ABM Industries Inc: Form 10-K for the period ended Oct 31, 2024

General

ABM Industries Incorporated, which operates through its subsidiaries (collectively referred to as “ABM,” “we,” “us,” “our,” or the “Company”), is a leading provider of integrated facility, infrastructure, and mobility solutions with a mission to make a difference, every person, every day. Our history dates back to 1909, when American Building Maintenance Company began as a window washing company in San Francisco with one employee. In 1985, we were incorporated in Delaware under the name American Building Maintenance Industries, Inc., as the successor to the business originally founded in 1909. In 1994, we changed our name to ABM Industries Incorporated. Since that time, we have grown into a multi-segment facility solutions company, primarily through strategic acquisitions and new service offerings, increasing our revenue to more than $8.0 billion.

The acquisitions of OneSource and Linc Group in the early 2000s established ABM as a leader in the commercial janitorial market and also enhanced our ability to be a full-service facility solutions provider with new service offerings, including lighting, mechanical, and electrical “technical solutions.” With demand increasing for industry-specific service providers, the acquisition of Air Serv established “Aviation” as our first industry group. In recent years, we have strategically acquired companies in the United Kingdom (“UK”) and the Republic of Ireland (“Ireland”), which expanded our janitorial and technical solutions businesses overseas.

In 2015, we began a comprehensive transformational initiative (“2020 Vision”) to drive long-term, profitable growth through an industry-based, go-to-market approach. Through this initiative, we centralized key functional areas and industry groups, strengthened our sales capabilities, and initiated investments in service delivery tools and processes to help support standard operating practices that we believe remain foundational to our long-term success.

As part of the transformation initiative, we also evaluated all of our service offerings and sold our Security and Government Services businesses, which did not align with our long-term focus on specialized industry groups.

In 2017, we acquired GCA Services Group (“GCA”), a provider of integrated facility services to educational institutions and commercial facilities, for approximately $1.3 billion, representing the largest acquisition in ABM history. The acquisition accelerated the Company’s position as a leading facility solutions provider in the education market.

In 2021, we acquired Crown Building Maintenance Co. and Crown Energy Services, Inc. (collectively, “Able”), a leading facilities services company headquartered in San Francisco, California, with the goal to provide additional scaling to the Company’s core businesses and key geographies and bolstering ABM’s janitorial and facilities services service lines. In addition, the acquisition of Able further expanded ABM’s sustainability and energy efficiency offerings amid growing demand for environmentally responsible solutions.

In 2022, we acquired RavenVolt, Inc. (“RavenVolt”), a leading nationwide provider of advanced turn-key microgrid systems utilized by diversified commercial and industrial customers, national retailers, utilities, and municipalities. A complementary extension of ABM’s Technical Solutions service offerings, the addition of RavenVolt enhanced ABM’s position as a market leader in electric vehicle (“EV”) charging infrastructure, power, and bundled energy solutions.

In 2022, we acquired Momentum Support (“Momentum”), a leading independent provider of facility services, primarily janitorial, across Ireland and Northern Ireland. The addition of Momentum provided greater access to Momentum’s blue-chip customer base as well as an opportunity to cross sell ABM services to existing U.S.- and UK-based clients who also have an operational footprint in Ireland and Northern Ireland.

In 2024, we acquired Quality Uptime Services, Inc. (“Quality Uptime”), an independent uninterrupted power supply system (“UPS”) maintenance company providing customized preventive and emergency service programs for mission-critical data centers and other facilities across the United States. With the addition of Quality Uptime, we will offer comprehensive and complementary critical infrastructure solutions for data centers and similar crucial facilities, including electrical testing, electrical switchgear maintenance, breaker testing, UPS service and maintenance, and battery and power distribution unit service and maintenance.

The above acquisitions and divestitures we’ve made since 2015 largely reflect strategies first introduced in our 2020 Vision initiative and also strategies included in our follow-on launched strategic plan called ELEVATE, which was introduced in 2021 and is described below.

As a result of these strategic initiatives and investments, we have strengthened our ability to offer janitorial, engineering, parking and eMobility, infrastructure, electrical, lighting and energy solutions, HVAC and mechanical services, landscaping and turf services, and mission critical solutions across aviation, education, manufacturing and distribution, and commercial business industries, on a standalone basis or in combination, and have positioned ourselves as a leading integrated facilities management company.

Unless otherwise indicated, all references to years are to our fiscal year, which ends on October 31.

Forward-Looking Strategic Plan

Leveraging the various accomplishments achieved through 2020 Vision, the Company embarked on the next step of its journey in 2021 with a multiyear strategic plan called ELEVATE. The ELEVATE strategy is designed to strengthen our industry leadership position through end-market repositioning and building on our core services, which we expect together will drive significant long-term value for our stakeholders.

We will continue to make significant investments over the life of the program, which are expected to total $200 - $215 million, and we will continue to implement various measures with the aim to ELEVATE:

• 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 will fundamentally change how we operate our business.

Contract Types

We generate revenues under several types of contracts, as explained below. Generally, the type of contract is determined by the nature of the services. Although many of our service agreements are cancelable on short notice, we have historically had a high rate of client retention and expect to continue maintaining long-term relationships with our clients. See Note 2, “Basis of Presentation and Significant Accounting Policies,” in the Notes to consolidated financial statements for additional information regarding the contract types that are most common in each of our service lines.

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Segment and Geographic Financial Information

Our current reportable segments consist of Business & Industry (“B&I”), Manufacturing & Distribution (“M&D”), Education, Aviation, and Technical Solutions. For segment and geographic financial information, see Note 17, “Segment and Geographic Information,” in the Notes to consolidated financial statements.

REPORTABLE SEGMENTS AND DESCRIPTIONS

B&I, our largest reportable segment, encompasses janitorial, facilities engineering, and parking services for commercial real estate properties (including corporate offices for high-tech clients), sports and entertainment venues, and traditional hospitals and non-acute healthcare facilities. B&I also provides vehicle maintenance and other services to rental car providers. We typically provide these services pursuant to monthly fixed-price, square-foot, cost-plus, and parking arrangements (i.e., management reimbursement, leased location, or allowance) that are obtained through a competitive bid process as well as pursuant to work orders.

M&D provides integrated facility services, engineering, janitorial, and other specialized services to a variety of manufacturing, distribution, and data center facilities. We typically provide these services pursuant to monthly fixed-price, square-foot, and cost-plus, that are obtained through a competitive bid process as well as pursuant to work orders. One client accounted for approximately 31% of revenues for this segment in 2024.

Education delivers janitorial, custodial, landscaping and grounds, facilities engineering, and parking services for public school districts, private schools, colleges, and universities. These services are typically provided pursuant to monthly fixed-price, square-foot, and cost-plus arrangements that are obtained through either a competitive bid process or re-bid upon renewal as well as pursuant to work orders.

Aviation supports airlines and airports with services ranging from parking and janitorial to passenger assistance, catering logistics, air cabin maintenance, and transportation. We typically provide services to clients in this segment under master services agreements. These agreements are typically re-bid upon renewal and are generally structured as monthly fixed-price, square-foot, cost-plus, parking, transaction-price, and hourly arrangements. Two clients accounted for approximately 26% of revenues for this segment in 2024.

Technical Solutions specializes in facility infrastructure, mechanical and electrical services, EV power design, installation and maintenance, microgrid systems design, installation and maintenance, including uninterrupted power supply system and power distribution units. These services can also be leveraged for cross-selling across all of our industry groups, both domestically and internationally. Contracts for this segment are generally structured as electrical contracting services for energy related products such as the installation of solar solutions, battery storage, distributed generation, and other specialized electric trade. One client accounted for approximately 22% of revenues for this segment in 2024.

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Service Marks, Trademarks, and Trade Names

We hold various service marks, trademarks, and/or trade names, such as “ABM,” “ABM Building Value,” “ABM GreenCare,” “ABM EnhancedClean,” “ABM EnhancedFacility,” “Linc Service,” “TEGG,” “ABM Connect,” “ABMVantage,” and “RavenVolt,” which we deem important to our marketing activities, to our business, and, in some cases, to the franchising activities conducted by our Technical Solutions segment.

