ABM INDUSTRIES INC /DE/ (ABM)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to facilitate an understanding of the results of operations and financial condition of ABM. This MD&A is provided as a supplement to, and should be read in conjunction with, our Financial Statements and our Annual Report on Form 10-K for the year ended October 31, 2025, which has been filed with the SEC. This MD&A contains forward-looking statements about our business, operations, and industry that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, and intentions. Our future results and financial condition may be materially different from those we currently anticipate. See “Forward-Looking Statements” for more information.

Throughout the MD&A, amounts and percentages may not recalculate due to rounding. Unless otherwise indicated, all information in the MD&A and references to years are based on our fiscal years, which end on October 31.

Business Overview

ABM is a leading provider of integrated facility solutions, customized by industry, with a mission to make a difference, every person, every day.

In 2021, we launched our multiyear ELEVATE transformation and systems modernization plan to strengthen our industry leadership, enhance our core service capabilities, and modernize our systems, processes, and tools — with a goal of advancing data integrity, technology enablement, and operational consistency to support long-term growth and value creation.

As this work progresses, ABM is entering a phase of turning modernization efforts into measurable performance improvements across our enterprise.

Looking ahead, ABM will continue to advance this transformation and modernization program where appropriate while optimizing systems and processes company-wide that we expect to drive performance, strengthen client trust, and create long-term value for shareholders.

Restructuring Program

In the fourth quarter of 2025, we launched a Restructuring Program to further streamline our operations and improve the efficiency of our support functions. This initiative is intended to enhance overall organizational effectiveness and ensure alignment between our cost structure and strategic growth objectives. Once fully implemented in 2026, this program is expected to deliver approximately $35.0 million of annualized cost savings. We recognized $20.1 million of cumulative restructuring charges under this program through the second quarter of 2026. The range of the remaining costs to be incurred related to the Restructuring Program cannot be reasonably estimated at this time.

We will continue to review our overhead and cost structure for efficiency opportunities under this program.

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Segment Reporting

Our current reportable segments consist of B&I, M&D, Aviation, Education, and Technical Solutions, as further described below.

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Key Financial Highlights

•Revenues increased by $178.3 million, or 8.4%, to $2,290.0 million during the three months ended April 30, 2026, as compared to the prior year period. Revenue growth was comprised of organic growth of 6.1% and acquisition growth of 2.3%. The organic revenue growth was due to net new business and expansion of business with existing customers, primarily in Aviation, and higher battery energy storage system, and related energy infrastructure projects, as well as microgrid projects within Technical Solutions. Acquisition growth was driven by a $48.5 million revenue increase from the WGNSTAR and LMC acquisitions.

•We had an increase in operating profit of $4.6 million, to $86.9 million, during the three months ended April 30, 2026, as compared to the prior year period. The increase was primarily attributed to increase in revenues and decrease in certain discrete transformational costs under our ELEVATE strategy.

The increase was partially offset by:

◦restructuring charges incurred during the second quarter of 2026 under our Restructuring Program.

•Our effective tax rates for the three months ended April 30, 2026, and April 30, 2025, were 27.9% and 29.4%, respectively, and were not impacted by any significant discrete items. Our effective tax rates for the six months ended April 30, 2026 and April 30, 2025 were 26.8% and 25.6%, respectively. Our effective tax rate for the six months ended April 30, 2026, was reduced by discrete items, primarily share based compensation. Our effective tax rate for the six months ended April 30, 2025, was reduced by discrete items, primarily return to provision adjustments related to our non-U.S. operations.

•Net cash provided by operating activities was $128.2 million for the six months ended April 30, 2026, as compared to cash used in operating activities of $73.9 million for the six months ended April 30, 2025. The $202.1 million improvement was primarily driven by favorable working capital changes, including improved cash collections and timing of payments.

•Dividends of $34.2 million were paid to shareholders, and dividends totaling $0.580 per common share were declared during the six months ended April 30, 2026. Additionally, we repurchased 0.1 million shares for $3.0 million, excluding excise taxes, during the three months ended April 30, 2026.

•At April 30, 2026, total outstanding borrowings under our Amended Credit Facility were $1.9 billion. At April 30, 2026, we had up to $518.9 million of borrowing capacity.

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Results of Operations

Three Months Ended April 30, 2026, Compared with the Three Months Ended April 30, 2025

Consolidated

*Not meaningful

Revenues

Revenues increased by $178.3 million, or 8.4%, to $2,290.0 million during the three months ended April 30, 2026, as compared to the prior year period. Revenue growth was comprised of organic growth of 6.1% and acquisition growth of 2.3%. The organic revenue growth was due to net new business and expansion of business with existing customers, primarily in Aviation, and higher battery energy storage system, and related energy infrastructure projects, as well as microgrid projects within Technical Solutions. Acquisition growth was driven by a $48.5 million revenue increase from the WGNSTAR and LMC acquisitions.

