Abm Industries Incorporated · NYSE:ABM
Abm Industries — Investor Day (January 2018)
82 slides from Abm Industries's investor day presentation, Jan 18, 2018
Slide 1: ABM Investor Day 2018
ABM INVESTOR DAY 2018 2020 Vision IN FOCUS>
Slide 2: 2018 Investor Day Agenda
2018 Investor Day Agenda 2 Time Speaker & Topic 9:00 a.m. NYSE – Welcome & Ceremony Continental Breakfast 9:30 a.m. NYSE – Opening Bell 9:45 a.m. Susie A. Choi , Investor Relations Introductions, Agenda, and Moment for Safety 9:50 a.m. Scott Salmirs, President and Chief Executive Officer 2020 Vision
Slide 3: Moment for Safety
Moment for Safety ) ABM. Building Value
Slide 4: Safe Harbor Statement
Safe Harbor Statement Cautionary Statement under the Private Securities Litigation Reform Act of 1995 4 Our Investor Day presentation and discussions during our Investor Day presentation contain forward - looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 .
Slide 5: Non-GAAP Financial Information
Non - GAAP Financial Information 5 The presentations and discussions during our Investor Day include references to certain financial measures that were not prepared in accordance with U . S . generally accepted accounting principles (GAAP) . These adjustments have been made with the intent of provid
Slide 6: 2020 Vision Making History
2020 Vision Making History 6 Scott Salmirs President & Chief Executive Officer
Slide 7: From 1909 to Today...
From 1909 to Today...
Slide 8: Growth to $6B+
Growth to $6B+ Janitorial 2007 A v ia ti on Hea l th c are 2012 Lighting M e c ha ni c al Electrical 2010 Janitorial (UK) 2014 Sold Security business 2015 Technical Solutions (UK) Sold G overn m e n t business 2017 Education and Commercial 2017 2015 $3B $6B 8 *Dates based on calendar year
Slide 9: Services We Perform
Services We Perform Energy Solutions HVAC, Central Plants, Lighting and Controls EV Charging Stations 24/7/365 Facility Operation Energy Audits & Optimization Infrastructure Upgrades Building Cleaning & Maintenance Green Cleaning and Recycling Services Hard Surface Floor & Carpet Care Clean Room and
Slide 10: Unparalleled Clientele
Unparalleled Clientele @® coanssinar GEG ‘American Airlines @ Northeastern Yale Ss U : Google (@) Hath" es JLI hoewiiutonl Aver One FedEx. BLEHIGH — nN Adobe «= GBD FS Fowerstoods hrow wit - & Brookfield. — geen (2-5 Tae PORT AUTHORITY Fam 2 umn verre ADELTA 3 AD Goes jettue ES, aE AvnotHealth adie
Slide 11: 2015: An Organizational Structure That Did Not Meet Our Clients' Needs
2015: An Organizational Structure That Did Not Meet Our Clients’ Needs Multiple service lines MW | NE | W | SC B E SG Ot h er O n si t e ABES (Tech Svcs) BESG Govt BESG Healthcare A v iation 11 Passenger Services Facility Services
Slide 12: 2015: An Inefficient Operating Framework
2015: An Inefficient Operating Framework 14 accounting centers No central procurement Inconsistent IT approach No operating leverage ‒ 12 ‒ ‒ ‒
Slide 13: 2015: The Start of Our 2020 Vision Journey
2015: The Start of Our 2020 Vision Journey 13 FY2015 Revenue $4.9B Adj. EBITDA Margin 3.8% Market Cap $1.6B Cash Returned to Shareholders (Past 3 Years) $155M FY15 adjusted EBITDA margin recast to reflect insurance reset and bonus accrual reversal from fiscal 2015 Cash Returned to Shareholders calcu
Slide 14: Today: 2020 Vision Reorganization
Today: 2020 Vision Reorganization y tr s u d In & B us in es s A via t i o n E du ca ti o n He a lth c a r e Technology & Manufacturing Business & Industry Technical Solutions 14 Shared Services, Support Functions
Slide 15: Today: 2020 Vision Process Improvements Underway
Today: 2020 Vision Process Improvements Underway Shared Services in Houston Centralized procurement initiative Strategic investments in cloud - based HRIS, CRM, Financial Analytics The ABM Way (SOPs) 15
Slide 16: Today: 2020 Vision Progress
Today: 2020 Vision Progress 16 FY2015 FY2017 2 - Year Change Revenue $4.9B $5.5B +12% Adj. EBITDA $ % of Revenue $185 3.8% $237 4.3% +28% Market Cap $1.6B $2.4B +50% Cash Returned to Shareholders (Prior 3 Years) $155M $198M +28% FY15 adjusted EBITDA margin recast to reflect insurance reset and bonus
Slide 17: Who Are We Today?
