Good morning, everyone, and welcome to our Fourth Quarter 2021 Earnings Call and Investor Day. 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; Earl Ellis, our Executive Vice President and Chief Financial Officer; as well as other members of our executive leadership team, whom you will meet later during the Investor Day portion of today's program. We are all very pleased you have joined us this morning. Please note that earlier this morning, we issued our press release announcing our fourth quarter and full year fiscal 2021 financial results as well as details about the ELEVATE initiative we are undertaking. A copy of this release and an accompanying slide presentation can be found on our website, abm.com. Regarding today's program, we will first review our Fourth Quarter and Full Fiscal Year 2021 Financial and Operating Results. After that, we will take a short break. We will then begin the Investor Day portion of the program, where we will provide an update on our strategic positioning, discuss our newly announced ELEVATE initiative and provide a multiyear outlook. After that, we will host a Q&A session. Instructions on how to submit a question will be provided at the end of our prepared remarks. Before we begin, I would like to remind you that our webcast 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. These 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 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 on the company's website under the Investor tab. And with that, I would like to now turn the webcast over to Scott.

Thanks, Paul. Good morning, and thank you all for joining us today to discuss our fourth quarter and fiscal 2021 results. Following our comments, we're hosting a virtual Investor Day, where we will provide a long-range strategic update and financial outlook, including a comprehensive discussion of our ELEVATE investment initiative. I hope everyone can join us for that part of the webcast, and we look forward to speaking with you and answering your questions. Fiscal 2021 was an exceptional year for ABM, highlighted by continued strong financial performance and the acquisition of Able Services, a key transaction that substantially expanded our geographic footprint and broadened our capabilities. Throughout the year, our global team continued to execute at the highest level, successfully navigating a dynamic environment with agility, resiliency and dedication to serve our clients. Fourth quarter revenue grew over 14% to $1.7 billion, and adjusted EPS increased 23%, representing a great finish to our fiscal 2021 year, where revenue of $6.2 billion was accompanied by an adjusted earnings per share increase of 47% to $3.58. Our strong revenue growth in the fourth quarter was driven by 1 month of contribution from Able as well as organic growth in our B&I, Aviation and Technical Solutions verticals, which more than offset a modest decline in our Education segment. I'm pleased with the progress we've made in enhancing our overall profitability as full year adjusted EBITDA margins reached a record 7.3% and fourth quarter adjusted EBITDA margins increased 40 basis points from prior year. Throughout the year, we continued to experience demand for our disinfection and virus protection services as clients prioritized our EnhancedClean protocols to maintain hygiene and high-traffic spaces. In addition, we continued to manage our labor costs proficiently as office occupancy trends increased gradually through the year. As anticipated, overall…

Thank you, Scott, and good morning, everyone. Fourth quarter revenue increased 14.2% to $1.7 billion, primarily driven by one month of contribution from the acquisition of Able Services, continued client demand for disinfection services and a generally improving economic environment. GAAP income from continuing operations in the fourth quarter was $34.3 million or $0.50 per diluted share compared to $53.1 million or $0.78 per diluted share in the same period last year. The decrease in GAAP income reflects higher operating and corporate expenses, which included acquisition-related costs of $19.7 million, initial investments in our ELEVATE initiative and a lower benefit from self-insurance adjustments related to prior years. On an adjusted basis, fourth quarter income from continuing operations grew 25% to $58.2 million or $0.85 per diluted share compared to $46.7 million or $0.69 per diluted share in the fourth quarter of last year. The increase in adjusted EPS reflects revenue growth and a benefit from the absence of a reserve for notes receivable related to a single project within the company's Technical Solutions segment recorded last year, partially offset by reduced labor efficiencies and disinfection work. Corporate expenses were $40.9 million higher compared to the fourth quarter of fiscal 2020 due to acquisition-related expenses, a lower benefit from prior year self-insurance adjustments and costs related to hiring initiatives. Corporate expenses in the fourth quarter of fiscal 2021 were also impacted by $10.3 million of initial investments in the ELEVATE transformation initiative that Scott mentioned and that we will discuss more fully later on. Now turning to our segment results in the fourth quarter. B&I revenue increased 17.5% year-over-year to $933 million, driven primarily by a 1-month contribution from Able Services, increased office occupancy and the expansion of key accounts. Excluding the contribution from Able, B&I revenue increased 4.7% from the…

Welcome back. What a great representation of who we are and what we do. I'm super excited to kick off the Investor Day portion of our program, especially in light of the incredible results we shared earlier. Joining me are the members of our executive leadership team, who you'll be hearing from later today. This team brings an incredible mix of industry experience and diverse backgrounds. We'll share our strategic plan that will unlock significant long-term value for our shareholders and strengthen our industry-leading position through end-market repositioning and building on our core services. Our new strategic plan will transform ABM from a position of strength, using what we learned from 2020 vision and our COVID response to launch our organization into the next phase of our journey. We're going to leverage the market trends that will impact our business over the next 5 years. This will not only sharpen our focus, but also inform the investments we'll be making. And we're going to optimize our portfolio of services, end markets and geographies and to better position our businesses to thrive as society evolves and moves forward. And we'll innovate in the areas of technology and data to modernize service delivery. This will improve the productivity of our frontline workforce and create digital connections with our clients and our teammates and will drive profitable growth. We'll accelerate organic revenue growth rates by close to 50%, with sustainable adjusted EBITDA margins almost double where we started in 2015, while building on our significant cash flow. Over the course of the next hour, we'll dive into each one of these elements. But before we jump into our strategic plan and tell you how we're going to elevate ABM, we'll briefly lay the foundation first. See we're confident that we can implement our…

