier in the summer.

I wasn't sure if there was much in the way of difference that you were seeing there, but I was wondering if you had any commentary there as to how that -- maybe what you're seeing there and what benefits you might be getting.

Yes, I think the way we think about it, Marc, is really more union territories versus nonunion.

So in our kind of union markets, we see less pressure, right, because wages are higher.

There's full benefits, and that mitigates a lot of the concern we have around labor.

It's more in the nonunion markets, which tends to be at the bottom half of the country.

And we're seeing some pressure there, but that's why we put our task force in place.

But it's also been muted because there hasn't been a return to work, and we're only beginning with return to school.

So we're feeling pretty good about it, and we'll see what happens as the benefits roll off now on unemployment.

And we'll see what happens with the Child Care Tax credit next year because it was elevated this year.

It used to be about $2,000 per child, and now it's between $3,000 and $3,600.

So we'll see if that gets renewed.

And that's not taxable, so it's another incentive to not get into the workforce.

So I think more to come on that story.

Thank you.

There are no further questions at this time.

I'd like to hand the call back over to management for any closing comments.

I just want to tell everyone to make sure you continue to stay safe and healthy and do all the proper guidelines.

That's our moment of safety for this quarter.

And we look forward to giving you an update next quarter when we'll have much more to say about the Able acquisition and then our full year guidance.

So, thanks, everyone, for your support and look forward to chatting soon.

Thank you for your participation.

This does conclude today's teleconference.

You may disconnect your lines at this time.

Have a great day.