WHO ARE WE TODAY? These accomplishments were possible through strong teamwork… some of who you’ll hear from today. Management Team Scott Salmirs President and Chief Executive Officer Scott Giacobbe Chief Operating Officer D. Anthony Scaglione Chief Financial Officer Andrea Newborn General Counsel an
Slide 18: Understanding The New ABM
Understanding The New ABM 18 Scott Giacobbe Chief Operating Officer
Slide 19: Strengths and Opportunities
First 100 Days Accelerate and Scale Best Practices Underscore Differentiation Leverage Cross - Selling/Up - Selling Commit to Results & Growth STRENGTHS OPPORTUNITIES 2020 Vision Excitement Core Capabilities & Unique Solutions Client Loyalty Leadership Focus 19
Slide 20: Alignment of Key Priorities
Alignment of Key Priorities Client Focused — Exceed Expectations — Build Loyalty — Underscore Ease of Doing Business — Leverage Technology Engaged People — Recruit – Onboard – Retain — Recognize & Rewa rd Achievement — Support Leadership Development — Become the Employer of Choice The ABM Way — Acco
Slide 21: Strategically Focused on Industries Where We Can Win
Strategically Focused on Industries Where We Can Win 21
Slide 22: Business & Industry
Business & Industry Enhancing the workplace experience through end - to - end solutions Market Size $100B Sources: US Dept of Commerce, US Dept of Energy, CoStar, First Research; Internal Company Data ABM Business & Industry: Approx. Revenue Size $ 2 .8B E m plo y ee s 5 0 ,0 0 0+ Fortune 500 ABM cl
Slide 23: Business & Industry: Services We Offer
15% 70% 15% Business & Industry: Services We Offer ~$2.8b IFS & Facilities Engineering (15%) − Facility Operations & Maintenance − Central Plant Operations & Maintenance − Mechanical Maintenance − Total Facility & Spend Management Parking & Transportation (15%) − Shuttle & Transportation Services −
Slide 24: Business & Industry: Industry Dynamics
MARKET TRENDS COMPETITIVE LANDSCAPE Predominantly outsourced market 3rd party, multi - tenant facilities continue to prioritize cost Owner - occupied and owner - managed facilities focus on employee/ tenant experience Innovation on the horizon (i.e. Internet of Things) Smaller, regional service prov
Slide 25: Business and Industry: Long-Term Strategic Priorities to Win
Focus on standardization, account planning and safety The ABM Way Optimize margin profile through efficiencies Operating Contrib u ti o n Focus on healthy organic growth Gr o w th Business and Industry: Long - Term Strategic Priorities to Win − Continue to deploy standard operating practices through
Slide 26: Education
ABM in Education: Approx. Revenue Size $800M E m plo y ee s 2 5 ,0 0 0+ K - 12 schools cleaned annually (sf) 5 0 0M+ Higher Education campuses serviced 150+ Reduced avg. energy use in schools we serve 2 9 % Market Size $25B Source: Parthenon Analysis; Internal Company Data; NCES; IPEDS Education Enh
Slide 27: Education: Services We Offer
5% 95% Education: Services We Offer ~$800m Other (5%) — Facility Operations — Grounds Maintenance — Plumbing Janitorial (95%) — Custodial Services — Recycling Services — General Maintenance — Carpet & Floor Care — Staffing & Specialty Services 27
Slide 28: Education: Industry Dynamics
MARKET TRENDS COMPETITIVE LANDSCAPE Aging infrastructures and budget pressures are driving increased desire to outsource Sustainability and technology continue to be a focus Food - based service providers Local and regional companies Education: Industry Dynamics 28
Slide 29: Education: Long-Term Strategic Priorities to Win
Establish standard operating procedures The ABM Way Operating Contribution Leverage GCA to drive higher organic growth Gr o w th Education: Long - Term Strategic Priorities to Win − Leverage GCA playbook and establish/standardize best practices to drive margin (e.g. labor) − Establish account plans