Thanks, Scott. Really appreciate the introduction. I feel so fortunate to be here. It's truly a pleasure to chart ABM's path forward from a position of strength, and we have a lot to leverage: our market leadership position in a large and still very fragmented industry, our unmatched footprint and service portfolio, our Blue Trip client base and our industry-leading team, but perhaps more than anything else, our business continues to prove time and time again to be incredibly resilient. We were tested in 2020 and 2021 as the COVID-19 pandemic took hold. We acted quickly and decisively, rapidly building and deploying new capabilities and mobilizing our teams to lead our clients through the unpredictable shutdowns and reopenings we've all experienced over the past 20 months. And throughout it all, we performed at record-breaking profitability. So how did we do it? And how has it further strengthened us for the path ahead? We prioritize the health and safety of our team members and clients, always our top priority, by assembling an advisory council with some of the nation's leading experts in industrial hygiene and infectious disease and establishing the leading pandemic-specific health, safety and operations protocols that we quickly deployed across our client base. We laser-focused on our cash flow and liquidity. When many in our industry struggled, our cash position improved significantly. We developed our own proprietary expert-backed solutions, EnhancedClean and Enhanced Facility, to deliver healthy, safe spaces and peace of mind to our clients and their employees, so buildings could reopen and stay open. We've built and deployed a flexible labor model to accommodate the changing landscape. And we shifted our growth to pandemic-appropriate end markets like manufacturing and distribution, which helped offset the revenue decline in more impacted areas like Aviation. These actions led to bottom line…

Thanks, Josh. To continue to win in the future, we must build on our positioning to capture the opportunity ahead and sustain the resilience our shareholders depend on. ELEVATE is the next step in our journey. We will elevate the client experience as a trusted adviser and innovate with multiservice solutions and consistent service delivery to drive sustained profitable growth. We'll elevate the team member experience by training and developing the next generation of leaders and building on our inclusive culture. And we'll elevate our use of technology and data to power client and team member experiences with cutting-edge data and analytics, processes and tools that will fundamentally change how we operate our business and result in significant financial returns. This will separate us from our competitors that just don't have the financial resources to make these investments. We will elevate ABM. Let's take a look at the ELEVATE launch video that brings our vision to life.

We are really inspired by this vision. Now I'd like to introduce Rene Jacobsen, our Chief Operating Officer. Rene is responsible for leading operations for all of our industry groups and has created an environment centered on collaboration, accountability and client focus. He's now going to take you through the market landscape, our service line and industry group portfolio and a view into how we'll elevate the client experience. into that strategic move a little later. These capabilities provide higher margin and increased retention or stickiness, a key to growing our business and profit profile. Our industry group structure was similarly strengthened by this new strategic approach. Let's start with a review of our Technical Solutions business. Technical Solutions has been our highest growth and highest margin business for years. Historically, we've achieved these results with our HVAC, mechanical, electrical and lighting services, which are often bundled together and packaged in a unique offering to our clients to generate cost savings while yielding healthy margins for ABM. We call that bundled energy solutions. We're seeing greater demand for services in higher growth segments of the market related to electrification, sustainable energy savings programs and power and electrical consistent with the long-term megatrends we discussed earlier. Our team is poised to continue on a growth trajectory powered by the momentum we're seeing in the market for vehicle electrification, where we are one of the largest installers of electrical vehicle charging stations in the country; bundled energy solutions, to guarantee energy savings and address critical aging infrastructure; power and electrical services that support the growth of mission-critical facilities like data centers for clients in technology, health care and the federal government. The $1 trillion bipartisan infrastructure bill that just passed will open doors for us. In fact, it allocates $7.5 billion that…

Thanks, Rene. We'll now turn to the M&A portion of our ELEVATE strategy. As one of the largest players in our industry with strong cash flow to match, we can pursue synergistic acquisitions consistent with our strategy and portfolio priorities to complement our organic growth initiatives. By making strategic acquisitions in our core and close-in adjacencies, we can add some new capabilities, strengthen our client base and ultimately accelerate our financial performance. We will approach acquisitions proactively and pursue companies with proven track records and significant synergy value in order to accelerate profitable growth; strengthen our portfolio of services and end markets; and ultimately, realize our strategic vision. The acquisition of Able Services was a natural move in our M&A strategy, checked a lot of boxes. Able service lines fit perfectly with our vision of expanding our core Janitorial and Engineering services portfolio in key markets, with over $1 billion in top line revenue, split 60% Engineering and 40% Janitorial. As our Engineering portfolio grows, so does our sustainability and energy efficiency offerings amid growing demand for environmentally responsible solutions, a key growth trend we are focused on. Able's strong engineering capabilities will help us achieve our strategic growth objectives as we build multiservice and IFS offerings for our clients. Able is a really good example of what we will look for in future deals. Our ELEVATE growth plan anticipates acquiring up to $2 billion of revenue through M&A, including the $1 billion we acquired from Able, which gave us a great head start. Transaction multiples, which vary widely across our service lines and end markets, will impact our ultimate revenue mix. Future acquisition targets could range from engineering companies that bolster our Technical Solutions' capabilities, synergistic janitorial and facilities engineering businesses that support our goals to increase density and scale and other deals that enhance our capabilities in key end markets service lines or geographies. Shifting our portfolio to organic investments and acquisitions will drive significant value over time. But achieving our aspiration requires us to do more. We are making strategic investments in areas that drive more efficient and effective operations, and we will build forward-looking capabilities to help future-proof and accelerate our growth. Our strategic plan is anchored on 3 pillars that will elevate ABM. These pillars represent our primary focus over the coming years: our client experience, our team member experience and the powering of both with technology and data. Each pillar contains a series of strategic initiatives that guide our investments to drive shareholder return. Let me now pass it back to Rene to introduce the first pillar, elevating the client experience.

