ABM Industries Inc

NYSE:ABM

Earnings Call Analysis

Steady Outlook Despite Mixed Market Conditions

After overcoming project delays and achieving improved performance in Technical Solutions in Q4, the company anticipates a generally healthy market in 2024, particularly for Technical Solutions, aviation, education, and manufacturing & distribution (M&D). However, they expect challenges in the commercial real estate office market and business rebalancing in M&D to dampen revenue growth and slightly reduce margins from the strong levels seen in 2023. The 2024 outlook remains stable, with plans to set new sales records, manage costs effectively, and ensure solid free cash flow to support long-term investment and shareholder returns. Fourth-quarter revenue rose to $2.1 billion, a 4.1% increase, with net income up significantly. Segment performance variances were noted across B&I, Aviation, M&D, Education, and Technical Solutions, with overall positive gains and operating margin improvements in some sectors. The expected full 2024 adjusted EPS is between $3.20 and $3.40, and the adjusted EBITDA margin is projected to be between 6.2% and 6.5%.

Rising Earnings and Strategic Investments Fuel Optimism

The company's fourth quarter revenue increased by 4.1% to $2.1 billion, with organic growth driving most of this expansion. Additionally, a new acquisition named Raven bold contributed to the top line for part of the period. Net income showed an impressive 29% growth to $62.8 million, or $0.96 per diluted share, while adjusted net income climbed to $66.2 million, a 11% improvement. Margin expansions and higher segment earnings, due to factors like price increases and effective cost management, bolstered the financial performance.

Focused Segmentation and Cost Initiatives Drive Results

Different segments of the business experienced varying degrees of success. The Business & Industry (B&I) segment saw modest revenue increases, countered by a decrease in operating profit. Meanwhile, the Aviation segment surged with a revenue boost of 16% and significantly higher operating profits, reflecting strong leisure and business travel demand as well as project timing benefits. The Education segment also delivered robust growth with an improvement in profit and margin thanks to new client acquisitions earlier in the year.

Healthy Cash Flow and Proactive Share Repurchases

The company's liquidity remains strong, ending the fourth quarter with $552.5 million available, including cash and equivalents. A notable free cash flow of $121 million for the quarter reflects the firm's financial health and operational efficiency, leading to significant share repurchase activity. Management repurchased 2.7 million shares at an average price of $40.82 per share, showing confidence in the company's valuation.

Outlook for Fiscal 2024: Adjusted EPS and Margin Expectations

For fiscal year 2024, the company projects an adjusted EPS range of $3.20 to $3.40, with adjusted EBITDA margins expected between 6.2% and 6.5%. This forecast accounts for a dynamic business mix, including a potential dip in B&I janitorial activity and changing revenue dynamics in the Manufacturing & Distribution (M&D) segment, as well as ongoing labor cost pressure. The guidance also factors in successful price increases and cost-saving initiatives such as the Elevate project.

Capital Allocation Strategy Emphasizes Investment in Growth

The focus remains on investing in organic growth and seizing M&A opportunities, but there's also a strong emphasis on shareholder returns, illustrated by the aggressive share repurchase in the quarter, which was particularly opportunistic due to a dip in share price following the third-quarter earnings call. This activity underscores a continuing commitment to capital return despite no change in fundamental capital allocation philosophy.

Improving Market Position and Future Prospects

Strategic changes in the Aviation sector, like the significant focus on airport services rather than airlines, have positioned the company advantageously, with new contracts and a healthier pipeline signaling growth in air travel demand. Within the Education market, the company enjoys market leadership and a growing pipeline due to its integrated solutions offering. The company's evolution, particularly through its technological investments and programmatic enhancements, has boosted its competitive edge and sales record, with over $1.6 billion in new sales for the year.

Earnings Call Transcript 2023-Q4

[Operator]

Greetings, and welcome to the ABM Industries Fourth Quarter 2023 Earnings Conference Call.

[Operator Instructions]

Please note, this conference is being recorded. I will now turn the conference over to your host, Paul Goldberg, Head of Investor Relations for ABM. Thank you. You may begin.

[Paul Goldberg, executive]

Good morning, everyone, and welcome to ABM's Fourth Quarter 2023 Earnings Call. My name is Paul Goldberg and I'm the Senior Vice President of Investor Relations at ABM. With me today are Scott Salmirs, our President and Chief Executive Officer; and Earl Ellis, our Executive Vice President and Chief Financial Officer.

Please note that earlier this morning, we issued our press release announcing our fourth quarter and full year 2020 financial results. A copy of Varilease and an accompanying slide presentation can be found on our website, bn.com. After Scott and Earl's prepared remarks, we will host the Q&A session.

But before we begin, I would like to remind you that our call and presentation today contains predictions, estimates and other forward-looking statements. Our use of the words estimate, expect and similar expressions are intended to identify these statements, and they represent our current judgment of what the future holds. While we believe them to be reasonable, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially. These factors are described in the 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. And with that, I'd like to turn the call over to Scott.

[Scott Salmirs, executive]

Thanks, Paul. Good morning, and thank you all for joining us today to discuss our fourth quarter results. Fourth quarter revenue grew 4.1% to $2.1 billion, including 3.8% organic growth. All segments grew organically in the quarter, led by double-digit growth in our Aviation segment, driven by healthy airport activity and the addition of new clients. Our technical solutions, education and manufacturing and distribution segments also posted solid growth, reflecting several project closeouts and technical solutions, new education clients and our strong positioning in M&D.