Slide 30: Aviation
Market Size $ 4 5B+ ABM in Aviation: Approx. Revenue Size $1B US/UK Employees 2 5 ,0 0 0+ Serving Airports Globally 100+ Aircrafts Cleaned Annually 1M+ Annual Wheelchair Requests 5M+ Airport Operations Bus Fleet 8 0 0+ Source: ACI, First Research, Grandview 30 Aviation Enhancing the passenger experi
Slide 31: Aviation: Services We Offer
55% 30% 10% 5% Aviation: Services We Offer ~$1B Janitorial (10%) — Cleaning & Recycling Services — General Maintenance — Carpet & Floor Care Facilities Engineering (5%) — Mechanical Maintenance — Plumbing, Carpentry & Locksmith — Facility Operations & Maintenance — Central Plant Operations & Mainten
Slide 32: Aviation: Industry Dynamics
Aviation: Industry Dynamics MARKET TRENDS COMPETITIVE LANDSCAPE Predominantly outsourced market Increasing focus on passenger experience Emerging innovations to drive traffic Smaller, regional airline service providers Single service providers Global IFS companies 32
Slide 33: Aviation: Long-Term Strategic Priorities to Win
Differentiate service lines through standardization The ABM Way Operating Contrib u ti o n Increase market share by expanding domestic and global density Gr o w th Aviation: Long - Term Strategic Priorities to Win — Establish best - in - class service lines through SOPs — Reduce safety & risk claims
Slide 34: Technology & Manufacturing
Market Size $20B ABM Technology & Manu f act u ring: Approx. Revenue Size $900M E m plo y ee s 2 0 ,0 0 0+ Technology clients serviced (sf) 8 0 M+ U.S. Nuclear Power Stations serviced 25% Data Centers maintained (sf) 35 M+ Technology & Manufacturing Enhancing innovation through end - to - end soluti
Slide 35: Technology & Manufacturing: Services We Offer
80% 20% Technology & Manufacturing: Services We Offer ~$900M Facility Services (20%) − Facility Operations & Maintenance − Mechanical Maintenance − Supplier Management − Office/Mail Services Janitorial (80%) − General Maintenance − Cleaning & Recycling Services − Clean Room and Specialized Facility
Slide 36: Technology & Manufacturing: Industry Dynamics
Technology & Manufacturing: Industry Dynamics MARKET TRENDS COMPETITIVE LANDSCAPE Greater demand for onsite presence Increasing demand for Integrated Facilities Services Increased focus on modernization and compliance National and regional facility service providers Engineering and construction firm
Slide 37: Technology & Manufacturing: Long-Term Strategic Priorities to Win
Establish and deploy standard operating procedures The ABM Way Focus on high - growth segments and optimize efficiencies Operating Contribution Accelerate organic growth through targeted sub - segments Gr o w th Technology & Manufacturing: Long - Term Strategic Priorities to Win − Post - acquisition
Slide 38: Healthcare
Market Size $ 2 0B+ ABM Healthcare: Approx. Revenue Size $275M E m plo y ee s 5, 0 0 0 + Hospitals & Medical offices serviced 300+ and 700+ Cars parked annually 22 .8M+ Healthcare space cleaned (sf) 125M Laundry processed annually (lbs.) 15 M+ Healthcare Enhancing the patient experience through end
Slide 39: Healthcare: Services We Offer
85% 15% Healthcare: Services We Offer ~$275M Technical Services (15%) − Facility Management − Healthcare Technologies (Clinical Engineering) Patient Experience Services (85%) − Environmental Services − Food & Nutrition Services//Senior Dining − Patient Transportation − Laundry/Linen − Parking/Valet/
Slide 40: Healthcare: Industry Dynamics
Healthcare: Industry Dynamics MARKET TRENDS COMPETITIVE LANDSCAPE Consolidation among large acute care hospital systems Non - acute segment continues to grow Traditional competitors rooted in nutrition services Nutrition - led, global facilities services providers Non - acute, smaller regional speci