Thanks, Josh. As we discussed earlier, societal shifts are leading to changes in client demands that require healthy, safe and efficient spaces for occupants and innovation to drive a better facilities experience. This includes more transparency into how facilities are operating, analytics and insights into how they can improve operations for customized solutions that meet their specific needs and new technology that can drive efficiencies and a better overall experience. This experience starts with our sales team. Over the past few years, we built a sales culture second to none in the industry that has driven record new bookings, but we still have an opportunity to do more. We will elevate the client experience by deepening relationships with our top clients and building new client relationships by delivering industry-leading, high-value service offerings, resulting in profitable growth. We will do this by focusing on the following initiatives: build out a strategic account management function, a dedicated team that oversees our largest and most important customers; improving retention and driving growth with existing clients through cross-selling, which has averaged $175 million over the last 2 years; improve our pricing and deal desk capabilities by creating new structured proposal content and guidelines that enable faster responses and higher win rates, enabling ABM to grow its client base; create new client-centric multiservice solutions and bundles that focus on high priority client needs and add value to core services while differentiating ABM from the competition; build hyper sales targeting capabilities that focus marketing capital and sales resources on the highest priority accounts, geographies and service lines; enhance and standardize our client retention strategy by creating a center of excellence that enables a consistent client experience and leads to improved retention. Now to introduce the second pillar of our strategic vision is Raul Valentin, our Chief Human Resources Officer. Raul has more than 30 years of human resources and management experience, leading the workforce management strategy for Fortune 500 organizations like Comcast and FritoLay, which have similar large distributed workforces. Raul will walk you through how we will elevate the team member experience.

Thanks, Rene. As noted earlier, future work trends are redefining what employees expect from their employers, and that certainly applies to our team members at ABM. They want to connect and collaborate with each other, both in person and across digital platforms. They care about the purpose of the company and how we live our values each day. They prefer flexibility in their work arrangements and balance for their busy lives. And they want training to grow their skills and experiences with real opportunities for advancement at every stage of their career. We will elevate the team member experience by investing in additional tools, hybrid learning and development approaches and reimagining the workforce experience to ensure we are not only attracting and retaining best talent, but creating environment where it is possible for everyone to grow, succeed and contribute. We rely on a distributed workforce of 100,000 frontline team members to deliver consistent quality service to our clients. Today, we have a wide-ranging set of tools and processes to manage our workforce. That variability makes it difficult to support how each team member can be most productive across the organization. We will transform how we work together, adopting industry-leading smart processes and tools by investing in a new workforce platform with modern timekeeping, scheduling, forecasting modules providing a simple user interface that our teams can manage and access via desktop, tablet or mobile. Ultimately, our goal is to create a digital connection with our workforce to enable just-in-time and on-demand training and development, providing them with insights to get their jobs done more productively, which will deliver better client satisfaction. We expect these investments to produce significant benefits due to increased labor productivity and will also provide us with better controls to help us comply with the ever-changing regulatory environment…

Thank you, Raul. Elevating the client and team member experiences requires us to create a digital connection that links the buildings we service to our teams and our clients. This connection will be enabled with technology and real-time data to promote visibility into facility operations and insights to drive meaningful action. This will result in increased productivity and improvements in client satisfaction and retention. Leading-edge technologies such as AI, machine learning and advanced data and analytics are radically changing the way we do business and deliver value to our clients and team members. To effectively capture the opportunities in front of us and stay at the leading edge, we must embrace these trends and develop a digital platform consistent with our market leadership position. We will elevate our use of technology and data by investing in our systems, tools, business processes and operating models to enable the following outcomes. We will engage our clients and team members in new ways to further differentiate us in the industry. This includes launching a new team member app that will serve as a one-stop shop to manage their schedules and shifts, access new training and development content and communicate with their managers and clients. By developing and deploying client-facing technology and data platforms, we can drive actionable insights that improve service delivery and our ultimate value to the client, a great example being the smart parking solution you heard about earlier in the presentation. We will expand our use of data by building an advanced data and analytics capability that will develop data products for high-value use cases, like some of the ones you heard mentioned already: team member retention, hyper targeting for sales and recruiting, among others. This will establish data and analytics as a strategic asset for ABM. We will modernize the digital ecosystem to support core activities and enable high-value business outcomes. Investments in this area will include upgrades to enterprise software like our ERP and payroll systems, along with infrastructure and cybersecurity builds to support our new capabilities. Technology, data and process will power our ability to provide best-in-class client and team member experiences. We will undergo a fundamental transformation with careful pace and cadence. And now to talk through our 2022 guidance and forward outlook is Earl Ellis, ABM's Chief Financial Officer.

Thank you, Melanie, and good morning, everyone. I am so pleased to have the opportunity to share with you our fiscal 2022 guidance and the details of our strategic investments that will transform ABM over the years to come. These investments will accelerate our organic growth, expand our profitability and significantly enhance, both our client and team member experiences. Over the next 4 years, we are confident these investments will drive substantial and sustainable improvements to our operational and financial performance, while improving both employee and client retention. Now before I dive into the details of our fiscal '22 guidance and longer-term outlook, I think it's important to first ground us in what's transpired over the past 1.5 years. Since the third quarter of fiscal 2020, we have experienced significant tailwinds from the dramatic impacts of COVID-19. The substantial increase in demand for disinfecting services, combined with our team's continued strong operational execution and drive for labor efficiencies, contributed to record adjusted EBITDA margins exceeding 7% in fiscal 2021. This represents a more than 200 basis point improvement versus pre-COVID adjusted EBITDA margins in fiscal 2019. Much of this improvement reflects COVID-related benefits from increased work orders, EnhancedClean and labor efficiencies. While we anticipate an easing of these tailwinds as we emerge from the pandemic, we are confident that we can retain approximately 50 to 70 basis points of uplift over the long term, as we expect to maintain a portion of both the disinfection-related revenue and profitability, along with a higher baseline level of labor efficiency. So turning to fiscal 2022 guidance. As we build upon the improved positioning gained over the past 18 months, we are guiding to an adjusted EBITDA margin within a range of 6.2% to 6.6%. This represents a meaningful improvement over our baseline pre-pandemic…