We also recorded modest organic growth in B&I, where robust sports and entertainment and special event activity hope to offset continued softness in the commercial real estate market. Additionally, our team set another sales record in 2023 with new sales bookings of $1.6 billion, which is a great accomplishment. I'm pleased with our progress in resolving certain microgrid project delays and technical solutions as well as our ability to win new clients, push price increases and effectively manage our cost structure. As a result, ABM generated double-digit increases in net income, adjusted net income and adjusted EBITDA and achieved an adjusted EBITDA margin of 7.2%.

I'll now discuss the demand environment for each of our industry groups. Let's begin with B&I. Office density rates remain relatively static in the fourth quarter at around 50-plus percent on a blended basis with the commercial office vacancy rate near 20%. These factors directly impacted demand for our janitorial services in B&I. Although the hybrid work model remains prevalent, we expect to see a continued gradual increase in the time employees spend at the office in the next couple of years. We expect as office leases expire in 2024, many clients will move forward with their plans to downsize their office footprint to match their density, which will put pressure on demand for janitorial services until vacant floors are re-leased and reoccupied.

If companies become more proactive and requiring their employees to return to the office, the impact may be more muted than our current expectations. Given our flexible labor model, ABM remains well positioned to navigate the challenges of commercial real estate. As a reminder, our multi-tenant commercial real estate profile largely consists of Class A and newer buildings, which we believe are far more resilient than lower quality buildings. In addition to janitorial services, our B&I segment provides engineering services and has clients in submarkets like sports and entertainment and health care, all of which are influenced by demand drivers that are far less correlated to office density. That's an important reason why B&I's full year revenue declined less than 1% despite softness in the commercial real estate market.

In summary, while the pressure in commercial real estate is tangible and will impact B&I's performance next year, we plan to mitigate a portion of the impact through our flexible labor model, cost management and the diversity of our end markets and mix of service lines. Moving to Aviation. The leisure and business travel markets, including international travel, remain quite strong and should be solid in 2024, although we face tougher year-over-year comparisons due to the large 2022 parking project that carried over into Q1 of 2023. Our aviation team has executed extremely well, managing through a historically tight labor market while ramping up service volumes to above pre-pandemic levels.

They also continue to win new business, including 2 large airport janitorial contracts pending final approval, along with 2 core airline projects, all of which kick in, in the first half of the year. Demand within our manufacturing and distribution segment has remained strong, benefiting from our core e-commerce and logistics clients and from our diversification efforts including expanded business with clients in the manufacturing, semiconductor and biopharma markets. The newer end markets continue to offer exciting growth opportunities as clients increasingly outsource support services in order to focus on their core business operations. In addition, we see growing momentum from the onshoring of manufacturing. As we mentioned last quarter, we expect a large and valued M&D client to rebid and rebalance their work needs in 2024 as part of their normal procurement process.

Our team has been working to offset the anticipated revenue reduction through expansion with other clients and pursuing new opportunities in other end markets. Over the midterm, we expect M&D to grow revenue in the high single digits. However, the 2024 growth rate will be impacted by the rebalancing. Moving to education. We generated mid-single-digit organic revenue growth driven by 100% in-class learning and by the addition of new clients. We executed well on our sales pipeline and won several new contracts during the year. We expect 2024 to be another year of solid growth and stability.

Moving to Technical Solutions. Segment backlog now exceeds $410 million even after several completions of projects in the fourth quarter with EV and microgrid services representing nearly 60% of the segment total. Conversely, we continue to experience soft market conditions in bundled energy solutions, which includes HVAC, lighting and electrical system retrofits primarily due to the impact of higher interest rates on project ROIs and the availability of government funding through legacy coded legislations. We believe projects will pick up once return expectations get reset and the government funding projects onset. The timing of this is hard to predict, which is why we are tempering 2024 expectations for bundled energy solutions. Technical Solutions as a whole performed better in the fourth quarter as we were able to close out several legacy projects and make progress on certain microgrid projects following supply chain and permitting delays earlier in the year.

Looking forward, we expect to advance microgrid projects during the year. Also, the level of interest and bidding activity for microgrid systems and large EV infrastructure projects including the opportunity recurring revenue remains high. We expect 2024 to be a year of solid growth in Technical Solutions. Now turning to our elevated initiatives. Following the successful financial close on our new cloud-based ERP system for the Education segment, we achieved 2 more milestones in the fourth quarter. First, we launched a new workforce management solution for pilot sites in the Education segment. This tool allows for a more modern approach to time and attendance for scheduling, providing managers with improved visibility. By pairing this tool with the workforce productivity and optimization tool we released last year, we are now entering a new phase of efficiency that provides operators with enhanced insights -- we expect to complete the rollout of this tool to our Education segment in 2024 and further expand deployment thereafter.

The second milestone is the initial release of our new team member, mobile app called Team Connect. The app is currently in the hands of more than 500 frontline team members. Over the next year, this app will deliver on-demand training, safety moments, clock in and clock out integrations and task management features among other capabilities. These tools will create a digital connection to the front line, driving a higher level of engagement and delivering real-time updates to our clients that provide more transparency on services performed. Over the next couple of years, we plan to scale this ecosystem deliver the outcomes we initially shared during Investor Day in late 2021. We've also had a lot of learnings from the successful initial deployment of our cloud-based ERP system in our education industry group earlier this year. We are applying those learnings to future segment ERP rollouts, and to ensure we minimize any potential disruption to our clients and our internal operations. As a result, we expect the full deployment may take about a year longer than first anticipated and the total program cost will likely be about $200 million to $250 million, which is modestly higher than we said in 2021. We cannot be more excited about the positive impact that our transformation initiatives are having on our clients and team members. Our expectation is that these capabilities will be game-changing in our industry.