Operating Expenses

Operating expenses increased by $172.0 million, or 9.3%, to $2,013.0 million during the three months ended April 30, 2026, as compared to the prior year period. Gross margin decreased by 72 bps to 12.1% in the three months ended April 30, 2026, from 12.8% in the prior year period. The decrease in gross margin was primarily driven by contract and service mix in B&I,M&D, and Aviation. This was partially offset by operational efficiencies achieved through our Restructuring Program.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $4.0 million, or 2.3%, to $171.1 million during the three months ended April 30, 2026, as compared to the prior year period. The decrease in selling, general and administrative expenses was primarily attributable to:

•a $5.4 million decrease in certain discrete transformational costs under our ELEVATE strategy for developing the new ERP system, client-facing technology, workforce management tools, and data analytics; and

•a $2.6 million decrease in accruals for potential legal settlements.

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The decrease was partially offset by:

•a $2.5 million increase in compensation and related expenses primarily due to higher salaries, certain incentive plans, and headcount expansion from WGNSTAR acqui

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following MD&A is intended to facilitate an understanding of the results of operations and financial condition of ABM. This MD&A is provided as a supplement to, and should be read in conjunction with, our Financial Statements. This MD&A contains both historical and forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. We make forward-looking statements related to future expectations, estimates, and projections that are uncertain and often contain words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “outlook,” “plan,” “predict,” “should,” “target,” or other similar words or phrases. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and assumptions that are difficult to predict. Factors that might cause such differences include, but are not limited to, those discussed in Part 1. of this Form 10-K under Item 1A., “Risk Factors,” which are incorporated herein by reference. Our future results and financial condition may be materially different from those we currently anticipate. Throughout the MD&A, amounts and percentages may not recalculate due to rounding. Unless otherwise indicated, all information in the MD&A and references to years are based on our fiscal year, which ends on October 31.

Business Overview

ABM is a leading provider of integrated facility solutions, customized by industry, with a mission to make a difference, every person, every day. Our principal operations are in the United States, and in 2025 our U.S. operations generated approximately 92% of our revenues.

Strategic Growth

We remain focused on long-term, profitable growth by delivering valued service offerings to both new and existing clients within our industry groups and across our many service lines. Our revenue growth strategy is predicated on pursuing new sales and targeting a favorable retention rate among existing contracts. Cross-selling and up-selling projects and services is also an integral part of our strategy. We believe our strategic growth initiatives, coupled with our continued focus on marketing, capital, and sales resources, will increase profitability.

ELEVATE Transformation

Through our ELEVATE strategy, as described in Item 1., “Business,” we continue to focus our efforts on:

•the client experience, by serving as a trusted advisor who can provide innovative multiservice solutions and consistent service delivery;

•the team member experience, by investing in workforce management, training, developing the next generation of ABM leaders, and building on our inclusive culture; and

•our use of technology and data to power client and employee experiences with cutting-edge data and analytics, processes, and tools that we expect to fundamentally change how we operate our business.

We believe that our technology and data investments will enable: the development and deployment of client-facing technology to improve service delivery to our clients; the use of advanced data analytics for sales targeting, employee retention, and recruiting; and the upgrade of our Enterprise Resource Planning and payroll systems.

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Developments and Trends

Restructuring Program

In the fourth quarter of 2025, we launched a restructuring program to further streamline our operations and improve the efficiency of our support functions. This initiative is intended to enhance overall organizational effectiveness and ensure alignment between our cost structure and strategic growth objectives. Once fully implemented in 2026, this program is expected to deliver approximately $35.0 million of annualized cost savings. During the fourth quarter of 2025, we recorded $13.4 million in restructuring charges related to these actions and expect to record additional $2.0 - $3.0 million in 2026.

We will continue to review our overhead and cost structure for efficiency opportunities under this program.

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Key Financial Highlights

•Revenues increased by $386.5 million, or 4.6%, to $8,745.9 million during 2025, as compared to 2024. Revenue growth was comprised of organic growth of 3.8% and acquisition growth of 0.8%. The organic revenue growth was due to the net new business and expansion of business with existing customers within Aviation, B&I, M&D, and Education and higher microgrid projects within Technical Solutions. The increase in revenues was partially offset by strategic pricing decisions, including for contract rebids within B&I. Acquisition growth of $68.4 million was driven by revenue from the Quality Uptime and LMC acquisitions.