Thanks, Earl. We couldn't be more excited about our future. Our industry-leading position will be rooted in innovation and technology and enable us to drive significant long-term value for our shareholders. By implementing our new strategic plan, we can ensure growth based on our commitment to transform from a position of strength, leverage our understanding of market trends, optimize the portfolio of services and end markets, innovate in technology and data to modernize service delivery and drive enhanced profitable growth. Our goal is to be a roughly $9 billion business, sustainable adjusted EBITDA margins by the end of 2025. To achieve this and build the capabilities to expand our position in the market, we expect to make investments in areas of the business that Earl just spoke about. These investments will drive improvement across several key metrics. From a growth perspective, our investments will drive organic growth rates almost 50% higher than approaching 4% annually. When factoring in our M&A strategy, we are targeting an overall compounded annual growth rate of over 10%. The focus on the client experience through investments in customer-facing technology and innovation and a new retention strategy aim to improve our client retention rates to between 92% and 94%. We believe these efforts, along with our strategic account management program, could double cross-selling performance by the end of 2025. Our people initiatives you just heard about will yield lower cost per hire and reduce team member turnover, which translates to operating margin improvement. Our workforce management initiative has one of the largest paybacks in our ELEVATE program, resulting in labor productivity, which will show up in higher operating profit at the industry group level. And the impact of the digital transformation will be felt across the entire firm. As you saw, technology and data are key components of our growth strategy, people strategy and how we execute on workforce management. All the improvements that we'll experience throughout ELEVATE will be supported in some way by the investments we're making in our digital transformation. Lastly, we'll continue to lean on the protocols that we put in place during the onset of the pandemic. COVID is here to stay in one form or another, and the emergence of new variants could be the new normal. At ABM, we are prepared to support our clients' ability to stay open, stay safe and be productive. Before we start our Q&A session, we want to share a few housekeeping items. So hang in there, and we'll kick things off shortly. Thank you.

Welcome back. We will now begin the Q&A portion of our Investor Day. This is Paul Goldberg again, and I will serve as moderator. And with that, our first question of the day comes from Tim Mulrooney of William Blair.

Can you guys hear me okay?

Perfect, Tim.

All right. Really appreciate all the color that you guys gave today. It was very helpful. I was wondering if you could dive in a little bit more on your EnhancedClean services. It wasn't discussed a lot today, but what's built in your guidance basically for 2022 relative to how much revenue you've made in 2020 and 2021? I know it's coming down but, at the same time, more and more contracts, I think, are integrating this. I would love to hear your thoughts on that.

Yes, sure. So look, it still remains vital for us, Tim. And it will be moderating and coming down. And we've signaled that probably for well over a year as things return to normal. But we have said that we're going to be retaining 50 to 70 basis points of COVID benefit in our numbers in 2022. So it's still there. It's just not going to be at the crazy record levels that we saw in 2020 and '21, but it's still baked into our numbers.

Okay. That's helpful. That's helpful, thanks Scott and I don't know who this should be directed to, but this is for anyone, but would love to hear a little bit more detail about your plans to improve customer retention over the next several years. I thought it was interesting that you're talking about building back to those rates of 92% to 94%. That really caught my ear, and I would love to hear more about that.

Sure. I'm going to pass that over to Rene. But I will tell you, it's a major element in our ELEVATE program. And I think we're going to -- well, I'll let Rene handle it. He's best to answer that.

Well, I mean, we have certainly been doing well, I would say, overall, if you look at the industry average. But we definitely want to improve dramatically here, and strategic account management is the way to go for us. And we've been working on this for roughly the last 12 months, very, very detailed, very focused from the standpoint of looking at our clients, not only from the standpoint of individual IG related, but also looking at how we can basically cross-sell into these clients in a bigger way than we're doing today. And we've really built a great team in the last year that really works together as a tremendous unit. And therefore, for us, it's all about focus, right? It's all about looking at focus as a keyword. Everybody knows it at ABM. So that's the key for us. So clearly, we're improving the program in a big way.

Yes. We -- for us, it's so important to have a team approach. And what we're doing around the strategic account management stand up, to Ray's point, it's going to be a game changer for us because all going to be about finding solutions and remaining stickier.

Scott, if I could ask -- if I could add one thing.

Sure.

Part of the ELEVATE program is focusing on -- specifically focusing on initiatives that drive client retention to the question. Client-facing technology is a great example of that. You saw that in the video and some of the remarks that were made. That is very deliberate bringing -- from clients have been asking for that, as Rene will -- and the operators will share for years. And I think now we're finally delivering on it, and it's going to be a real game changer, providing a stickier solution that we have as we provide the client base with the data that they need.

That's a great point, Josh. Great.

Thank you, Tim. Our next question today comes from Andy Wittmann of R.W. Baird.

Great. Can you guys hear me okay?

Yes.

Yes.