Dependence on Significant Client

No single client accounted for more than 10% of our consolidated revenues during 2024, 2023, or 2022.

Competition

We believe that each aspect of our business is highly competitive and that such competition is based primarily on price, quality of service, efficiency, and productivity enhancements, adapting to changing workplace conditions, and ability to anticipate and respond to industry changes. A majority of our revenue is derived from projects requiring competitive bids; however, an invitation to bid is often conditioned upon prior experience, industry expertise, and financial strength. The low cost of entry in the facility services business results in a very competitive market. We mainly compete with regional and local owner-operated companies that may have more acute vision into local markets and significantly lower labor and overhead costs, providing them with competitive advantages in those regards. We also compete indirectly with companies that can perform for themselves one or more of the services we provide.

Sales and Marketing

Our sales and marketing activities include digital engagement and direct interactions with prospective and existing clients, pricing, proposal management, and customer relationship management by dedicated business development teams, operations personnel, and management. These activities are executed by branch and regional sales, marketing, and operations teams assigned to our industry groups and are supported by centralized sales support teams, inside sales teams, and marketing personnel. The sales and marketing teams acquire, nurture, and manage leads through the sales buying process, as well as train personnel on product offerings, sales tools, and proposal systems, all governed by standard operating procedures.

Macro-Economic Environment in Commercial Real Estate

On an ongoing basis, we monitor changes to the macro-economic environment and their potential impacts on demand for our services and on our financial condition. One such monitored change is the strength or softness of the commercial real estate industry, especially multi-tenant and owner-occupied commercial office buildings. The recent softness in that market is primarily attributable to the lingering effects of the Pandemic, especially the normalization of hybrid work, which has resulted in higher office vacancy rates. Given that Class A and high-quality commercial office buildings are a key end market for us, we have experienced modest declines in demand for janitorial services and work orders in these markets. We expect the occupancy rates of Class A and high-quality buildings and back-to office trends to improve throughout 2025.

Regulatory Environment

Our operations are subject to various federal, state, and/or local laws, rules, and regulations regulating among other things, labor, wages, and health and safety matters, as well as laws and regulations relating to the discharge of materials into the environment or otherwise relating to the protection of the environment. Historically, the cost of complying with these laws, rules, and regulations has not had a material adverse effect on our financial position, results of operations, or cash flows.

Corporate Responsibility Strategy and Oversight

As a company with over 110 years of history, we understand the importance of embedding and integrating responsible and community-minded business practices into our operations and commit to standards to create value and support the long-term success of our business, shareholders, employees, and clients.

Our Board of Directors oversees ABM’s corporate responsibility-related risks and priorities with the assistance of its committees. Our Board of Directors receives regular reports from meetings of its Governance Committee, which is responsible for oversight of the Company’s corporate governance and overall corporate responsibility-related framework, as well as from meetings of its Stakeholder and Enterprise Risk Committee, which is responsible for oversight of the Company’s programs, policies, and practices relating to social and environmental matters that may impact the Company’s business and key stakeholders. Additionally, our internal culture, environmental sustainability, and inclusion efforts are led by cross functional teams that include employees across the enterprise, and are aimed to advance our corporate responsibility strategies, and regularly present to the Board of Directors’ Stakeholder and Enterprise Risk Committee.

Since 2011, we have voluntarily published a Corporate Responsibility Report on an annual basis in alignment with the Global Reporting Initiative framework and the Sustainability Accounting Standards Board to address our business, our employees, and the environment. More information about our sustainability performance, progress, and goals can be found in the Human Capital section of this report and in the Corporate Responsibility section of the Company’s corporate website.

Human Capital

Given that ABM is a service-oriented business, our employees are the driving force behind our success, and we believe our ability to attract, develop, and retain our employees at all levels of our organization has a direct impact on client satisfaction and our ability to grow the Company. To succeed in a competitive labor market, ABM has developed key recruitment and retention strategies, objectives, and measures that we focus on as part of the overall management of our business. These strategies, objectives, and measures form the pillars of our human capital management framework and are advanced through the programs, policies, and initiatives described below.

Direct labor costs represented 68% of our total revenue for 2024. As of October 31, 2024, we employed approximately 117,000 employees, of whom approximately 49,000, or 42%, were subject to various local collective bargaining agreements. As of October 31, 2024, our frontline employees represented 92% of our total workforce, while staff and management employees represented the other 8%.

Our human capital strategy is guided by our values and advanced by our employees. We prioritize doing business in a responsible way and enabling our employees’ and clients’ success. The execution of our human capital strategy is overseen at the highest levels of our organization, from our Board of Directors, our Board of Directors’ Stakeholder and Enterprise Risk Committee, and across our senior management.

Business ethics

Our Code of Business Conduct drives the application of our core values of respect, integrity, collaboration, innovation, trust, and excellence throughout our operations. Our Code of Business Conduct serves as a critical tool to help all ABM team members to recognize and report unethical conduct, while preserving and nurturing our culture of honesty and accountability. The Company provides comprehensive annual training and certification programs on our Code of Business Conduct for our Board of Directors and all of our staff and management employees.

Human resources, hiring, and training

With a team of approximately 117,000 employees across the United States, UK, Ireland, and other locations, we have invested in and implemented a variety of systems and tools designed to centralize and standardize hiring and training practices, including regional recruitment strategies, applicant tracking technology, and advanced analytics that provide actionable insights in our HR processes. These efforts are intended to drive ongoing improvement in the attraction, retention, and engagement of our frontline employees, who constitute the majority of our workforce.

As we continue to elevate our employee experience and prepare our next generation of internal leaders, we continued to grow our frontline leadership program, which we launched enterprise-wide in 2022. This program is designed to enhance the management and coaching skills of frontline supervisors to improve the employee experience, create an environment for career growth, and increase retention.

In 2024, we re-launched our Leadership Academy designed for middle- and senior-level leaders from across the enterprise. The 2024 class participated in the four-month development program, which provided a broader operational understanding of the organization, identified and closed development gaps, and accelerated such employees’ readiness for future growth as effective leaders.

Our online training platform, ABM University, provides our staff and management employees with access to a multitude of training courses, videos, reference material, and other tools. Additionally, our frontline employees receive on-the-job training specific to their role and location to enable us to deliver for our clients in a safe and efficient manner.

Compensation and employee benefits

In addition, we offer competitive wages and salaries in our served markets, and full-time employees have access to a continuum of health and wellness benefits, including medical, dental, vision, disability, and basic and voluntary life and AD&D insurance, 401K employee savings and an employee stock purchase plan, a 24/7 employee assistance program, healthcare flexible spending accounts, telemedicine options, legal support, as well as commuter, fitness, and other discount programs.

Labor relations

With approximately 49,000 union-represented employees, we are party to more than 300 collective bargaining agreements nationwide, with more than 20 major labor unions. Our collective bargaining agreements include regional multiemployer agreements covering thousands of employees, as well as localized site agreements covering smaller groups. We strive to engage with our labor partners in an atmosphere of mutual respect, and seek to resolve disputes in a fair and equitable manner.

Safe working environment

ABM’s commitment to its employees is evidenced in its approach to risk management and safety. The Company’s programs are designed to meet or exceed compliance standards of the Occupational Safety and Health Administration and other regulatory bodies and to protect the health and welfare of our employees and our clients. A cornerstone of ABM’s comprehensive risk management and safety program is safety awareness to confirm our employees are:

• educated on how to complete tasks safely;
• trained in hazard identification;
• made aware of emergency response procedures to immediately address challenges; and
• proficient in reporting accidents, utilizing applicable procedures to confirm appropriate loss mitigation techniques are implemented should a loss occur.

Our “Think Safe” approach to safety includes establishing a safety mindset from day one of employment. This safety culture is continuously reinforced through daily moments for safety messaging, relevant monthly training topics, and unique programs and materials created for our employees.

One of the cornerstones of our ThinkSafe program is designed to help leaders identify workplace hazards and implement changes to prevent accident or injury. In our frontline leader training, participants are guided in creating a culture of safety and provided guidance on practices to support our employees receiving the right care at the right time to expedite their recovery.