Looking back at our performance in 2023, we did a terrific job winning large new contracts in aviation, in education as well as in M&D where we continue to expand. Although we experienced some project delays in Technical Solutions, our performance improved in the fourth quarter, and we expect further progress as the nascent markets mature. In B&I, we are effectively navigating this challenging market, benefiting from the flexibility in our labor model and our real estate portfolio that remains heavily weighted towards better performing Class A properties. In 2024, we expect generally healthy market activity for Technical Solutions, aviation, education and M&D. At the same time, we anticipate that the conditions will remain challenging in the commercial real estate office market and that we will be impacted by some business rebalancing and M&D. We expect these factors, along with projected labor inflation will likely mute our revenue growth and cause our margins to incrementally tick lower when compared to the strong levels we achieved in 2023.

Our overall outlook for 2024, therefore, is essentially unchanged from the comments we shared last quarter. Earl will walk you through the specifics of our 2024 outlook in his comments. As we look forward, we expect our teams to set another new sales record in 2024 after record sales in 2023. Through our Elevate initiatives, we are leveraging our scale, depth of service offerings and technology. In addition, we will continue to carefully manage cost and proactively make changes to our cost base, if necessary, just as we did in 2023. And of course, our anticipated strong free cash flow will enable us to continue to invest for the long term while regularly returning cash to our shareholders. Now I'll turn it over to Earl.

[Earl Ellis, executive]

Thank you, Scott, and good morning, everyone. For those of you following along with our earnings presentation, please turn to Slide 5. Fourth quarter revenue of $2.1 billion increased 4.1%, comprised of organic revenue growth of 3.8% a 1-month contribution from Raven bold. Moving on to Slide 6. Net income in the fourth quarter was $62.8 million or $0.96 per diluted share, up 29% and 32%, respectively, versus last year. These increases were largely driven by higher segment earnings on higher revenue, the benefits of the prior year self-insurance adjustments and lower Elevate costs, partially offset by higher interest expense and labor costs.

Adjusted net income of $66.2 million increased 11% and adjusted earnings per diluted share of $1.01 and was up 13% over the prior year period. These year-over-year increases primarily reflect higher segment earnings, including the benefits from price increases and our cost management efforts partially offset by higher interest expense and labor costs. Adjusted EBITDA grew 10% over the prior year to $144.2 million and adjusted EBITDA margin increased 40 basis points to 7.2%. These year-over-year improvements were driven by higher segment earnings, including several project closeouts in Technical Solutions and normalized performance in Aviation as compared to the prior year, which was impacted by adverse project timing. Now turning to our segment results beginning on Slide 7. B&I revenue increased modestly to $1 billion, partly due to strong sports and special event demand, which helped to offset reduced demand in the commercial real estate market.

Operating profit in B&I decreased to $84.6 million and operating margin declined to 8.2% as adverse service mix was partially offset by price increases and cost actions. Aviation grew 16% and to $248.2 million, once again driven by strong demand for leisure and business travel and new business wins, we expect demand within our Aviation segment to remain robust going forward. Aviation's operating profit was $16.4 million versus $1.3 million in the prior year period, and operating margin expanded significantly to 6.6%. These increases reflected the absence of the adverse project timing, which negatively impacted the prior year period as well as benefits of higher volume and price increases. Turning to Slide 8. Manufacturing and Distribution revenue grew 5% to $391.2 million, reflecting broad-based demand. Operating profit increased to $42 million while operating margin declined 40 basis points to 10.7%. Profit and margin performance was largely due to customer mix. Education revenue increased 6% to $229.8 million, benefiting from the addition of new clients earlier in the year. Education operating profit was $10.2 million, up 23% over the prior year period, while margin increased 60 basis points to 4.4%. These increases were largely attributable to increased organic revenue growth and a modestly improved labor market.

Technical Solutions grew 6% over the prior year period to $190.8 million comprised of an even split between organic growth and acquisition contribution. This performance largely reflecting the closeout of several legacy projects and progress on battery storage system projects. Of note, Raven Ville contributed to organic growth beginning in September. After these project closeouts, as Scott noted, Technical Solutions backlog now exceeds $410 million. a large portion of which is scheduled to convert to revenue in 2024. Technical Solutions operating profit was $24.4 million and margin was 12.8%, and compared to operating profit of $20.9 million and margin of 11.7% last year. These increases were largely due to higher volume and approximately $2 million of onetime gains related to certain contracts. Moving on to Slide 9. We ended the fourth quarter with total indebtedness of $1.4 billion, including $58.2 million of standby letters of credit, resulting in a total debt to pro forma adjusted EBITDA ratio of 2.3x. At the end of Q4, we had available liquidity of $552.5 million, including cash and cash equivalents of $69.5 million. Free cash flow was strong in the fourth quarter at $121 million and was $191 million for the year. Excluding full year Elevate and integration costs of $71 million, our Cares Act repayment of $66 million and employee retention credits received of $24 million, Normalized free cash flow was $303 million in 2023.