Okay. Great. Just wanted to make sure. We've had some technical difficulties this morning. I just wanted to dig into the margin that you guys are forecasting here. I heard it 2 different ways on the conference call. I heard that you're targeting a 7% margin in the out year at the end of the time planning period here. But I also heard that you're going to plan on picking up. I think you said 50 -- or keeping 50 to 70 basis points of the margin improvement that you saw during COVID. So I guess I just wanted to reconcile what the 50 to 70 basis points is based off of. I think as I think back pre-COVID, you guys were kind of guiding adjusted EBITDA margins in the low 5s, which would give me something in the high 5s or maybe 6% versus the 7%. So maybe Earl or Scott, maybe that one is for you, but could you just clarify kind of the discrepancy there and maybe some of the cadence that you see that unfold?

Sure. And I wouldn't say it's really necessarily a discrepancy. What I would say is, I think, you outlined it right. Pre-COVID, we're at 5.2%. So you tack on to that 50 to 70 basis points just from COVID, and then you land somewhere under 6% as kind of the new normal, and then you take all the investments and ELEVATE and everything we're doing, and you add another 100-plus basis points, and that gets you to 7% over the ELEVATE period. Does that make sense?

Okay. Yes it totally makes sense. That's clear. And then maybe I just -- so the revenue CAGR here is 10% mid-single-digit organic. You get about the same amount from M&A. I guess you've already kind of landed half of that $2 billion with Able or a little bit more than half. So you have to find another $1 billion of revenue to hit these targets. But I guess with these margin goals that you have outlined, and maybe I missed it, but what's the EPS CAGR attached to that revenue plan?

Earl, do you want to try and take that on?

Sure. Yes. So if you look at what we're going to be driving over the next 5 years, and if you look at what ELEVATE is driving for us, it's about $110 million to $130 million of EBITDA. So we're really going from EPS, starting with this year at $3.55. Over the next 4 years, 5 years, we're looking at probably roughly, I would say, approximately a 40%-ish increase over that period of time.

Got it. Okay. If you'll, for me, one more. I'll just clean up with this final question.

Sure.

Scott, over the years, we've heard you talk about investments in technology. Certainly, I think we've heard about different payroll timekeeping systems and all these things. They all seem to have a new iteration with the ELEVATE plan. So I don't know if there's a concrete way to answer this or even to ask it, but can you talk about maybe summarize what you've done so far? Because some of these initiatives have had investments already. I'm trying to get a sense of how much different than the next wave of investments are, if that makes sense?

Yes. No. Thanks for that, Andy. What I'll do is why don't I let Josh kick that off, and I'm sure he'll have -- Melanie have part of that answer as well. But Josh, do you want to take that?

Yes, I'm happy to, Scott. So if you think about some of the investments in the past, and that predated us a bit -- a couple of us a bit, that was focused mainly on getting the ERP and some of the core financial systems up and running. Then COVID hit, and we really paused a lot of that. So the investment now is going to expand on that and continue to do some of those fundamentals. And I think the biggest thing is it's expanding to all of those outer systems and modernizing workforce management, modernizing the client base in technology, really trying to make sure that we're at the leading edge, and we are really leading the industry in bringing technology to our teams and to our clients. So that's the fundamental difference. We kind of stopped after a short start, and now we're expanding it. I don't know, Melanie, if there's anything else that you want to add?

Sure. I mean, like you said, staying on the leading edge is extremely important. And as you know, technology continues to change. So we continue to move to more cloud computing platform that allows us to add the updates and upgrades and stay ahead of technology. And I think that's extremely important to continue.

Thank you, Andy. Our next question today comes from Tate Sullivan of Maxim.

First, on EV charging, if I can start there. You mentioned some details with your parking customers is what you can gain in terms of electric vehicle charging solutions starting mostly with parking and then moving to other technical solutions customers? Or is it broad-based across your customers right now?

Yes. I mean I'll let Rene give you a little background on that. But I can tell you, we are super excited about EV charging. And it's not just the EV charging stations, it's infrastructure as well. This year, we did somewhere around $50 million in revenue. We can see that doubling next year, and then who knows from there. And we've seen some catalysts like Rene with the Infrastructure Bill as well, right? It's getting our folks excited, right?

Yes. I mean, in answer to your question specifically, I mean, we are seeing really the electrical vehicle service lines really introduced within the ATS side primarily, but we're starting to really shift into the aviation space. We mentioned earlier that the project that we have at LAWA, LAX. And that's a great example of how we're able to cross-sell between several groups I alluded to earlier. So we're really seeing great cooperation between ATS and aviation specifically. So we're looking at that as kind of the basis and the foundation to be able to look at how we can broaden that out to the other IGs as well. We see great opportunity within B&I specifically relative to EV charging as well. So that's kind of the game plan.

And would you -- or can you quantify now or willing to? I know it's growing from a probably small base, but is it still less than 1% of earnings? Is it 5%? Or I mean, what kind of growth relative to are you willing to give any context around the size?

Yes, the way I would answer that is it's small now, it's emerging, but huge, huge potential. I think if memory recalls, the Infrastructure Bill has $7.5 billion targeted to EV charging in many forms. And our pipeline is as big as it's ever been.

And a separate question. With where you've come in the last 2 years, and it sounds doing more work with Amazon, Google, FedEx, UPS and now following Able acquisition, do you have larger customer concentration? Do you have less? Is customer concentration a good thing with those types of companies? Or how do you look at it strategically, Scott?

Yes. So look, I think it's important to have customer concentration because it's focused, and this is something that Rene always talks about. The more we focus, the better we do, and we can build teams around those customers. We've had accelerated growth with some of the big names that we've mentioned because we're able to invest in those relationships and build solutions. So we'll continue to do that. But I would also say we're going to be building business development teams in our new M&D segment to broaden the horizon and grow because there are so many e-commerce and logistic companies that are emerging now, and we want to capture them in early stage. So it's a combination of both.

And last from me for before turning out. Scott, you mentioned with the fiscal year '25, I think it was related to fiscal year '25 at CAGR. What was that referring to specifically?