Slide 41: Healthcare: Long-Term Strategic Priorities to Win
Capitalize on efficiencies through scale The ABM Way Drive growth and optimize efficiencies Operating Contribution Target growth as a niche player Gr o w th Healthcare: Long - Term Strategic Priorities to Win − Customize standard operating procedures to unique Healthcare environment − Focus on effic
Slide 42: Technical Solutions
ABM Technical Solu t io n s: Approx. Revenue Size $450M Employees 1,000+ Service and maintain heating and cooling systems 78,000+ Installed EV Charging ports across the U.S. 8,000+ Reduced clients’ avg. energy use by 2 3 % Market Size $100B Supported by financial solutions Technical Solutions Provid
Slide 43: Technical Solutions: Services We Offer
15% 15% 5% 65% Technical Solutions: Services We Offer ~$450M Mechanical & Energy (65%) − Preventive & Proactive Maintenance − Repairs, Retrofits & Replacements − Guaranteed Energy Saving Programs − Energy Efficient Solutions − Sustainable Solutions Power (15%) − Reliability Testing − EV Charger Inst
Slide 44: Technical Solutions: Long-Term Strategic Priorities to Win
Drive sales through engaged people Expand growth The ABM Way Operating Contribution Gr o w th Technical Solutions: Long - Term Strategic Priorities to Win − Focus on employee engagement to attract talent and retain talent to support sales culture − Continue driving safety culture − Target expansion
Slide 45: Summary
Sum m ary Sales – Organic Growth Leverage Enterprise & Unique Offerings Implement Standard Operating Practices Technology Leadership The People Business 45
Slide 46: ABM Investor Day 2018
ABM INVESTOR DAY 2018 2020 Vision IN FOCUS>
Slide 47: Strength Through Our People
Strength Through Our People 47 Dave Goodes Chief Human Resources Officer
Slide 48: ABM Has ~130K+ Employees
ABM Has ~130K+ Employees Source: ABM internal employee data UK 5 ,5 00 48 WA 3 ,0 36 OR 1 ,0 58 CA 19 ,5 83 ID 590 NV 1 ,1 74 UT 621 WY 140 MT 50 CO 1,991 ND 19 SD 56 NE 465 NM 182 KS 386 AZ 2 ,6 45 TX 16 ,1 85 AK 205 HI 480 GA 8 ,0 00 PR 2 ,4 14 OK 822 IA 924 MO 868 AR 425 LA 602 MS 774 AL 1 ,1 59
Slide 49: Labor Trends Differ on National and Local Level
Labor Trends Differ on National and Local Level We have historically navigated federal policy changes and national labor trends National Local Local trends can be more impactful than federal and national trends NATIONAL LANDSCAPE Lower unemployment Immigration reform Strong economy 49 LOCAL LANDSCAP
Slide 50: Industry Group Dynamics Exist for Labor
Large Union Presence Business & Industry Lower Wage Healthcare Increa s ing Demand for Skilled Workforce Technical Solutions CHALLENGE Industry Group Dynamics Exist for Labor Increa s ing Demand for Skilled Workforce Technology & Manufacturing Industry Group dynamics underscore the need for best - i
Slide 51: We Are Better Equipped to Address Labor Under our 2020 Vision
We Are Better Equipped to Address Labor Under our 2020 Vision Reduce time to hire Drive productivity earlier on from candidates Reduces administration tasks and time due to digitization (mobile/text vs. paper) Job Align Centralizes and streamlines application process tied to Industry Group and clien
Slide 52: Improving Employee Engagement
Improving Employee Engagement Role clarity Career management Performance management Networks Reward Work en v iron m ent Organiza t i onal values Engagement driver A B M ’ S C U LT U R E , P R O G R A M S A N D P R O C E S S E S 53
Slide 53: 2020 Vision: HR Priority
2020 Vision: HR Priority Enablers to achieve our 2020 Vision Objectives — Scale to stay ahead of market dynamics — Best - in - class HR processes — Tools and technology — Fully engaged workforce 54
Slide 54: Driving our Future