Culture and inclusion

With a widely distributed workforce serving over 20,000 clients across multiple nations and geographic regions, ABM’s culture, and the team member experience it supports, plays a vital role in attracting, retaining, and engaging talent. The Company works to develop an increasingly inclusive culture, where individuals from all backgrounds are equally able to contribute and are provided with opportunities to grow in their careers.

Guided by ABM’s mission and values, the Company’s inclusive culture strategy is activated through its Culture & Inclusion Council. ABM’s President and CEO and Chief Human Resources Officer each serve as executive sponsors of the Council, which provides regular reports to the Board’s Stakeholder and Enterprise Risk Committee.

Additionally, ABM is an Equal Opportunity and Affirmative Action employer in compliance with the requirements of the Executive Order 11246 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans’ Readjustment Assistance Act.

Available Information

Our corporate website is www.abm.com (http://www.abm.com). The content on any website referred to in this filing does not constitute, and should not be viewed as, a part of this Annual Report, and our website is not incorporated into this or any of our other filings with the Securities and Exchange Commission (“SEC”). We make available, free of charge through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. Additionally, the SEC maintains a website at www.sec.gov (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Executive Officers of Registrant

Executive Officers on December 19, 2024

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The following risks, some of which have occurred and any of which may occur in the future, could materially and adversely affect our business, financial condition, cash flows, results of operations, and/or the trading price of our common stock. The risks described below identify the material risks we face; however, our business could also be affected by factors that are not presently known to us or that we currently consider to be immaterial. You should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) and the consolidated financial statements and accompanying notes (the “Financial Statements”).

Risks Relating to Our Strategy and Operations

Our success depends on our ability to gain profitable business despite competitive market pressures.

Each market we provide services for is highly competitive and such competition is based primarily on price, quality of service, reputation, and ability to anticipate and respond to industry changes. A majority of our revenue is derived from services that require competitive bids from multiple suppliers. The low barrier of entry in the facility services business results in a very competitive market. We compete mainly with regional and local owner-operated companies that may have more insight into local market dynamics and significantly lower operating costs, which could provide them with a competitive advantage in those regards. We also compete indirectly with companies that can perform for themselves one or more of the services we provide. Further, if we are unable to respond adequately to market shifts and changing technology, we may lose existing clients and fail to win future business opportunities. A failure to respond effectively to competitive pressures or failure in our ability to increase prices as costs rise could reduce margins and materially adversely affect our financial performance.

Our results of operations can be adversely affected by labor shortages, turnover, and labor cost increases.

We employ approximately 117,000 persons, and our operations depend on the services of a large and diverse workforce. We must attract, train, and retain a large and growing number of qualified employees while controlling related labor costs. Our ability to control labor and benefit costs is subject to numerous internal and external factors, including changes in the unemployment rate, changes in immigration policy, regulatory changes, prevailing wage rates, and competition we face from other companies for similarly skilled employees. Meaningful labor shortages, inflationary pressures on wages, and/or increased turnover rates within our employee base could lead to increased costs, such as increased overtime incurred and/or increased usage of temporary labor to meet the demands of our customers, as well as increased wage rates to attract and retain employees. Further, many of our contracts provide that our clients pay certain costs at specified rates, such as insurance, healthcare costs, salary and salary-related expenses, and other costs. If actual costs exceed the rates specified in the contracts, our profitability may be negatively impacted. There is no assurance that in the future we will be able to attract or retain qualified employees or effectively manage labor and benefit costs, which could have a material adverse effect on our business, financial condition, and results of operations.

We may not be able to attract and retain qualified personnel and senior management we need to support our business.

Our future performance depends on the continuing efforts and contributions of our senior management and on our continued ability to attract and retain qualified personnel. Unplanned turnover in senior management or inability to attract and retain qualified personnel could have a negative effect on our results of operations. In addition, activities related to identifying, recruiting, hiring, and integrating qualified management employees may require significant time and expense. We may not be able to locate suitable replacements for any key employees who leave, or offer employment to potential replacements on reasonable terms, each of which may adversely affect our business and financial results.

Investments in and changes to our businesses, operating structure, or personnel relating to our ELEVATE strategy, including the implementation of strategic transformations, enhanced business processes, and technology initiatives, may not have the desired effects on our financial condition and results of operations.

We have made significant investments and expect to make additional investments in various initiatives intended to drive long-term profitable growth and increase operational efficiency. These investments in and changes to our business systems and processes may not create the growth, operational efficiencies, competitive advantage, or cost benefits that we expect and could result in unanticipated consequences, including disruptions to our back-office operations and service delivery. Moreover, the execution and/or benefits of our ELEVATE strategy may not be realized on the expected timeline and/or may result in expenses in excess of what is currently forecast, which could negatively affect our financial condition.

Our ability to preserve long-term client relationships is essential to our continued success.

We depend to a large extent on our relationships with clients and our reputation for quality integrated facility solutions. Maintaining our existing client relationships, particularly with our largest clients, is an important factor contributing to our business success. We primarily provide services pursuant to agreements that are cancelable by either party upon 30 to 90 days’ notice. As we generally incur higher initial costs on new contracts until the labor management and facilities operations normalize, our business associated with long-term client relationships is generally more profitable than short-term client relationships. If we lose a significant number of long-term clients and/or all or a portion of the services for our larger clients, our financial results could be negatively impacted.

Our use of subcontractors or joint venture partners to perform work under customer contracts exposes us to liability and financial risk.

We depend on subcontractors or other parties, such as joint venture partners, to perform work in situations in which we are not able to self-perform the work involved. Such arrangements may involve subcontracts or joint venture relationships where we do not have direct control over the performing party. We may be exposed to liability whenever one or more of our subcontractors or joint venture partners, for whatever reason, fails to perform or allegedly negligently performs the agreed-upon services. Although we have controls and programs in place to monitor the work of our subcontractors and our joint venture partners, there can be no assurance that these controls or programs will have the desired effect, and we may incur significant liability as a result of the actions or inactions of one or more of our subcontractors or joint venture partners.

Our international business involves risks different from those we face in the United States that could negatively impact our results of operations and financial condition.

We have business operations in jurisdictions outside of the United States, most significantly in the UK and Ireland. Our international operations are subject to risks that are different from those we face in the United States and subject us to complex and frequently changing laws and regulations, including differing labor laws and regulations relating to the protection of certain information that we collect and maintain about our employees, clients, and other third parties. Among these laws is the UK Modern Slavery Act, the Criminal Law (Human Trafficking) Act 2008 (Ireland), the UK Bribery Act, the Criminal Justice (Corruption Offences) Act 2018 (Ireland), and the UK and European Union General Data Protection Regulations (the “GDPR”). The failure to comply with these laws or regulations could subject us to significant litigation, monetary damages, regulatory enforcement actions, or fines in one or more jurisdictions.

In addition, when we participate in joint ventures that operate outside of the United States where we are not a controlling party, we may have limited control over the joint venture. Any improper actions by our joint venture employees, partners, or agents, including, but not limited to, failure to comply with the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, and/or laws relating to human trafficking, could result in civil or criminal investigations, monetary and non-monetary penalties, or other consequences, any of which could have an adverse effect on our financial position as well as on our reputation and ability to conduct business.

Additionally, the operating results of our non-U.S. subsidiaries are translated into U.S. dollars, and those translations are affected by movements in foreign currencies relative to the U.S. dollar. There can be no assurance that the foregoing factors will not have a material adverse effect on our international operations or on our consolidated financial condition and results of operations.

Risks Relating to Market and Economic Conditions

Decreases in commercial office space utilization due to hybrid work models and increases in office vacancy rates could adversely affect our financial condition.

A key part of our business involves providing janitorial, facilities engineering, and parking services for commercial office building properties. Across the United States, hybrid work models remain prevalent and commercial office vacancy levels remain elevated, compared to pre-pandemic levels. Reduced office occupancies and any further deterioration in vacancy levels would likely decrease the demand for our facility services as well as the demand for highly profitable supplemental services (“work orders”) requested by our clients outside the scope of our standard service specifications. As new tenants occupy vacant office spaces, there may be delays and additional expenses incurred in securing client relationships with such new tenants. These factors could adversely affect our revenues and financial results.