We repurchased 2.7 million shares of common stock in the fourth quarter at an average price of $40.82 per share for a total cost of $110 million. For the full year, we repurchased 3.3 million shares for $137.1 million, excluding excise taxes and reduced our share count by 5%. Also, subsequent to the year-end, our Board approved a $150 million expansion of our share repurchase authorization. The total current authorization is now $210 million. Interest expense was $20.5 million, up $4.5 million from the prior year period. Now let's move on to the full year fiscal 2024 outlook, as shown on Slide 10. As Scott mentioned, our view for 2024 is consistent with the comments we made on the third quarter earnings call. We expect full 2024 adjusted EPS to be in the range of $3.20 $3.40. Adjusted EBITDA margin is expected to be 6.2% to 6.5%, largely driven by a shift in business mix. This includes expected lower B&I janitorial activity, a change in revenue mix in M&D and continued labor cost pressure, partially offset by Elevate and cost initiatives as well as price increases.

Interest expense is estimated to be in the range of $82 million to $86 million. The tax rate before discrete items is expected to be between 29% to 30%. Lastly, full year normalized free cash flow is expected to be in the range of $240 million to $270 million, excluding the estimated $45 million of Elevate and integration costs, the majority being elevated investments. With that, let me turn it back to Scott for closing comments.

[Scott Salmirs, executive]

Thanks, Earl. I want to thank our teams for their incredible efforts and dedication throughout the year. despite challenging commercial real estate and labor markets and through the introduction of new technology and processes, our teams never took their eyes off our clients and delivered solid performance. I wish you and your loved ones a very happy and healthy holiday season and a happy new year. With that, let's take some questions.

[Operator]

We will now be conducting a question-and-answer session. [Operator Instructions]

Our first questions come from the line of Jasper Bibb with Truist.

[Unknown Analyst]

I wanted to ask what you're seeing from a labor inflation and pricing perspective and if you could kind of provide underlying assumptions for '24 guidance with respect to labor cost inflation and the recovery rate there, that would definitely be helpful.

[Unknown Executive]

Sure. So for us, we're thinking it's going to be in the 4% to 5% range. A lot of the collective bargaining agreements for the janitorial workers across the country are in process right now. And we feel encouraged that they're going to end in that range. So our guess is on the collective bargaining agreements, which are the union-based agreements, they're going to be in that 4% range, and it will be a little higher for the nonunion as we look to those markets with the lower labor rates.

So again, that 4% to 5% range. And just as a reminder, we've been successful over the last few years of recovering 75% to 80% of that. So kind of that's what we're thinking.

[Unknown Analyst]

Makes sense. And then I was hoping to get an update on the Elevate progress. I think on the last call, you mentioned you've already captured about 50% of the cost benefit there. Any color on where you expect to be from a cost capture perspective by the end of fiscal '24? And are there any kind of key deliverables like ERP deployments we should be aware of over the next 12 months?

[Earl Ellis, executive]

Yes. So we're probably -- I think we're in the kind of that 30% range, 1/3 of the benefits that we've captured to date. And it's something that escalates over time as we actually execute on the different industry group segments, then we can put in some of the tools. So I think it's just going to be a normal ramping up to that range that we laid out of $110 million to $130 million over time. So we're right on track with our cadence on that. So everything is going as planned right now.

[Unknown Analyst]

Got it. Last question for me. The company really stepped up the repurchase this quarter. How should we think about the pace of capital performance into 2024?

[Unknown Executive]

Yes. No, thanks for the question, Jesper. I would say that we're really pleased that we're able to return capital back to our shareholders over Q4, especially in light of the compression in our share price that we saw after our Q3. And as we look to the future within FY '24 at a minimum, we'll buy back shares against the dilutive share-based compensation. We have board authorization now for about $210 million worth of shares. And so we'll be opportunistic where it makes sense..

[Operator]

Our next questions come from the line of Faiza Alwy with Deutsche Bank.

[Faiza Alwy, analyst]

So I wanted to ask about technical solutions. I know you don't guide to revenues, but it sounds like the range of alternatives or the range of scenarios on Technical Solutions is quite wide just given timing. So give us a bit more color on how do you expect the pacing of these new projects project revenues to be realized? And how do you expect sort of the underlying business to perform within Technical Solutions.

[Unknown Executive]

It's great. Thanks for the question. So look, we feel strongly about technical solutions as we ever have. We love kind of the end markets that we're serving here. And we think it's going to be a strong year for Technical Solutions in '24. They continually post high single-digit margins. We're expecting that again. And remember, Faiza, the cadence of Technical Solutions, it starts off a little soft and then progresses through the year from a margin standpoint because it is quite seasonal in the summer, you do a lot of the work, right?

So -- we're excited about that. We don't guide to revenue, but we're excited about the potential for growth this year. And we have the strongest backlog that we've ever had in -- just as a reminder, backlog are the contracts that are signed and locked and it's just a question of starting the work. So we're feeling really good about Technical Solutions this year.

[Faiza Alwy, analyst]

Maybe just a follow-up on that, now that you've ended fiscal '23, could you give us a bit of a breakdown because I know there is a bunch of different items underneath Technical Solutions. Does the bundled energy, there's other things, there's the EV charging segment? Can you give us just a breakdown of the revenues in fiscal '23?