Driving our Future 54 D. Anthony Scaglione Chief Financial Officer
Slide 55: Supporting the New ABM and Driving our Future
Supporting the New ABM and Driving our Future FINANCE — Incentive Alignment — Capital Allocation SHARED SERVICES — Centralized Back Office Operations — Focus on End - to - End Process PROCESS — Procurement — Safety & Risk TECHNOLOGY — Customer Relationship Management (CRM) — Proprietary vs. Third Pa
Slide 56: Financial Incentives to Drive Behavior
— Organic Growth — Adj. EBITDA — ROIC — Safety Financial Incentives to Drive Behavior FY2015 – 2016 FY2016 – 2017 F Y 2 0 1 8+ Executive Alignment Industry Group & Corporate Alignment Field Alignment B U I L D I N G A PAY - F O R - P E R F O R M A N C E C U LT U R E — Organic Growth — Gross Profit —
Slide 57: Prioritized Capital Allocation Framework
EXCESS CAPITAL Excess capital to shareholders and exploration of M&A Prioritized Capital Allocation Framework ORGANIC INVESTMENTS Investments to support our core business, driving profitable organic growth LEVERAGE Utilize FCF to deleverage while continuing dividend policy FINANCE 57 PROCESS SHARED
Slide 58: Establishing a Shared Services Center
Establishing a Shared Services Center — Non - Dedicated Resources — Poor Job Mobility — Multiple Invoice Templates — Costly Methods of Payroll — Disparate Processes — Singular Focus — Career Pathing — Standardized Templates — Consistent Processes — More Efficient — One TEAM Billing Payroll Accounts
Slide 59: Shared Services Process Cycles
Lead - to - sale Source - to - pay Hire - to - retire Record - to - report Identify leads Segment, target & qualify leads De v elop leads Walk the site Develop the bid / pricing Close the sale Find and contract with vendors Onboa r d vendors Place ord er s Receive orders & make pa y ments Manage ven
Slide 60: A Multi-Year Procurement Process with Increasing Benefits
A Multi - Year Procurement Process with Increasing Benefits 2016 2017 2018 2019 2020 Phase 4 Scenario analysis, procurement portfolio optimization, risk mitigation Integrated metrics, SPM – Supplier Supplier development Phase 3 Performance Management and collaboration Technology integration - Esourc
Slide 61: Risk & Safety
Measurable Accountability — Enhanced accountability program for WC; new programs for GL and AL — Portion of incentive compensation Safety and Risk performance Market - based Assessments — Exposure modification program Professional Onboarding and Training — Aligned cross - functional objectives with
Slide 62: Evolving Technology to Support the New ABM
Evolving Technology to Support the New ABM FINANCE PROCESS SHARED SERVICES TECHNOLOGY C a pex Opex New ABM 62
Slide 63: Introducing the TAG Pricer
I N T R O D U C I N G T H E TA G P R I C E R Internal Development of Tools Unique to ABM Send proposal to client Scope, cost, price new TAG Create work order for billing Manage TAG pipeline FINANCE 63 PROCESS SHARED SERVICES TECHNOLOGY
Slide 64: TAGPricer
TAGPricer
Slide 65: Evolving Technology to Support the New ABM
Evolving Technology to Support the New ABM FINANCE PROCESS SHARED SERVICES TECHNOLOGY C a pex Opex New ABM 65
Slide 66: Financial Outlook
Financial Outlook 66 D. Anthony Scaglione Chief Financial Officer
Slide 67: Fiscal 2018 Outlook (Pre-Tax Reform)
Fiscal 2018 Outlook (Pre - Tax Reform) 67 Metric Amount Income from Continuing Operations per Diluted Share¹ $1.33 - $1.43 Adjusted Income from Continuing Operations per Diluted Share¹ $1.70 - $1.80 Depreciation $50m - $60m Amortization* $60m - $70m Interest Expense $50m - $53m Capital Expenditures
Slide 68: Tax Reform Update
Tax Reform Update 68 ¹ This guidance does not include any potential benefits associated with certain other discrete tax items and other unrecognized tax benefits including WOTC and ASU 2016 - 09. Current FY18 Outlook (Pre - Tax Reform) Amount Current Tax Rate 1 38% - 40% Preliminary Assessment of Ne