Negative changes in general economic conditions, such as recessionary pressures, high interest rates, durable and non-durable goods pricing, changes in energy prices, or changes in consumer goods pricing could reduce the demand for our services and, as a result, reduce our revenue and earnings and adversely affect our financial condition.

Slowing economic activity or other negative changes in global, national, and local economic conditions could have a negative impact on our business. These adverse economic conditions could cause a decline in our clients’ demand for our services and/or in scope of work, including work orders and our clients’ ability to pay for such services, or attempts by our clients to defer payments owed to us. Further, potential declines in economic conditions could result in depressed prices for our services, which could affect our financial condition.

We offer a portfolio of capital projects, which are designed to reduce a client’s overall consumption of energy, such as electricity and natural gas. Downward fluctuations in energy prices, and/or elevated interest rates, may reduce client demand for such projects. Additionally, we depend, in part, on federal and state legislation and policies that support energy efficiency projects. If current legislation or policies are amended, eliminated, or not extended beyond their current expiration dates, or if funding for energy incentives is reduced or delayed, it could also adversely affect our ability to obtain new capital projects. All of these factors could have an adverse effect on our financial condition, results of operations, and cash flows.

Risks Relating to Information Technology and Cybersecurity

We may experience breaches of, or disruptions to, our information technology systems or those of our third-party providers or clients, or other compromises of our data that could adversely affect our business.

Our information technology systems and those of our third-party providers or clients could be the target of cyberattacks, ransomware attacks, hacking, unauthorized access, phishing, computer viruses, malware, or other intrusions, which could result in operational disruptions or information misappropriation, such as theft of intellectual property or inappropriate disclosure of confidential, proprietary, or personal information. We maintain confidential, proprietary, and personal information in our information technology systems and in systems of third-party providers relating to our current, former, and prospective employees, clients, and other third parties. We have experienced certain data and security breaches in the past and could experience future data or security breaches stemming from the intentional or negligent acts of our employees or other third parties. Furthermore, while we continue to devote significant resources to monitoring and updating our systems and implementing information security measures to protect our systems, there can be no assurance that the controls and procedures we have in place will be sufficient to protect us from future security breaches. Emerging artificial intelligence technologies may intensify these cybersecurity risks. As cyber threats are continually evolving, our controls and procedures may become inadequate, and we may be required to devote additional resources to modifying or enhancing our systems in the future. We may also be required to expend resources to remediate cyber-related incidents or to enhance and strengthen our cybersecurity.

Any such disruptions to our information technology systems, breaches or compromises of data, and/or misappropriation of information could result in lost sales, negative publicity, litigation, violations of privacy and other laws, or business delays that could have a material adverse effect on our business. Additionally, we believe that along with the GDPR and the California Consumer Privacy Act, further increased regulation is likely in the area of data privacy. Compliance with this rapidly expanding area of law will require significant management and financial resources, and we could be subjected to additional legal risk or financial losses if we are not in compliance. This expanding area of law may also lead to potentially significant additional claims, including class action claims, being alleged against us.

Our ongoing implementation of new enterprise resource planning (“ERP”) and related boundary systems could adversely impact our ability to operate our business and report our financial results.

We utilize multiple platforms and ERP systems to record transactions, provide information to management, and prepare our financial statements. We are in the process of transitioning our ERP and other key boundary systems. This transition began in the third quarter of 2023 and will continue for the next couple of years with a large portion of our business transitioning to the new systems in the first quarter of 2025. While we believe our new ERP and boundary systems will enhance and standardize our processes, allow better oversight, and improve our service to our customers, any disruption to this transition could impact our ability to send and track invoices, process vendor payments, pay employees, fulfill contractual obligations, report our financial results, or otherwise operate our business. Such disruption could adversely affect our profitability and reputation. Additionally, any disruption could negatively impact the effectiveness of our controls. Refer to “Risks Relating to Financial Matters” below for further information on the internal controls.

Risks Relating to Acquisitions, Divestitures, or Strategic Transactions

Acquisitions, divestitures, and other strategic transactions could fail to achieve financial or strategic objectives, disrupt our ongoing business, and adversely impact our results of operations.

In furtherance of our business strategy, we routinely evaluate opportunities and may enter into agreements for possible acquisitions, divestitures, or other strategic transactions. A significant portion of our growth has been generated by acquisitions, and we may continue to acquire businesses in the future as part of our growth strategy. However, we may encounter challenges identifying opportunities in a timely manner or on terms acceptable to us. Furthermore, there is no assurance that any such transaction will deliver the anticipated results, including expected synergistic benefits. A potential acquisition, divestiture, or other strategic transaction may involve a number of risks including, but not limited to:

• the transaction may not effectively advance our business strategy, and its anticipated benefits may never materialize;
• our ongoing operations may be disrupted, and management time and focus may be diverted;
• clients or key employees of an acquired business may not remain, which could negatively impact our ability to grow that acquired business;
• integration of an acquired business’s accounting, information technology, cybersecurity, HR, and other administrative systems may fail to permit effective management and expense reduction;
• unforeseen challenges may arise in implementing internal controls, procedures, and policies;
• additional indebtedness incurred as a result of an acquisition may impact our financial position, results of operations, and cash flows; and
• unanticipated or unknown liabilities may arise related to an acquired business.

Risks Relating to Insurance and Safety Matters

We manage our insurable risks through a combination of third-party purchased policies and self-insurance, and we retain a substantial portion of the risk associated with expected losses under these programs, which exposes us to volatility associated with those risks, including the possibility that changes in estimates to our ultimate insurance loss reserves could result in material charges against our earnings.

We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. We are responsible for claims both within and in excess of our retained limits under our insurance policies, and while we endeavor to purchase insurance coverage that is appropriate to our assessment of risk, we are unable to predict with certainty the frequency, nature, or magnitude of claims for direct or consequential damages. If our insurance coverage proves to be inadequate or unavailable, our business may be negatively impacted.

The determination of required insurance reserves is dependent upon actuarial judgments. We use the results of actuarial studies to estimate insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years. Actual experience related to our insurance reserves can cause us to change our estimates for reserves and any such changes may materially impact results, causing significant volatility in our operating results.

Should we be unable to renew our excess, umbrella, or other commercial insurance policies, it could have a material adverse impact on our business, as would the incurrence of catastrophic uninsured claims or the inability or refusal of our insurance carriers to pay otherwise insured claims. Further, to the extent that we self-insure our losses, deterioration in our loss control and/or our continuing claim management efforts could increase the overall cost of claims within our retained limits. A material change in our insurance costs due to changes in the frequency of claims, the severity of the claims, the costs of excess/umbrella premiums, or regulatory changes could have a material adverse effect on our financial position, results of operations, or cash flows.

In 2015, we formed a wholly owned captive insurance company, IFM Assurance Company (“IFM”), which we believe has provided us with increased flexibility in the end-to-end management of our insurance program. There can be no assurance that IFM will continue to bring about the intended benefits or the desired flexibility in the management of our insurance programs, because we may experience unanticipated events that could reduce or eliminate expected benefits.

Our risk management and safety programs may not have the intended effect of reducing our liability for personal injury or property loss.

We attempt to mitigate risks relating to personal injury or property loss through the implementation of company-wide safety and loss control efforts designed to decrease the frequency of accidents or events that might increase our liability. However, incidents involving personal injury or property loss may be caused by multiple potential factors, a significant number of which are beyond our control. Therefore, there can be no assurance that our risk management and safety programs will have the desired effect of controlling costs and liability exposure.

Risks Relating to Labor, Legal Proceedings, Tax, and Regulatory Matters

Unfavorable developments in our class and representative actions and other lawsuits alleging various claims could cause us to incur substantial liabilities.