Yes, I think it broke up a little bit, but I think you said that you're referring to the CAGR of 10% on growth?

Yes.

Yes. So it's a combination of organic, which we said was mid-single digit, and also acquisitions. And we're on our way, right, with Able, $1 billion right in our core, highly synergistic that's going to open up geographies for us. The ability to cross-sell is going to be phenomenal. And we've been talking about IFS, which is integrated facility solutions. And what really that means is controlling the facility spend for clients. Able's going to be a great enabler for that. So for us, it just shows how important it is to have M&A growth and to build and create scale. So I think it's a combination of that mid-single-digit organic growth, and then acquisitions will get us to that 10% CAGR.

Thanks, Tate. Your next question today comes from Sean Eastman of KeyBanc.

Just going back to Andy's question on the margins. I just wanted to make sure I understand the cadence correctly. So we're coming down 100 basis points in fiscal '22. That's sort of post-COVID normalization. And then we're marching up 20 basis points annually from there. In other words, there's going to be no step down in margins in '23. Is that correct?

Yes. That's absolutely correct. So if you think about where we're starting the year -- this year, FY '21, it's the 7.3% margins. And then going to next year, if you look at our range of 6.2% to 6.6%, the net ratio being 6.4%, we're down about 90 basis points. The majority of that decline is really driven by the retrenching, if you will, of the COVID benefits. So if you think about it, we now actually have a new ground floor for EBITDA margins, which is in the 6-ish rate, which now allows us to elevate. So to answer your question directly, we do not see a step down going into FY '23. But yet, a 20 basis point increase year-over-year starting in FY '23.

Yes. And what I would add to that, what I think is so exciting, if you think pre-COVID when we were in that 5.2% margin range, we set out an aspirational range of 5.5% to 6%, which everyone was pretty excited about. And if I give context back to 3.8% in 2015 was astronomical in and of itself. And now to say that the floor is above what our aspirational target was back in 2018, 2019, it gets this team pretty energized to think that we're on a path towards 7%, and with the possibility of going beyond that. And the other thing I would say, Sean, is that if you think back to 2020 Vision, and we were at 3.8% and we outlined 100 basis points in growth, I think there were some that were skeptical because we had 15 years of stagnation on margin. We ended up at 140 basis points, not 100. So we're going in to ELEVATE and outlining approximately 100 basis points, I think you're going to have to give us a couple of years. We're going to see how things unfold. But there's no reason to believe at this point that 7% is an ultimate cap for the firm. It's just -- it's what we have really strong line of sight to right now.

Okay. That's great context. It seems like the market is telling you that maybe the target doesn't look achievable, and it seems like maybe the biggest concern from the investment community is the labor constraints and whether you see some additional margin drag as it becomes difficult to restaff. I think we saw that in the Education segment this quarter. So maybe we can just get a little more color on some of the changes around the flexible labor model, just how confident you are in those targets to the extent the labor market doesn't really loosen up that much over the next year or 2?

Sure. And I'll give you my explanation, and then I'm going to pass to Raul who's going to tell you about what we're doing. But I think, let's get some context, right? 50% of our labor spend is with unionized labor, where they have clear outline collective bargaining agreements. So we know what those labor rate increases are. And you're starting from a baseline where wages are generally accelerated compared to market and they're getting benefits. So we don't see a lot of turnover, and it's not as hard for us to get unionized labor. So that's half of it, right? And then the other half is the nonunion labor, which is definitely more challenging. But on the other hand, this is something we're really good at, right? And if you think back to 2018 and 2019, I mean, I don't think a day went by where the headline wasn't talking about labor challenge, historic labor shortages. So we've been through this before, but we're not resting on our laurels, right? Part of ELEVATE and part of the investments we're making is to be able to do rapid recruiting. And Raul, why don't you give them some insight on the things that you're working on?

Sure. Thank you, Scott. Certainly, it's been a challenging labor market. And as Scott said, we've really been leaning into what we call a rapid recruiting program, which has a couple of key tenets. So one is kind of an outreach into the local communities, churches, community centers and other direct reaches to get candidates. The other is a very aggressive campaign and approach for driving social media and really reaching to different pockets in our communities and talent pools that we can draw from. Then in other situations, we're looking in key markets where we might establish brick-and-mortar hiring centers, right, in key urban centers. Our distributed workforce means there isn't a silver bullet, but I feel really good about the work the team is doing. We've got a dedicated talent acquisition team that's really driving that forward. And at the same time, we're looking at retention initiatives, making sure our wages are competitive, as Scott said, in other things like driving training, development and career pathing for our team members to drive that retention so that both sides of that equation is being addressed.

Yes. And Rene, I mean, I think you need to give your take on this, right, especially on the customer side, right?

Yes. I mean we've become very, very disciplined and regimented around escalations. And as Scott mentioned, half the business is, I wouldn't say automatic, but it definitely is, on the union side, an easier process of passing on escalations to clients. It's on the nonunion side certainly that we see improvement year-over-year, and we're really focused on looking at each client on its own. We obviously have to consider the impact this has relative to retention as well. So there's always these trade-offs that we go about looking at each individual client. But we have been quite good at getting escalations to clients. And really -- for us, it's something that we're very bold about. It's something that we have to be very bold about, and we are, relative to escalations as such.

Yes. And what I would add is Rene has been very humble about this. He's a taskmaster with our team, right? It's all again about his level of focus and driving those customer increases. And we just have this feeling like we're adding value. And when you're adding value and you're doing a good job, you should not be afraid to ask for an increase, especially in this labor market. And Rene has done more than a phenomenal job of capturing those costs. So really enthusiastic about the results we'll get in '22.

Thank you. Our next call today comes from David Silver from CL King.

Am I coming through okay?