Slide 69: GCA Integration Update
GCA Integration Update 1 ‘Other’ represents Aviation and Healthcare Industry Groups B&I 15% 69 EDUC A TI O N 60% T&M 20% O T H ER¹ 5% Approximate Revenue Mapping PROGRESS TO DATE - Remapped operations to new Industry Group format - Targeted organizational realignment by end - Q1/early - Q2 - Initiat
Slide 70: Fiscal 2018 – Preliminary Segment Structure
Fiscal 2018 – Preliminary Segment Structure 71 SEGMENT DESCRIPTIONS B&I B&I, our largest segment, encompasses janitorial, facilities engineering, and parking services for commercial real estate properties, and sports and entertainment venues. Aviation Aviation includes services supporting airlines a
Slide 71: Diversified Portfolio with Differing Profit Profiles
Diversified Portfolio with Differing Profit Profiles 45% 25% 10% 20% Fixed Price Cost - Plus Management Reimbursement Project - based 72
Slide 72: Fiscal 2018 – Preliminary Segment Structure
Fiscal 2018 – Preliminary Segment Structure 73 Segment FY17 Revenues 1 FY18 Operating Profit Margin %² Business & Industry ~ $2.8B low 5% Aviation ~ $1.0B mid 3% Education ~ $800M low 5% Healthcare³ ~ $275M low 5% Technology & Manufacturing ~ $900M low 8% Technical Solutions ~ $450M high 8% ($ in mi
Slide 73: Reaching Our 2020 Vision Over FY19-FY20
Reaching Our 2020 Vision Over FY19 - FY20 73 ORG. REVENUE ADJ. EBITDA % ADJ. EPS GDP+ +50bps - 60bps Expansion Mid - Teens Growth ANNUAL FCF CONVERSION ~40% - 50% of Adj. EBITDA LEVERAGE ~2.5x to ~3.0x
Slide 74: Key Takeaways
Key Takeaways Leading market positions and technical know - how underpin durable growth; overall business conditions in our served markets remain strong Fragmented competitive landscape provides significant opportunity for organic and acquisitive growth potential Focused business development and str
Slide 75: Closing
Closing 75 Scott Salmirs President & Chief Executive Officer
Slide 76: Looking Beyond 2020
Looking Beyond 2020 Diversified end markets and contract structures, along with a balanced array of services provide visibility and resilience to changes in the macro environment In each of our chosen verticals, there is substantial runway to capture incremental revenue growth, pairing organic oppor
Slide 77: ABM Investor Day 2018 Q&A
ABM INVESTOR DAY 2018 Q&A 2020 Vision January 18, 2018
Slide 78: Appendix: Reconciliation of Non-GAAP Financial Measures
Appendix 78 Unaudited Reconciliation of Non - GAAP Financial Measures
Slide 79: Unaudited Reconciliation of Non-GAAP Financial Measures
Unaudited Reconciliation of non - GAAP Financial Measures ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES RECONCILIATIONS OF NON - GAAP FINANCIAL MEASURES (UNAUDITED) ($ in millions) Reconciliation of Income from Continuing Operations to Adjusted Income from Continuing Operations Income from continuing
Slide 80: Unaudited Reconciliation of Non-GAAP Financial Measures
Unaudited Reconciliation of non - GAAP Financial Measures ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES RECONCILIATIONS OF NON - GAAP FINANCIAL MEASURES (UNAUDITED) ($ in millions) $ $ 3.8 61.0 74.3 8.8 ( 0 . 4 ) 19.2 76.3 66.3 ( 22 . 2 ) 18.3 - 10 . 2 57.1 206.0 (20.8) Reconciliation of Net Income t
Slide 81: Unaudited Reconciliation of Non-GAAP Financial Measures
Unaudited Reconciliation of non - GAAP Financial Measures ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES 2018 GUIDANCE (Excluding 2017 Tax Reform Act impact) Reconciliation of Estimated Income from Continuing Operations per Diluted Share to Estimated Adjusted Income from Continuing Operations per Dilu
Slide 82: ABM Investor Day 2018
ABM INVESTOR DAY 2018 2020 Vision IN FOCUS>