•Operating profit increased by $99.7 million to $311.7 million during 2025, as compared to 2024. The increase in operating profit was attributable to:

•respective revenue increases for all industry groups,

•operational efficiencies within Aviation and Education, and

•service mix within Technical Solutions.

The increase was partially offset by:

•strategic pricing decisions for contract rebids and proactive extensions, combined with managing the timing of contract escalations to maintain and expand certain customer accounts within B&I, and

•strategic pricing on select new wins within M&D.

•Our effective tax rate on income was 26.2% for 2025, as compared to 39.1% during 2024. Our effective tax rate for 2024 was negatively impacted by a $95.7 million non-taxable change to increase the fair value of the contingent consideration related to the RavenVolt Acquisition.

•Net cash provided by operating activities was $234.4 million during 2025. Our net cash provided by operating cash activities was higher than prior year, primarily due to the timing of certain working capital requirements.

•Dividends of $65.6 million were paid to shareholders, and dividends totaling $1.06 per common share were declared during 2025. Additionally, we repurchased 2.6 million shares for $121.3 million, excluding excise taxes, during 2025.

•At October 31, 2025, total outstanding borrowings under our Amended Credit Facility were $1,569.0 million, and we had up to $577.5 million of borrowing capacity.

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Results of Operations

Consolidated

*Not meaningful

The Year Ended October 31, 2025, Compared with the Year Ended October 31, 2024

Revenues

Revenues increased by $386.5 million, or 4.6%, to $8,745.9 million during 2025, as compared to 2024. Revenue growth was comprised of organic growth of 3.8% and acquisition growth of 0.8%. The organic revenue growth was due to the net new business and expansion of business with existing customers within Aviation, B&I, M&D, and Education and higher microgrid projects within Technical Solutions. The increase in revenues was partially offset by strategic pricing decisions on contract rebids within B&I. Acquisition growth of $68.4 million was driven by revenue from the Quality Uptime and LMC acquisitions.

Operating Expenses

Operating expenses increased by $344.9 million, or 4.7%, to $7,670.8 million during 2025, as compared to 2024. Gross margin decreased by 7 bps to 12.3% in 2025, as compared to 12.4% in 2024. The decrease in gross margin was primarily driven by strategic pricing decisions within M&D and B&I as well as the management of contract escalation timing to maintain and expand certain customer accounts within B&I. This was partially offset by operational efficiencies within Education and service mix within ATS.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $67.9 million, or 8.9%, to $697.4 million during 2025, as compared to 2024. The decrease in selling, general and administrative expenses was primarily attributable to:

•an absence of a $95.7 million adjustment to increase the fair value of the contingent consideration related to the RavenVolt Acquisition in 2024, compared to a $1.6 million adjustment to decrease the fair value in 2025.

This decrease was partially offset by:

•an $18.9 million increase in compensation and related expenses primarily due to headcount expansion from recent acquisitions; and

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•a $6.6 million increase in costs associated with systems’ go-live.

Amortization of Intangible Assets

Amortization of intangible assets decreased by $3.6 million, or 6.4%, to $52.5 million during 2025, as compared to 2024. This decrease was due to lower amortization of intangibles, primarily intangibles acquired as part of the Able and GCA acquisitions, partially offset by amortization of intangibles from the Quality Uptime and LMC acquisitions.

Interest Expense

Interest expense increased by $11.4 million, or 13.4%, to $96.4 million during 2025, as compared to 2024. This increase was primarily driven by higher borrowings from our Amended Credit Facility to fund working capital requirements due to the transition to the Company’s new ERP system for our B&I and M&D segments that temporarily delayed invoicing to certain clients within these industry groups in the first half of 2025, and payment of the $75.0 million contingent consideration liability related to the RavenVolt Acquisition.

Income Taxes

During 2025 and 2024, we had effective tax rates of 26.2% and 39.1%, respectively, resulting in an income tax provision of $57.6 million and $52.2 million, respectively. Our effective tax rate for 2025 was benefited by a $3.1 million return to provision adjustment related to our non-U.S. operations. Our effective tax rate for 2024 was negatively impacted by a $95.7 million non-taxable change to increase the fair value of the contingent consideration related to the RavenVolt Acquisition, partially offset by a $7.3 million tax benefit for return to provision adjustments related to our non-U.S. operations, and a $5.5 million benefit related to energy efficiency incentives.

Interest Rate Swaps

We had a loss of $9.3 million and $22.9 million on interest rate swaps during the years ended October 31, 2025 and October 31, 2024, respectively, primarily due to underlying changes in the fair value of our interest rate swaps. Our interest rate swaps will mature in 2026.

Foreign Currency Translation and Other

We had a foreign curren

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