Our business involves employing tens of thousands of employees, many of whom work at our clients’ facilities. We incur risks relating to our employment of these workers, including, but not limited to: claims by our employees of discrimination, harassment, violations of wage and hour requirements, or violations of other federal, state, or local laws; claims of misconduct or negligence on the part of our employees; and claims related to the employment of unlicensed personnel. We also incur risks and claims related to the imposition on our employees of policies or practices of our clients that may be different from our own. Some or all of these claims may lead to litigation, including class action litigation, and these matters may cause us to incur negative publicity with respect to alleged claims. Additionally, there are risks to all employers in some states, such as California, resulting from large collective, class, Private Attorneys General Act actions, as well as from new and unanticipated judicial interpretations of existing laws and the application of those new interpretations against employers on a retroactive basis, which could involve substantial claims and significant defense costs. It is not possible to predict the outcome of these lawsuits or any other proceeding, and our insurance may not cover all claims that may be asserted against us. These lawsuits and other proceedings may consume substantial amounts of our financial and managerial resources. An unfavorable outcome with respect to these lawsuits and any future lawsuits may, individually or in the aggregate, cause us to incur substantial liabilities that could have a material adverse effect upon our business, reputation, financial condition, results of operations, or cash flows.

We are subject to extensive legal and regulatory requirements, which could limit our profitability by increasing the costs of legal and regulatory compliance.

Our business is subject to a complicated set of federal, state, and local laws and regulations as well as stakeholder views addressing, among other things, wage and hour standards, employment and labor relations, various Corporate Responsibility-related practices, leave of absence, cybersecurity, data privacy and protection, occupational health and safety, environmental matters, anti-competition, anti-corruption, and government contracting. Many of these laws and regulations may have differing or conflicting legal standards or legal interpretations across jurisdictions, increasing the complexity and cost of compliance. When federal, state, local, or foreign minimum wage rates increase, we may have to increase the wages of both minimum wage employees and employees whose wages are above the minimum wage. We may also face increased operating costs resulting from changes in federal, state, or local laws and regulations relating to employment matters, including those relating to meal and rest breaks, eligibility for overtime, pay transparency and reporting, sick pay, and predictive scheduling requirements. In addition, we expect there will likely be increasing and evolving levels of regulation, disclosure-related and otherwise, with respect to Corporate Responsibility (including environmental) matters, and increased regulation will likely lead to increased compliance costs as well as scrutiny that could heighten all of the risks identified in this risk factor. Increased costs of legal and regulatory compliance with this constantly evolving legal and regulatory environment could reduce our profitability and adversely affect our financial condition.

A significant number of our employees are covered by collective bargaining agreements that could expose us to potential liabilities in relation to our participation in multiemployer pension plans, requirements to make contributions to other benefit plans, and the potential for strikes, work slowdowns, or similar activities, and union organizing drives.

We participate in various multiemployer pension plans that provide defined pension benefits to employees covered by collective bargaining agreements. Because of the nature of multiemployer pension plans, there are risks to us associated with participation in these plans that differ from single-employer plans. Assets contributed by an employer to a multiemployer pension plan are not segregated into a separate account and are not restricted to provide benefits only to employees of that contributing employer. In the event another participating employer in a multiemployer pension plan no longer contributes to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers, including us. In the event of the termination of a multiemployer pension plan or a complete or partial withdrawal from a multiemployer pension plan, under applicable law we could incur material withdrawal liabilities. We further discuss our participation in multiemployer pension and postretirement plans in Note 12, “Employee Benefit Plans,” in the Notes to consolidated financial statements. In addition, the terms of collective bargaining agreements require us to contribute to various fringe benefit plans, including health and welfare, pension, and training plans, all of which require us to have appropriate systems in place to assure timely and accurate payment of contributions. The failure to make timely and accurate contributions as a result of a systems failure could have a negative impact on our financial position.

At October 31, 2024, approximately 42% of our employees were subject to various local collective bargaining agreements, some of which will expire or become subject to renegotiation during 2025. In addition, at any given time we may face union organizing activity. When one or more of our major collective bargaining agreements becomes subject to renegotiation or when we face union organizing drives, any disagreement between us and the union on important issues may lead to a strike, work slowdown, or other job actions at one or more of our locations. In a market where we are unionized but competitors are not unionized, we could lose clients to such competitors. A strike, work slowdown, or other job action could disrupt our services, resulting in reduced revenues or contract cancellations. Moreover, negotiating a first time collective bargaining agreement or renegotiating an existing agreement could result in increases in labor and benefits expenses that we may be unable to pass through to clients.

Our business may be materially affected by changes to fiscal and tax policies. Negative or unexpected tax consequences could adversely affect our results of operations.

We are subject to a variety of taxes and tax collection and remittance obligations in the United States and foreign jurisdictions, primarily the UK and Ireland. We compute our income tax provision based on enacted tax rates in the jurisdictions in which we operate. As tax rates vary among taxing jurisdictions, a change in earnings attributable to the various jurisdictions in which we operate could result in an unfavorable change in our overall tax provision. Additionally, at any point in time, we may be under examination from taxing jurisdictions. We regularly assess the likelihood of adverse outcomes resulting from these audits to determine the adequacy of our income tax related provision. We may recognize additional tax expense, be subject to additional tax liabilities, or incur losses and penalties due to adverse outcomes in tax audits or changes in laws, regulations, treaties, administrative practices, principles, assessments by authorities, and interpretations related to tax laws, including tax rules in various jurisdictions, which could have an adverse effect on our operating results and financial condition.

Risks Relating to Financial Matters

Future increases in the level of our borrowings and interest rates could affect our results of operations.

Any future interest rate increases would have corresponding impact to our costs of borrowing and may have an adverse impact on our ability to raise funds through the offering of our securities or through the issuance of debt due to higher debt capital costs, diminished credit availability, and less favorable equity markets. Any significant federal fund rate increases may have a material adverse effect on our business, results of operations, and financial condition, and may cause our customers to implement cost saving strategies that could reduce the demand of our services.

Our future ability to make payments on our debt, fund our other liquidity needs, and make planned capital expenditures will depend on our ability to generate cash. Our ability to generate cash, to a certain extent, is subject to general economic, financial, competitive, and other factors that are beyond our control. We cannot guarantee that our business will generate sufficient cash flow from our operations or that future borrowings will be available to us in an amount sufficient to enable us to service our debt, fund other liquidity needs, make planned capital expenditures, or continue our dividend.

The degree to which we are leveraged could have important consequences for shareholders. For example, being highly leveraged could: require us to dedicate a substantial portion of our cash flows from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, share repurchases, capital expenditures, acquisitions, and other general corporate purposes; limit our availability to obtain additional financing in the future to enable us to react to changes in our business; and place us at a competitive disadvantage compared to businesses in our industry that have less debt.

Further, our credit facility contains both financial covenants and other covenants that limit our ability to engage in specific transactions. Any failure to comply with covenants in the credit facility could result in an event of default that, if not cured or waived, would have a material adverse effect on us.

Impairment of goodwill and long-lived assets could have a material adverse effect on our financial condition and results of operations.

We evaluate goodwill for impairment annually, in the fourth quarter, or more often if impairment indicators exist. We also review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the fair value of one of our reporting units is less than its carrying value, or if as a result of a recoverability test we conclude that the projected undiscounted cash flows are less than the carrying amount, we would record an impairment charge related to goodwill or long-lived assets, respectively. (For example, during the second quarter of 2020, given the general deterioration in economic and market conditions arising from the COVID-19 Pandemic (“the Pandemic”), we identified a triggering event that resulted in the impairment of goodwill and intangible assets.) The assumptions used to determine impairment require significant judgment, and the amount of the impairment could have a material adverse effect on our reported financial results for the period in which the charge is taken.

If we fail to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be negatively impacted, which could harm our operating results and investor perceptions of our Company and as a result may have a material adverse effect on the value of our common stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and related rules, our management is required to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing, and, in some instances, remediation. We have acquired entities that had no publicly traded debt or equity and therefore were not previously required to conform to the rules and regulations of the SEC, especially related to their internal control structure. When we acquire such entities, they may not have in place all the necessary controls as required by the Public Company Accounting Oversight Board. Integrating acquired entities into our internal control over financial reporting has required and will continue to require significant time and resources from our management and other personnel, which increases our compliance costs. We are required to include our assessment of the effectiveness of the internal controls over financial reporting of entities we acquire in our overall assessment, so we must plan to complete the evaluation and integration of internal controls over financial reporting and report our assessment within the required time frame.