[Scott Salmirs, executive]

Sure. So yes, there's really 3 core areas. There's bundled energy solutions, EV and Raven vault. And I guess the best way to describe it is our sentiment on those different industries, both sub industries. And we just feel really strong about all the signs are pointing to strong growth there. Because if you remember, like there has been some news coverage lately that EV is maybe taking a step back or is not as exciting as it was. But that's all in context to the crazy growth rates that they've had in the past.

And the truth is what a lot of the card deals are realizing is the impediment to this excitement is they call it range fear that people feel like they're going to run out of power. And that's because there's not a lot of infrastructure. So for us, the catalyst, the way we see EV, the catalyst for our growth is going to be the fact that infrastructure is so light. So we're really happy about our backlog. So EV is going to be a really strong segment for us. And Raven Vault, we're really excited about. We have a very strong backlog, probably close to half of our backlog in Technical Solutions is around Raven vault and these big projects. And the frustrating part, frankly, is the fact that it's really hard to time these quarter-by-quarter. Because the way you got to think about it Faiza, it's not they're basically battery backup projects, right? And it's not like you're going in and installing one battery.

These are battery fields, some of them are the size of a football field, right? So it's almost like a construction project. and timing of construction project, getting the permits, getting the equipment. So when you look across a year, we feel really confident that Raven Volt is going to perform. But can I tell you whether or not Q2 is going to be stronger than Q1? It's hard to get that insight, but we're getting better at it, frankly. We think the back half of the year is going to be stronger than the first half of the year right now, but Raven Vault's going to be another big, strong performer for ATS. And then the last piece is Bundled Energy Solutions. And that's the one that's going to be most pressured. And the way I want you to think about it think about these big projects where you go in and retrofit a school, and it's a $15 million project, changing out the lighting, the air conditioning equipment, the heating equipment. And what ends up happening there is it's high capital for these schools. And the IRRs were typically really strong when interest rates are low.

But now that interest rates are higher, it's causing them to push and to see where interest rates come down, what's going to happen. And that's why you're seeing a little bit of a step back in bundled energy solutions. And plus, there's been a lot of government funding through the CARES Act. And so there's been a lot of free money out there for school. So we think that's going to be sunsetting towards the end of this year. So I would suggest that bundled energy solutions will be soft in '24, more excited about '25. But that being said, they'll still perform just not at their kind of run rate that they used to be at where it was over $200 million in projects. It will probably be around half of that this year, which is still fairly strong, but not what we're used to. So hopefully, that gives you more color.

[Faiza Alwy, analyst]

Yes. And then just a quick one on your interest expense guide, are you assuming any debt paydown? And just talk a little bit more about your capital allocation I know you've talked about the share buyback. But is any sort of debt paydown? Or are you thinking about that at all?

[Earl Ellis, executive]

Yes. It anticipates marginal paydown in debt. And so if you think about we have a term loan that amortizes probably about $30 million a year. And then we'll use some of the excess cash to pay down a bit of the revolver. But nothing material in that when you look at our leverage of 2.3x, we feel very comfortable there. And we're looking to maintain that level of leverage into next year.

When it comes to capital allocation, our plan is still consistent. We'll continue to invest in our organic growth through the Elevate program, investing in talent, et cetera. And again, based on our strong projected cash flows, relatively low leverage, it continues to provide us with the flexibility to allocate capital, whether it's to M&A opportunities or returning back to shareholders.

[Operator]

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

[Andrew J. Wittmann, analyst]

I guess I just want to understand the quarter a little bit better, particularly in the Technical Solutions segment. And so for Earl. So you talked about how there were several closeouts in the quarter, oftentimes, but not always, closeouts are basically accounting adjustments when projects that you've been working on come in better than expected after you finish them and then you recognize a whole bunch of revenue and basically almost 100% profit against that revenue in the quarter.

Is that what you mean by saying -- by attributing the revenue growth year-over-year significantly to that kind of performance? Or were you saying something different? I just want to make sure we're clear about what you're paying on the project closeouts and how that contributed to revenue and profits.

[Earl Ellis, executive]

Yes. No, I think you got it spot on, Andy. There were a number of projects that closed out. And as a result of that, you're actually able to do your final billings. Any holdouts that you actually had, you're now able to capture that. And in the quarter, that amounted to about $2 million. When we talk about the profitability in Q4. Remember, Q4 is a seasonal business and typically back half with Q4 being our largest quarter. So keep that in mind that by no means would be a run rate into Q1, which we know typically would be a lower quarter than others.

[Andrew J. Wittmann, analyst]

Okay. But your revenue growth was like $11 million, $12 million in the quarter for Technical Solutions. The gain was only 2. I guess it sounded like the other whatever 9-ish million of revenue might also be attributable to closeouts. Is that true or not? -- just trying to understand that.

[Earl Ellis, executive]

No, that would be the regulatory -- if you think about on Raven volt where throughout the first half of the year, we actually had delays on certain battery storage projects as we're waiting for not only inventory supplies, but getting a lot of the authorizations finalized. So we actually were able to close off on a number of those deals in Q4. And as a result, you're seeing the revenue and the associated profit.

[Andrew J. Wittmann, analyst]

Okay. That's helpful. And then, Scott, just on the B&I segment. I guess you mentioned in your press release or your report here, your slide deck, you talked about kind of diversification. I just want to make sure I'm understanding what you're saying there as well. Is that meaning you had the good entertainment and sports and diversified in that way -- from, I don't know, call it, the traditional janitorial services? Or is there some other dynamic there that we should be aware of that -- you that you're referring to in diversification.