Yes. Fine.

Yes.

Very good. First of all, I'll just make a comment. I really benefited from the contributions made by the other members of the team that we don't normally hear from. So I thought that was an excellent addition to this presentation.

Thank you.

I'm going to start maybe with Scott's comment right near the end where you said "COVID is here to stay in one form or another." And I think in a lot of the assumptions underlying the presentations I heard today, there is the expectation that the quantity of the high-margin tag work or outside the core contract, the services were going -- moderate as we enter the post-pandemic period. And I'm just wondering, but my assumption is that the standard, let's say, cleaning contract is going to have to change as well. And I think Scott, the term you used in the past was embedded, right?

Right.

So underlying your thinking about how your book of business is going to evolve over the next few years, what are your expectations for that standard cleaning contract or standard technical services contract? How much of the enhanced sanitation and disinfection work that you're now doing outside the standard contract is going to become embedded in maybe a new or evolving contract?

That's great. So look, I think the way you got to think about this, David, is like cleaner, safer, healthier buildings are here to stay. We see survey upon survey of employees who are talking about the fact that the only way they're willing to come back to work is to have proof by their companies or their landlords that they're going to be in safe, healthy spaces. And look, we've put a stake in the ground, and it's what you've always asked for. How much of the COVID benefit do you believe you're going to retain? And we said 50 to 70 basis points. So we do think a lot of the work orders that we're getting will be embedded into the contracts. But that doesn't mean that there's going to be significant margin deterioration. Because you have to remember, to do the disinfecting, to do the cleaning that we have to do, to combat COVID, more expensive equipment, more expensive PPE, more training, higher value. It gets baked in, but it's going to get baked in at a higher margin rate. So we still believe we're going to keep 50 to 70 basis points. And it will be the new normal. Think about with Omicron, that's just 3 or 4 weeks old in the narrative, how everything is changing already. So there's just no question that safety is going to be paramount.

Okay. And my next question, and I apologize, I'll try to not be so wordy, but I'll probably fail. It has to do with the IT development. So in your 2020 program, Scott, there was some spending there. But I would say it was more catch-up spending. In other words, improving your back office to where industry standards were. Whereas when I hear a number of the speakers today, the digital transformation is much more moving you to the leading edge and becoming a tool to develop revenue streams. So a couple of things. But basically, this is a new kind of level of IT spend and a new target goal for your IT program. And I'm painting with an unfair brush. Over the last 20 years, I've had a number of companies who put in SAP type systems, and they always tend to take too much time, you miss timelines, cost too much, and it usually causes the CEO and the CFOs there to fall out. So on that

Too late. Too late, I was going to say.

But more in all seriousness, how confident or what -- as opposed to what you're trying to do or accomplish with the IT spend, what are the controls? What are the stage-gate evaluations that are going to keep that core strategic IT spend and productivity on target?

Sure. Yes, that's a good question. So first, I would say it starts with having unbelievable leaders leading that program. Ones that have done it already have the playbook. And I'm going to pass it off to Josh and Melanie. Maybe, Josh, you start. But like I'm going to pass it off to someone who in his career has been involved with many of these. And he's going to pass it off to someone who's been involved in many, many of these as well. And you may want to talk about the stage-gate process a little bit and what that really means because that sounds like maybe jargon. So Josh, why don't you start off?

Thanks, Scott. Yes, so the governance of our IT implementation and the ELEVATE program holistically really has 3 components to it. The first one is accountability. So every initiative, every piece of the IT implementation, every element has a single management team owner, who is ultimately responsible for the delivery. So that, number one, puts accountability in a singular place. Two, and what Scott was referencing is a stage-gate process. No matter what the initiative is, what the IT piece is, it has to go through a stage-gate process. And I'll quickly talk about it a bit, and then I'll pass it to Melanie. The first one is a business case. There has to be a clear business case for any element of the IT implementation, including an ROI, including the metrics that you want to track. That's number one. If you pass that, then you get the design. "Okay. Well, what's the design? And what does that kind of look like? And are we comfortable that, that has a potential to create the value that we set in the business case?" And then third is, let's test it. Let's actually go ahead and test it and see whether or not it's working, prove some value and only then do we scale it. But at each of those 4 stages, it has to pass a governance process, where if it doesn't pass, it's out or we stop and pause and fix it and you get funding along the way. So we feel really, really good about that, that we have it under control. And again, it's not like we're writing a blank check from the beginning and handing it off to someone and see them in a year. It's very incremental and it's very controlled in that manner. So I may have stolen Melanie's thunder, but I'll pass it there.

Great. Thank you, Josh. So think about it. We have a -- we're going with a phased implementation plan. And the point of that is so that we can mitigate the risk that you're alluding to. And with that phased implementation plan comes a very detailed road map. And what we're doing is we're going to have a robust internal tracking system and program management capability that keeps that accountability. It also tracks our success against those milestones that we have planned, so it keeps us on target.

Thank you, David. And our next question comes from Marc Riddick of Sidoti.

So first of all, I want to thank everybody for their part of the presentation. It's certainly very helpful, and it's good to hear from everyone that we don't always hear from, so it's certainly beneficial. I wanted to talk a little bit about maybe continuing on that right a bit. The digital transformation process, I was wondering if you could talk a little bit about sort of how you develop that plan. Is that something that you did exclusively internally? Was that something you've been working with outside partners for? And how should we think about how that plan gets maintained throughout? And then I have a couple of a little, simpler follow-ups.