In addition, with the increasing frequency of cyber-related frauds perpetrated to obtain inappropriate payments, we need to ensure our internal controls related to authorizing the transfer of funds and changing our vendor master files are adequate. Furthermore, the introduction of new, and changes to existing, ERP and financial reporting information systems create implementation and change management risks that require effective internal controls to mitigate. Failure to maintain an effective internal control environment could have a material adverse effect on our ability to accurately report our financial results, the market’s perception of our business, and our stock price.

General Risk Factors

Our business may be negatively impacted by adverse weather conditions.

Weather conditions such as snow storms, heavy flooding, hurricanes, and fluctuations in temperatures can negatively impact portions of our business. Within our Technical Solutions segment, cooler than normal temperatures in the summer could reduce the need for servicing of air conditioning units, resulting in reduced revenues and profitability. Within Parking and Aviation services and portions of our Technical Solutions business, adverse weather conditions can lead to reduced activity, as well as increases in certain costs, both of which negatively affect gross profit. On the other hand, the absence of snow during the winter could cause us to experience reduced revenues in our B&I segment, as many of our contracts specify additional payments for snow-related services.

Catastrophic events, disasters, pandemics, and terrorist attacks could disrupt our services.

We may encounter disruptions involving power, communications, transportation or other utilities, or essential services depended upon by us or by third parties with whom we conduct business. This could include disruptions due to disasters, pandemics, weather-related or similar events (such as fires, hurricanes, blizzards, earthquakes, and floods), political instability, labor strikes, or war (including acts of terrorism or hostilities) that could impact our markets. If a disruption occurs in one location and persons in that location are unable to communicate with or travel to or work from other locations, our ability to service and interact with our clients and others may suffer, and we may not be able to successfully implement contingency plans that depend on communications or travel. These events may increase the volatility of financial results due to unforeseen costs with partial or no corresponding compensation from clients. There also can be no assurance that the disaster recovery and crisis management procedures we employ will suffice in any particular situation to avoid a significant loss. In addition, to the extent centralized administrative locations are disabled for a long period of time, key business processes, such as accounts payable, information technology, payroll, and general management operations, could be interrupted.

Actions of activist investors could disrupt our business.

Public companies have been the target of activist investors. In the event that a third party, such as an activist investor, proposes to change our governance policies, board of directors, or other aspects of our operations or strategy, our review and consideration of such proposals may create a significant distraction for our management and employees. This could negatively impact our ability to execute various strategic initiatives and may require management to expend significant time and resources responding to such proposals. Such proposals may also create uncertainties with respect to our financial position and operations and may adversely affect our ability to attract and retain key employees.

Risk Management and Strategy

ABM recognizes the importance of cybersecurity risk management, which is integrated within ABM’s overall enterprise risk management framework and is aligned with standard industry information security frameworks. Specifically, cybersecurity is one of the key risk topics covered within ABM’s enterprise risk framework through the Company’s regular identification, assessment, and reporting processes. Our internal information security program is managed by a dedicated team of cybersecurity professionals led by our Chief Information Security Officer, who reports to our Chief Information Officer.

We have implemented cross-functional cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and mitigate cybersecurity-related risks, as well as to detect and prevent cybersecurity incidents. In evaluating cybersecurity incidents, management considers the potential impact to our results of operations, control framework, and financial condition, as well as the potential impact, if any, to our business strategy or reputation.

We adhere to a risk-based, multi-layered “defense in depth” approach with multiple layers of security controls, including, but not limited to, security monitoring, endpoint protection, and identity and access management. We maintain processes designed to oversee and identify material risks from cybersecurity threats associated with our use of third-party technologies and systems, including, as appropriate, pre-procurement assessment of contractual terms addressing cybersecurity and data protection, as well as review based on assessed vendor risk.

We conduct regular testing and assessments of our systems and controls to evaluate our information security program’s maturity and effectiveness, and from time-to-time we engage and retain expert external assessors and consultants to help improve our security, stay aligned with industry best practices, evaluate external threats, and periodically conduct independent security assessments.

ABM provides regular, mandatory training for our employees regarding cybersecurity threats to bring awareness on how they can help prevent and report potential cybersecurity incidents. We also provide regular cybersecurity awareness reminders to our employees.

Although the Company dedicates significant resources and efforts to protect against cybersecurity risks, the Company has experienced, and expects to continue to be subject to, cybersecurity threats. To date, the Company is not aware of any cybersecurity incidents that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition. However, the Company continues to face cybersecurity risks such as those described in "Item 1A. Risk Factors" in this Annual Report on Form 10-K, and there can be no assurance that cybersecurity threats or incidents will not have a material adverse effect on the Company in the future. While the Company maintains cyber risk insurance, such insurance may not be sufficient to cover all losses from cybersecurity incidents.

Governance

ABM’s management is responsible for the day-to-day administration of the Company’s cybersecurity policies, processes, practices, and risk management. Within management, the Company's Chief Information Security Officer has specific responsibility for cybersecurity risk management, reporting to the Chief Information Officer. The Chief Information Security Officer meets regularly with our executive management team to review our cybersecurity programs, objectives, trends and threats. Our Chief Information Officer has over 20 years of experience as a technology leader, with responsibilities for developing and executing technology strategies across diverse industries, including technology, commercial real estate, manufacturing, healthcare and aviation. Our Chief Information Security Officer also has over 20 years of significant leadership experience in audit, risk, compliance, and security across complex global organizations, and formerly held Chief Information Security Officer roles leading cybersecurity efforts at two Fortune 500 organizations.

Our Board of Directors has ultimate oversight of the Company’s risk management and strategy related to its cybersecurity programs, policies, and practices, including (i) the Company’s processes for assessing, identifying, managing, and mitigating material risks from cybersecurity threats and emerging cybersecurity developments and threats; (ii) whether any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect the Company; (iii) the expertise of members of management with respect to assessing and managing risks from cybersecurity threats; and (iv) the Company’s disclosure controls and procedures with respect to material cybersecurity threats and incidents. The Board of Directors is assisted by its Stakeholder and Enterprise Risk Committee, which oversees the Company’s enterprise risk management program and the Company’s identification, evaluation, and mitigation of stakeholder risks, including those relating to cybersecurity.

In addition, ABM has a monitoring system and an escalation process in place to inform senior management and the Board of Directors of any potentially material cybersecurity issues. Specifically, our cybersecurity operations team monitors and reviews cybersecurity developments and threats, makes an initial assessment of such developments and threats, and escalates to ABM’s Chief Information Officer matters determined to require the attention of members of senior management.

ABM’s Chief Information Officer and Chief Information Security Officer regularly provide reports and updates to other members of senior management, the Board of Directors, and the Stakeholder and Enterprise Risk Committee. In connection with these updates, the Board of Directors reviews the Company’s cybersecurity programs and oversees the Company’s efforts to continually enhance the Company’s cybersecurity profile and to mitigate the risks relating to cybersecurity. The reports from ABM’s Chief Information Officer and Chief Information Security Officer also include updates on emerging trends and progress on overall enterprise cybersecurity priorities.

Our principal executive office is located at One Liberty Plaza, 7th Floor, New York, New York 10006.

Principal Properties as of October 31, 2024

In addition to the above properties, we have other offices, warehouses, and parking facilities in various locations, primarily in the United States. See Note 5, “Leases,” in the Notes to consolidated financial statements for additional information regarding leases. We believe that these properties are well-maintained, in good operating condition, and suitable for the purposes for which they are used.

Information with respect to legal matters is set forth in Note 13, “Commitments and Contingencies,” in the Notes to consolidated financial statements (included in Part II., Item 8 of this Form 10-K) and is incorporated herein by reference.

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 2024 our U.S. operations generated approximately 93% 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.