[Scott Salmirs, executive]

Yes. No. That's a great question. Yes. It's partly that. It's partly. We have a little health care in there. But more importantly, the engineering segment. So if you think about, especially with the Able acquisition, where between able and the legacy ABM. We had a lot of stationary engineers, and that's about 25% of our business is just engineering, and that doesn't change with office occupancy and density.

If you have engineers in an engine room whether you're 80% occupied or 95%, that's really not going to change. And we have parking in that segment as well. and that's been relatively stable since we've come out of the pandemic. So that moderates the Janitorial, which is the piece of it that becomes more variable. So I guess, Andy, I'm so glad you brought up this question because like when we look at B&I, we don't want you to look at that as just purely janitorial and having all that kind of variability, so to speak, based on density because the truth of it is, it's so mitigated by again, the engineering specifically.

[Andrew J. Wittmann, analyst]

Yes. Okay. I just wanted to make sure I understood that and now we do. And then just -- just on the, I guess, the ELEVATE program here. So you said it's taking about a year longer. The new number is, what, $215 I think I heard $200 to $215. I think previously, the high end of the total Elevate spend was $175 million. So that's the delta looks like. I guess you were always planning for like around, I think, $15 million of spend in '24. So am I doing the math here, like the extra $30 million with the extra year is the delta that takes you from that $175 million number into the low 2s, Earl. Is that -- am I thinking about that correctly? Is that what you're saying here today?

[Earl Ellis, executive]

Yes, you are. So it's a spillover. -- we'll have an extra year. You remember, for FY '24, we are actually planning on that being a bit higher as it tails down throughout the you could almost think of rough numbers, probably about $35 million in '24, followed by 25% for the next 2 years.

[Andrew J. Wittmann, analyst]

And then, Scott, can you just talk a little bit about kind of what you've learned along the way that's causing the extra year and the extra cost here? What are some of the technical challenges or maybe operational challenges that go along with the extension of the program.

[Scott Salmirs, executive]

Sure, Andy. And these things are so complex, right? And I would think about -- the way I would think about it is when you think about deploying an ERP, like the easiest part of it is putting a financial system in -- it's all the other systems that talk to it, right, whether it's your payroll system, your T&E system, your procurement system, and the data has to flow in and out through a pipe.

It's almost like -- I look at it like a Lego, where you got the middle of the LEGO is the ERP and then you have all these systems coming around at creating a wheel. And as part of that, what we learned with education is it's just going to take longer to get that data flow right and clean and to set up all the processes to go in and out of the ERP. And then once you launch the system, all the -- we call it hyper care internally, which is basically all the training, all the answering of questions of the field as they start using the new system. And it's just it's taking longer than we originally expected because we had no frame of reference, right?

So I think the strong point here, Andy, more than anything, is this is -- it's not a system that's off the rails. It's not like, hey, we were going with Oracle and we ditched that, and now we're going to SAP. It's not like we had a specific consulting group that was helping us with some process work and we had to change them and scrap it and start over again. So none of this is about really missteps it's really about the fact that risk mitigation is the most important thing to us internally and to our shareholders, right? So we just have to make sure we do everything we can so that our invoices are right, our payables are right and our payroll is right, and it's just going to take a year longer, but it's all for like good reason.

[Operator]

Our next questions come from the line of Josh Chan with UBS.

[Joshua Chan, analyst]

So you mentioned the margin guidance for '24. I appreciate the drivers behind that. So I guess as you think about going beyond 2024, how should we think about the trajectory of margins? And what are some of the factors that will drive it up or down beyond this year?

[Earl Ellis, executive]

Sure. Thanks. Look, we think there is going to be a cadence up to our 7.2%. I think '25 will be one of the more challenging years for us to predict, right, because so much of kind of the -- I don't want to say set back, but the stall in our trajectory is because of commercial real estate. And we kind of think that's a 2-year overhang '24 and '25. So I think once we get out of that trough, it will be a normal cadence up. But at the same time, we're not sitting around and just admiring the problem, right?

We've made some changes to our cost structure. And then the Elevate benefits start kicking in as we start lighting up these industry segments and put our new financial system and overlay the tools that I talked about in my prepared remarks, like workforce management and this app that's going to be a game changer because we're going to be able to communicate with all of our frontline employees and ultimately help them manage labor during the day and night. It's just going to be phenomenal. So I think, again, it won't be a straight line up, but the key thing will be when do we think we're going to get past the commercial real estate trough and we're suggesting that it's probably just another year or 2.

[Joshua Chan, analyst]

Okay. And then I want to follow up on the repurchase. I guess, could you just talk to the amount of repurchase and it's obviously a lot higher than what you normally do. And so I just wonder if there's any change in philosophy in terms of how you think about the stock versus other means of deployment, mainly M&A, I suppose.

[Scott Salmirs, executive]

Yes. No change in philosophy. As we mentioned, when we look at capital allocation, first and foremost, we want to ensure that we're actually investing in our organic growth. And we feel that we actually have sufficient investments there with Elevate and other key investments. When you look at the fact that after looking at organic growth, M&A opportunities, when we actually have excess [ cash ], we look at how is the best way to deploy that back to shareholders.