Yes. So why don't I get started on that, then I'll pass it back again to my right. But I would say a lot of our plan -- and Josh alluded to it a little earlier about how COVID happened and we paused. What do we all see in COVID, right? We saw that we need to figure out how to work in a remote environment, how to communicate in a remote environment. So, so much of what we're doing with the digitization is about communicating with customers digitally, the client-facing technology that we spoke about, how do you get your clients' information in a remote format? How do you work -- and Josh definitely should touch on workforce management, how do you work with your team members in a remote environment. And so it started with the societal trends that Josh talked about in his prepared remarks. But with that, let me kick it over to Josh.

Yes. Thanks, Scott. And I think it's important just to answer the question very directly, how did it come about? How did digitization come about? The whole ELEVATE program came about with 4 inputs, and it was really from listening and analyzing the market trends. Digitization and mobility is one that was screaming out of us, what the client needs are, now we're going to satisfy those, the team member needs and then the economics across it all. So what that generated then was this focus on client experience, team member experience and then powering both of those with data and analytics. That's where the digitization comes in. A core tenet of ELEVATE from that third pillar is to make digitization a competitive advantage. That's number one. Number two is it's happening today. You see it today. It's just not happening on scale. We have the opportunity to make it happen on scale because of our footprint. We have the largest footprint in buildings across the U.S., and we have the opportunity to do this at scale. Number three is there's an infinite amount of data that we can collect from buildings. It come in from the equipment. It comes in from the people that are in the buildings, from the team members, from the clients, et cetera. There's an infinite amount of data that can be done. And then to Scott's point, it's where do you use that data. So how do you use that data for workforce management and particularly to make sure that our people are operating most efficiently and effectively with the information that's being provided to make sure our clients have what they need to manage the building. So we're very specifically focused on creating value, whether it be in the P&L or in more leading metrics like client retention that's going to start to generate some more of the growth. But if that's where the digitization comes in, and we really feel like this is the core tenant to support the team member experience and the client experience and create that competitive advantage.

One of the things that I really like to talk about that excites me, and I think would resonate with you, is understanding the fact that our frontline workers will be mobilely enabled. And so here's the picture I want to pay for you. Our workers are mobilely enabled. We have sensors in a building, and the cleaner is walking by a conference room and sees on their mobile device, that conference room wasn't used today. You can pass by, right? Whereas normally, they wouldn't know that, and they'd spend 10 minutes cleaning the conference room. So what that does is, first, it makes us more efficient and ultimately save on labor cost because they'll be able to do more. And two, this enriches our clients with data because all of a sudden, they start learning about their facilities and start asking a question, "Why is that conference room not being used as much? Oh, it's a 10-person conference room. It seems like the 4-person conference rooms are being used more." So that's -- this is a simple way for you to understand about how we can provide such value for our clients by putting systems like this some place and think about how sticky we get with our clients if we're providing this rich data. It's going to be brilliant. We're very excited about it.

Great. And so there's a bunch of different directions I could go in, but I'll be a little more specific on this part. I was -- I think as part of the prepared remarks, there was a commentary around building development teams, business development team within the manufacturing distribution area. And I was wondering if there -- if you could give a little commentary on that as well as if there are other areas that are targeted or prioritized for hiring growth and maybe above company .

Sure. And when it comes to manufacturing and distribution, I'll pass it off to Rene. But one of the elements of ELEVATE is hypertargeting and how we're going to focus on where to grow and how to grow and adding business development folks, but maybe you want to talk a little bit about our M&D because I know you're super excited about that industry group.

Yes. I mean, as I alluded to earlier today, I mean, there's 1 billion square feet of space coming on to meet the needs of the clients within the retail distribution side. So there's a huge market coming, and we wanted to kind of take advantage of refocusing our attention to retail distribution. And that was really the premise for changing from a T&M perspective to M&D with the anchor around retail distribution. And with the high-growth clients we already have, Amazon, UPS, Walmart, et cetera, there's tremendous opportunity still to be had within that space. And really, for us, you hear the word all the time. It's about focus. We know focus creates results here. So it's a key one for us to really tap into. And what we also did was we just -- we're building the M&D business around the big clients. We're looking at only big clients to be serviced through that, and we're using the branch network system within B&I to capture the small to medium size. And there's efficiencies there as well. So the M&D story for us, as we grow the business through the end of ELEVATE, this will be -- apart from ATS, this -- we expect this to be a high-growth IG, probably the highest aside from ATS.

Great. Thank you, Marc. And today's last question comes via the platform and it was typed in. And the question is, has anything changed with regard to ABM's capital allocation strategy and the way you think about dividends and share repurchases?

Yes, I'll take that one, and thanks for the question. So the good news is our capital allocation strategy remains the same and is really hinged on investing in organic growth. And if you look at ELEVATE, that's a great example of us being able to allocate capital in a way that drives not only top line growth, but also bottom line profitability. At the same time, we've talked about ELEVATE also including M&A opportunities. So we will continue to look at opportunities to acquire value assets that will contribute to our long-term growth opportunities and, at the same time, embellish our profitability. When we look at the opportunities to allocate capital back to our investors, we just announced a 2.6% increase in our dividend. And so we will continue to fund our long-standing dividend program. And as you know, we currently have Board authorization for about $145 million of share buybacks. Share buybacks has been something we've done in the past and will continue to be part of our playbook. So that's a tool that we will continue to look at on a month-to-month basis. So the good news is that with our strong cash flow and relatively low leverage. It gives us a lot of flexibility for future opportunities.

Great. Well, thank you all for joining us today. That concludes our Q&A session, and I will turn it back to Scott for final comments.

Yes. Thank you so much for spending the morning with us. What can I say? We're just so excited. And hopefully, you can tell how really excited we are about ELEVATE and the future of ABM and just can't wait to share the results with you as they unfold. So more importantly than anything else, have a terrific, terrific holiday season, and we'll be back at you in Q1. Take care, and thank you, everybody.

See you.