Developments and Trends

Macro-Economic Environment in Commercial Real Estate and Other

On an ongoing basis, we monitor changes to the macro-economic environment and their potential impacts on demand for our services and on our financial condition. One such monitored change is the strength or softness of the commercial real estate industry, especially multi-tenant and owner-occupied commercial office buildings. The recent softness in the market is primarily attributable to the lingering effects of the Pandemic, especially the normalization of hybrid work, which has resulted in higher office vacancy rates. Given that Class A and high-quality commercial office buildings are a key end market for us, we have experienced modest declines in demand for janitorial services and work orders in these markets. We expect the occupancy rates of Class A and high-quality buildings and back-to office trends to improve throughout 2025.

A large M&D client completed its rebalancing of a portion of its work needs as part of its normal procurement process. We expect M&D’s financial results to be adversely impacted in the near-term.

Insurance Reserves

We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. Insurance claim liabilities represent our estimate of retained risks without regard to insurance coverage. We retain a substantial portion of the risk related to certain workers’ compensation and medical claims. Liabilities associated with these losses include estimates of both filed claims and incurred but not reported claims (“IBNR Claims”).

With the assistance of third-party actuaries, we review our estimate of ultimate losses for IBNR Claims on a quarterly basis and adjust our required self-insurance reserves as appropriate. As part of this evaluation, we review the status of existing and new claim reserves as established by third-party claims administrators. The third-party claims administrators establish the case reserves based upon known factors related to the type and severity of the claims, demographic factors, legislative matters, and case law, as appropriate. We compare actual trends to expected trends and monitor claims developments. The specific case reserves estimated by the third-party administrators are provided to the actuary who assists us in projecting an actuarial estimate of the overall ultimate losses for our self-insured or high deductible programs, which includes the case reserves plus an actuarial estimate of reserves required for additional developments, such as IBNR Claims. We utilize the results of actuarial studies to estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years.

Based on the results of the actuarial reviews performed during 2024, which included analyzing recent loss development patterns, comparing the loss development against benchmarks, and applying actuarial projection methods to determine the estimate of ultimate losses, we increased our total reserves related to prior years for known claims as well as our estimate of the loss amounts associated with IBNR Claims by $20.3 million in 2024. In 2023, we decreased our total reserves related to prior year claims by $14.8 million.

Key Financial Highlights

• Revenues increased by $263.0 million, or 3.2%, to $8,359.4 million during 2024, as compared to 2023. Revenue growth was comprised of organic growth of 2.9% and acquisition growth of 0.3%. The organic revenue growth was due to the higher project revenues due to the timing of certain microgrid systems design and installation projects within Technical Solutions, and net new business and expansion of business with existing customers within Aviation, M&D, and Education. The increase in revenues was partially offset by attrition of engineering customers and soft commercial office market conditions within B&I, and the expected rebalancing of the scope of work with an existing customer within M&D. Acquisition growth of $26.3 million was driven by the Quality Uptime Acquisition, completed in the third quarter of 2024.
• Operating profit decreased by $197.5 million to $212.0 million during 2024, as compared to 2023. The decrease in operating profit was attributable to:
• an increase in the fair value of the contingent consideration related to the RavenVolt Acquisition;
• an increase in other Corporate expenses, primarily costs associated with various systems’ go-live and other investments in technology;
• an unfavorable self-insurance reserve adjustment related to prior year claims from actuarial evaluations completed in 2024, as compared to a favorable adjustment in 2023;
• an absence of employee retention credits received as compared to 2023; and
• $11.4 million in revenue recognized for an Aviation parking project during 2023, whereby all the direct labor and related costs for such project were recognized prior to 2023.

The decrease was partially offset by:

• labor efficiencies within B&I, Aviation, and Education, as well as contract mix within Technical Solutions, Aviation, and M&D; and
• a decrease in amortization of intangibles, primarily related to the RavenVolt Acquisition.
• Our effective tax rate on income was 39.1% for 2024, as compared to 24.1% during 2023. Our effective tax rate for 2024 was primarily impacted by a $95.7 million non-taxable expense related to the change in the fair value of the contingent consideration related to the RavenVolt Acquisition. Our effective tax rate for 2023 was primarily impacted by a $45.6 million non-taxable benefit related to the change in the fair value of contingent consideration related to the RavenVolt Acquisition.
• Net cash provided by operating activities was $226.7 million during 2024. Our net cash provided by operating cash activities was lower than prior year, primarily due to the timing of certain working capital requirements.
• Dividends of $56.5 million were paid to shareholders, and dividends totaling $0.90 per common share were declared during 2024. Additionally, we repurchased 1.17 million of shares for $55.8 million, excluding excise taxes during 2024.
• At October 31, 2024, total outstanding borrowings under our Amended Credit Facility were $1,335.3 million, and we had up to $423.6 million of borrowing capacity.

Results of Operations

Consolidated

($ in millions)

*Not meaningful

The Year Ended October 31, 2024, Compared with the Year Ended October 31, 2023

Revenues

Revenues increased by $263.0 million, or 3.2%, to $8,359.4 million during 2024, as compared to 2023. Revenue growth was comprised of organic growth of 2.9% and acquisition growth of 0.3%. The organic revenue growth was due to the higher project revenues due to the timing of certain microgrid systems design and installation projects within Technical Solutions, and net new business and expansion of business with existing customers within Aviation, M&D, and Education. The increase in revenues was partially offset by attrition of engineering customers within B&I and the expected rebalancing of the scope of work with an existing customer within M&D. Acquisition growth of $26.3 million was driven by the Quality Uptime Acquisition, completed in the third quarter of 2024.

Operating Expenses

Operating expenses increased by $288.3 million, or 4.1%, to $7,325.9 million during 2024, as compared to 2023. Gross margin decreased by 71 bps to 12.4% in 2024, as compared to 13.1% in 2023. The decrease in gross margin was primarily driven by the increase in self-insurance adjustments related to prior year claims as a result of actuarial evaluations completed on our workers’ compensation, general liability, automobile liability, and property damage insurance plans. In addition, the decrease in gross margin was attributable to the $11.4 million in revenue from an Aviation parking project recognized in 2023.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $192.5 million, or 33.6%, to $765.3 million during 2024, as compared to 2023. The increase in selling, general and administrative expenses was primarily attributable to:

• a $95.7 million fair value adjustment to increase the contingent consideration related to the RavenVolt Acquisition recorded during 2024, as compared to a $45.6 million fair value adjustment to decrease the contingent consideration recorded during 2023;
• a $24.3 million increase in costs associated with various systems’ go-live and other investments in technology;
• an absence of a $24.0 million benefit from employee retention credits received during 2023;
• an $8.8 million increase in accruals for actual and potential legal settlements; and
• a $6.5 million increase in compensation and related expenses primarily due to higher compensation under certain incentive plans.

This increase was partially offset by:

• an $18.6 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.

Amortization of Intangible Assets

Amortization of intangible assets decreased by $20.4 million, or 26.6%, to $56.1 million during 2024, as compared to 2023. This decrease was primarily due to the lower amortization of intangibles, primarily intangibles acquired as part of the RavenVolt Acquisition.

Interest Expense

Interest expense increased by $2.7 million, or 3.3%, to $85.0 million during 2024, as compared to 2023, primarily driven by higher borrowings from our Amended Credit Facility to fund the Quality Uptime Acquisition.

Income Taxes

During 2024 and 2023, we had effective tax rates of 39.1% and 24.1%, respectively, resulting in a provision for tax of $52.2 million and $79.7 million, respectively. Our effective tax rate for 2024 was negatively impacted by a $95.7 million non-taxable expense related to the change in the fair value of the contingent consideration related to the RavenVolt Acquisition. Our effective tax rate for 2023 was favorably impacted by a $45.6 million non-taxable benefit related to the change in the fair value of the contingent consideration related to the RavenVolt Acquisition.

Interest Rate Swaps

We had a loss of $22.9 million on interest rate swaps during the year ended October 31, 2024, as compared to a loss of $0.5 million during the year ended October 31, 2023, primarily due to underlying changes in the fair value of our interest rate swaps.