And after Q3 with the compression that we saw in the share price, we thought that it was prudent to actually take actions -- but going forward, we'll actually take a balanced approach. We manage our leverage. Currently, right now, it's 2.3x, and we anticipate that, that's going to be consistent going to the next year. So we'll continue to look at opportunities and allocate accordingly.

[Operator]

Our next questions come from the line of Sam Kessler with William Blair.

[Unknown Analyst]

Thanks, Scott. I hope you hope they're doing well. I guess to start here. Yes. I guess to start here, you mentioned last quarter that B&I could be down 2% to 3% in 2024. And today's outlook commentary calls for a challenging B&I market. I guess I want to see first, it down 2% to 3% is the right way to think about this business for next year still. And then I'd also like to get your thoughts on how long this type of challenging environment coast I think you just mentioned that maybe in the 2025 when it goes to, but is there a chance that it goes beyond that? Just trying to get your broad kind of commentary there.

[Scott Salmirs, executive]

Sure. So I think you're kind of spot how you're thinking about 24% that revenue perspective on the growth side. So I think you hit that. And yes, we do think it's going to go into 25%. And the reason we're more optimistic about and beyond. So just from a pure statistics standpoint, I think they're saying that 50% of all leases are coming due in '24 and '25. So you're going to see that volatility with some of the compression. Because opportunistically, when you lease comes up, you have a chance to kind of narrow your density a bit. So that's why we think it's going to be more of a 2-year problem than extended.

But more importantly than that, I have to tell you, and I think you're probably seeing it and everybody on the call are seeing it too, like the sentiment out there is really becoming stronger and stronger on return to work. I can tell you in my CEO peer networks, all we're talking about is getting people back to the office for collaboration. There's all these studies now that are being released on effectiveness of organizations by having people on-site and collaborating. And the macroeconomic environment, frankly, are giving employers more power over saying you have to come into the office versus where we were a year or 2 ago when the labor situation was different, right? So there's a bit of a power shift going on right now in favor of employers who want to bring people back.

So I think it's episodic. I think it's '24 and '25. I suspect 25 won't even be as difficult as '24. And that's our feeling, and it seems to be the general sentiment.

[Unknown Analyst]

Awesome. Very, very helpful color. Maybe sticking with B&I then. Maybe you could break out the growth rates between commercial cleaning and engineering services. I guess I'd just be curious how each of those are doing within the broader portfolio.

[Scott Salmirs, executive]

Yes. We don't really guide to revenue or anything like that. But I will tell you -- I could give you some high-level color, right? Engineering is just a lot more stable, right? You do not see variability in -- on the downside. Because again, if you have an office building and it requires engineers to take care of the equipment between the day shift, the night shift and the weekend shift. That equipment has to be taken care of.

And it doesn't matter what the occupancy is, right? Because you have to run that equipment. You're still delivering air conditioning to the building. You're still doing electrical and mechanical work pumps are still breaking that have to be fixed. So this stuff all happens. And that's why when you look at it being like 25% of B&I, you have that stability. It's the janitorial side that ends up being more, I guess, flexible, if you will, having more variability.

[Unknown Analyst]

Got you. Makes sense. Maybe a final one related more to -- maybe you could characterize the growth across the end markets, parsing out the e-commerce logistics, I think biopharma and semiconductor. I'm not asking for any actual numbers here, just more curious how you'd rank these in terms of performance or maybe growth opportunities as you head into 2024?

[Scott Salmirs, executive]

Yes. So look, we've done a really good job on the e-commerce side, and we'll see some good growth there, but probably more normalized. But it's really where we're focusing now like semiconductors, biopharma, some of the manufacturing stuff that we're doing. We think those will be higher growth areas. Listen, I have to tell you, like we'll have this little impediment in '24 because of the rebalancing of one big client. But we have every confidence in the outer years after that, that this is going to be a high single-digit grower, one of our fastest growing in all of ABM. So really enthusiastic about the manufacturing and distribution industry segment.

[Operator]

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

[David Silver, analyst]

Yes. Thank you. I'd like to ask a question firstly on your aviation segment. So clearly not your biggest segment in terms of revenues or absolute profit, but it was the best performer by a wide margin this year, both in revenue growth and in -- well, operating income growth and especially margin improvement. So I know there's a number of initiatives that you've undertaken over the last couple of years, which I would say are starting to bear fruit.

But on a scale of 1 to 10 or 0 to 200 or whatever, where do you think ABM is in terms of fully exploiting the opportunities from your evolving strategies there? In other words, should we expect another meaningful improvement next year, assuming that, I don't know, air flight or air travel trends continue as positively as they've been.

[Earl Ellis, executive]

Sure. That's a good question. So there's so much going on in aviation that we're excited about. Firstly, we've had a new management team in place for the last couple of years have been phenomenal, both on the ability to operate the business. And then on business development, we've been really excited about. And you may remember, David, that we started a few years back, shifting our focus to airports and less on airlines because we saw all the modernizations that were happening across the country.

And the perfect example of that is LaGuardia. Just got named the best new airport in the world. Terminal B is like, I don't know, 80% of that airport, we do everything there. We just got a very large -- we call it APS, which is ABM Performance Solutions, which is integrated facility services, basically where the client says, "Look, you self-perform a bunch of these services. In addition to that, why don't you take care of all our subcontracted services as well. So basically bundling everything together and letting us run it. So we just got a massive contract at LaGuardia to handle all of Terminal B, also Provident school systems we got. So we're excited about the ability to take this ABM Performance Solutions to airports around the country, and our pipeline is growing there.

