Andrew Whittman

Andrew Whittman inquired about the specific components that bridge ABM's $250 million normalized free cash flow for 2026 to the actual expected free cash flow, identifying any unusual or one-time items. He also asked for details on the WGNSTAR acquisition's payout structure, including whether it involves cash or contingent considerations, and sought clarification on the segment operating profit for fiscal 2025 to contextualize the new metric's guidance. Finally, he asked about the remaining scope and phasing of the restructuring program and where its benefits are expected to accrue in fiscal 2026 and beyond.

Answer

David Orr, EVP and CFO, ABM Industries, detailed that the $250 million normalized free cash flow for 2026 includes approximately $20 million in transformation costs, $10 million in integration acquisition costs, $5 million in restructuring costs, and a $30 million payout for the RavenVolt contingent consideration, resulting in an actual free cash flow of around $185 million. He stated that the WGNSTAR deal is expected to close early in fiscal Q2 2026 with cash funding at that time, and management structures are in place to motivate the team. Orr confirmed that the segment operating profit for fiscal 2025 was 7.9%. He added that about 20% of the $35 million restructuring benefits were realized in Q4 2025, with the remainder expected in 2026, and that the program is largely complete, with ongoing efforts in areas like real estate and AI-enabled savings.

Andrew Whitman sought clarification on the $250 million normalized free cash flow outlook for fiscal 2026, asking for a breakdown of unusual or one-time items. He also inquired about the WGNSTAR acquisition's payout structure, specifically if it involves cash or contingent considerations. Additionally, he asked about the remaining scope and phasing of the restructuring program for fiscal 2026 and where the benefits are expected to accrue, including into 2027. Finally, he asked for the segment operating profit for fiscal 2025.

Answer

David Orr, Executive Vice President and CFO, detailed the free cash flow bridge for 2026, noting that from the $250 million normalized figure, approximately $20 million in transformation costs, $10 million in integration/acquisition costs, $5 million in restructuring costs, and $30 million for the Ravenvolt contingent consideration payout would be deducted, resulting in an actual free cash flow of around $185 million. He stated that the WGNSTAR deal is anticipated to close early in Q2 2026 and will be funded at that time, with management structures in place to motivate the team. Mr. Orr confirmed that the segment operating profit for fiscal 2025 was 7.9%. He also explained that about 20% of the $35 million restructuring benefits were realized in Q4 2025, with the balance expected in 2026, and that the program is largely complete, with future savings from real estate, subcontract optimization, and AI being incremental.