So air travel is up. It continues to be up. Aviation had a really, really great year. It was also helped, if you remember, in Q1 by the parking project that happened in 2022, a lot of the expenses happened in 2022, but we got paid in '23. So the profit flow-through is about $11 million or $12 million. So that helps as well. But we're very, very enthusiastic about aviation and its growth ability for next year, and again, loving the team.

[David Silver, analyst]

And I just would like to ask for a clarification on the share repurchase activity this quarter. So there were a couple of comments, certainly already, but I'm just trying to sharpen my understanding. Should I assume that the bulk of the fourth quarter activity was kind of concentrated early in the quarter? In other words, after your stock was quite volatile 90 days ago.

Is that when the activity was concentrated in, in other words, more opportunistic? Or would you say it was spread a little more evenly and hence, maybe more, I don't know, programmatic or more balanced through the quarter?

[Earl Ellis, executive]

Yes. No, it was definitely more front-end loaded. And hence, when we look at the average price, which was $40.8 that is emblematic of kind of like where it was trading shortly after the Q3 earnings call.

[David Silver, analyst]

Great. And then last question would be for Scott, I guess. And Scott, I'd like you to maybe look back a few years and then compared to today. But in the immediate aftermath of the pandemic -- and I'm sorry, I should say this is kind of related to your and competitive advantages and your ability to gain new business.

But in the immediate aftermath, when the pandemic began, your company was kind of in a very strong position in some ways to capture new business because of your scale, because of your ability to source scarce equipment, better purchasing power, et cetera, as well as staffing, a number of advantages. And we're kind of in the post- [indiscernible] -- and at least in some parts of your business, commercial real estate, things are structurally a little softer. But my sense is that your go-to-market strategy or value proposition to your core, like bread and butter industrial or commercial customer is probably a little bit stronger even than it was a few years ago just in terms of maybe the enhancements from your internal Elevate program and whatnot.

But how would you think about just for the core kind of bread and butter clientele across education manufacturing, et cetera. How has your value proposition kind of shifted, let's say, over the last couple of years and in particular, as you kind of look at the post-pandemic environment. Maybe if you could comment on that, that would be helpful.

[Scott Salmirs, executive]

Yes, sure. Yes. Look, I think for us, as a brand, it's certainly I guess our positioning has changed a great deal as we came through this pandemic different than our competitors. And I think our competitors would admit that, too. We're developing our enhanced clean product. We got so much more exposure on social media. If you remember, we did a commercial. So we've become more prevalent. And it's just -- it's just a different swagger, I guess, if you will, when we're pursuing business development and talking to clients.

And then you layer on top of that, David, all the investments that we're making in technology and to sit across from a client in the presentation and show them a digital dashboard and how we're monitoring their facilities in with this ABM Team Connect and how very shortly, all of our team members in the field are going to have an app that is going to connect them to the client, to us. It's just going to be game changers. So I just feel like this momentum that we're having is very palpable. And I would close off the comment by saying we just had another record year of new sales. We were -- to give you a context a few years back, we put a true north of -- is it possible to possibly bring in $1 billion in new sales. And we were like -- that was our -- that was our like aspiration that was really far out there.

And this year, we did over $1.6 billion in new sales. I mean, what we brought in, in new sales is probably 3x bigger than our nearest competitor in terms of total revenue, not what they brought in, and I'm talking about their book of business. So we feel like we have a really compelling value proposition.

[Operator]

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

[Marc Riddick, analyst]

I'll be brief on this. I know we've gone deep into a lot of things. So wonder if you could talk a little bit about what you're seeing with education and the commentary was around the strength that you saw there and some of the prior new business wins, the benefits of that. Maybe you could bring us a little bit of an update as to maybe what you're seeing there on revenue visibility, the margin profile there and the opportunity to continue to gain share in the space?

[Scott Salmirs, executive]

Sure. We're like so happy about our education positioning. We're the clear #1 in education, and we're split between K through 12 and higher ed, we have great growth this year. brought in over $100 million in new business, never done that before. And our margins are up since the pandemic. We've held on to that. And then what I said earlier, Mark, about our APS or our integrated solution that we not only got at LaGuardia, but Provident school district, that's something that we're pitching now to our education clients that like, listen, we can do so many things and self-perform, put everything under us, and we'll strategically manage it.

Our pipeline is really growing there. We picked up George Washington University last year. So we're just really excited about industry group. And we typically project like kind of GDP-ish growth and hopefully, we'll get to GDP plus. Usually, it's longer decision time frames in that segment. But again, the proof is in the pudding, and we just had a tremendous year this year. So I appreciate you asking that question.

[Operator]

Thank you. We have reached the end of our question-and-answer session. I would now like to turn the call back over to Scott Salmirs for any closing remarks.

[Scott Salmirs, executive]

Just want to thank everybody for their interest, and we were excited to close out the year the way we did. And '24 will be a challenging year for everybody in the business environment. We know that. But I could just tell you that this team at ABM is going to be attacking taking it with enthusiasm, and we're really excited about it. So have an amazing holiday, everybody, hopefully, get some time with your loved ones, and we look forward to giving you an update in Q1. So take care, everybody.

[Operator]

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect at this time. Enjoy the rest of your day.