Foreign Currency Translation and Other

We had a foreign currency translation gain of $7.5 million during the year ended October 31, 2024, as compared to a foreign currency translation gain of $7.3 million during the year ended October 31, 2023. This change was due to fluctuations in the exchange rate between the U.S. Dollar (“USD”) and the British pound sterling (“GBP”). Future gains and losses on foreign currency translation will be dependent upon changes in the relative value of foreign currencies to the USD and the extent of our foreign assets and liabilities.

The Year Ended October 31, 2023, Compared with the Year Ended October 31, 2022

For a comparison of our Results of Operations for the year ended October 31, 2023, to the year ended October 31, 2022, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended October 31, 2023, filed with the SEC on December 18, 2023.

Segment Information

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

Financial Information for Each Reportable Segment

($ in millions)

*Not meaningful

27

The Year Ended October 31, 2024, Compared with the Year Ended October 31, 2023

($ in millions)

B&I revenues decreased by $30.3 million, or 0.7%, to $4,059.1 million during 2024, as compared to 2023. The revenue decrease was primarily driven by attrition of certain engineering clients and soft commercial office market conditions, partially offset by the new clients and existing client expansions both domestically and internationally. Management reimbursement revenues for this segment totaled $281.4 million and $270.1 million during 2024 and 2023, respectively.

Operating profit decreased by $8.6 million, or 2.7%, to $307.0 million during 2024, as compared to 2023. Operating profit margin decreased by 15 bps to 7.6% in 2024 from 7.7% in 2023. The decrease in operating profit margin was primarily driven by a change in contract mix and higher legal, bad debt, and insurance expense. The decrease was partially offset by labor efficiencies and lower amortization of intangible assets.

($ in millions)

M&D revenues increased by $27.6 million, or 1.8%, to $1,554.3 million during 2024, as compared to 2023. The increase was primarily attributable to the expansion of business with existing customers, partially offset by the expected rebalancing of the scope of work with an existing customer and a loss of a certain customer.

Operating profit increased by $4.6 million, to $166.3 million during 2024, as compared to 2023. Operating profit margin increased by 11 bps to 10.7% in 2024 from 10.6% in 2023. The increase in operating profit margin was primarily attributable to the change in contract mix, partially offset by investments to hire certain technical expertise to support future growth.

($ in millions)

Aviation revenues increased by $106.9 million, or 11.5% to $1,032.6 million, during 2024, as compared to 2023. The increase was primarily attributable to new business and scope expansions with the existing clients as well as continuing recovery in travel volume. In addition, in 2023, we recognized $11.4 million in revenue from an Aviation parking project, whereby all the direct labor and related costs were recognized prior to 2023. Management reimbursement revenues for this segment totaled $36.3 million and $31.8 million during 2024 and 2023, respectively.

Operating profit decreased by $0.9 million, to $59.1 million during 2024, as compared to 2023. Operating profit margin decreased by 75 bps to 5.7% in 2024, from 6.5% in 2023. The decrease in operating profit margin was primarily attributable to the $11.4 million in revenue from an Aviation parking project recognized in 2023. The decrease in operating profit margin was partially offset by contract mix and labor efficiencies primarily due to increases in travel volume.

($ in millions)

Education revenues increased by $23.6 million, or 2.7%, to $904.0 million during 2024, as compared to 2023. The increase was primarily attributable to net new business wins, partially offset by a decrease in work orders.

Operating profit increased by $5.6 million, or 11.4% to $55.3 million during 2024, as compared to 2023. Operating profit margin increased by 48 bps to 6.1% in 2024 from 5.6% in 2023. The operating profit margin was positively impacted by labor efficiencies and lower amortization of intangibles, partially offset by higher bad debt expense.

($ in millions)

Technical Solutions revenues increased by $135.1 million, or 20.0%, to $809.3 million during 2024, as compared to 2023. Revenue growth was comprised of organic growth of 16.1% and acquisition growth of 3.9%. The organic revenue increase was primarily driven by higher project revenues due to the timing of completions of microgrid systems and generators installation projects, partially offset by a decrease in electric vehicle charging station sales. Acquisition growth of $26.3 million was driven by the Quality Uptime Acquisition, completed in the third quarter of 2024.

Operating profit increased by $16.2 million, or 30.4%, to $69.4 million during 2024, as compared to 2023. Operating profit margin increased by 68 bps to 8.6% in 2024 from 7.9% in 2023. The increase in operating profit margin was primarily attributable to the contract mix and lower amortization of intangible assets. This increase was partially offset by an expected charge to potentially settle a certain client matter.

($ in millions)

Corporate expenses increased by $206.5 million, or 91.1%, to $433.1 million during 2024, as compared to 2023. The increase in corporate expenses was primarily related to:

• a $95.7 million fair value adjustment to increase the contingent consideration related to the RavenVolt Acquisition recorded during 2024, as compared to a $45.6 million fair value adjustment to decrease the contingent consideration recorded during 2023;
• a $20.3 million unfavorable self-insurance reserve adjustment related to prior year claims from actuarial evaluations completed during 2024, as compared to a favorable $14.8 million adjustment recorded in 2023;
• a $24.3 million increase in costs associated with various systems’ go-live and other investments in technology; and
• an absence of a $24.0 million benefit from employee retention credits received during 2023.

This increase was partially offset by:

• an $18.6 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.

The Year Ended October 31, 2023, Compared with the Year Ended October 31, 2022

For a comparison of our Segment Information for the year ended October 31, 2023, to the year ended October 31, 2022, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended October 31, 2023, filed with the SEC on December 18, 2023.

Liquidity and Capital Resources

Our primary sources of liquidity are operating cash flows and borrowing capacity under our credit facility. We assess our liquidity in terms of our ability to generate cash to fund our short- and long-term cash requirements. As such, we project our anticipated cash requirements as well as cash flows generated from operating activities to meet those needs.

In addition to normal working capital requirements, we anticipate that our short- and long-term cash requirements will include funding insurance claims, dividend payments, capital expenditures, share repurchases, mandatory loan repayments, contingent consideration payments from acquisitions, and systems and technology transformation initiatives under our ELEVATE strategy. We anticipate long-term cash uses may also include strategic acquisitions. On a long-term basis, we will continue to rely on our credit facility for any long-term funding not provided by operating cash flows.

We believe that our operating cash flows and borrowing capacity under our credit facility are sufficient to fund our cash requirements for at least a 12-month period from the issuance of these financial statements. In the event that our plans change or our cash requirements are greater than we anticipate, we may need to access the capital markets to finance future cash requirements. However, there can be no assurance that such financing will be available to us should we need it or, if available, that the terms will be satisfactory to us and not dilutive to existing shareholders.

Credit Facility

On September 1, 2017, we refinanced and replaced our then-existing $800.0 million credit facility with a new senior, secured five-year syndicated credit facility (the “Credit Facility”), consisting of a $900.0 million revolving line of credit and an $800.0 million amortizing term loan. In accordance with the terms of the Credit Facility, the revolving line of credit was reduced to $800.0 million on September 1, 2018.

On June 28, 2021, the Company amended and restated the Credit Facility (the “Second Amendment,” and the Credit Facility as amended, the “Amended Credit Facility”), extending the maturity date to June 28, 2026, and increasing the capacity of the revolving credit facility from $800.0 million to $1.3 billion and the then-remaining term loan outstanding from $620.0 million to $650.0 million. The Amended Credit Facility provides for the issuance of up to $350.0 million for standby letters of credit and the issuance of up to $75.0 million in swingline advances. The obligations under the Amended Credit Facility are secured on a first-priority basis by a lien on substantially all of our assets and properties, subject to certain exceptions. We may repay amounts borrowed under the Amended Credit Facility at any time without penalty.

At November 1, 2022, we amended our Amended Credit Facility pursuant to the LIBOR Transition Amendment and the Fifth Amendment to replace the benchmark rate at which U.S.-dollar-denominated borrowings bear interest from LIBOR to the forward-looking SOFR term rate administered by CME Group Benchmark Administration Limited. As a result of these amendments, we can borrow at Term SOFR plus a credit spread adjustment of 0.10% subject to a floor of zero.

The Amended Credit Facility contains certain covenants, including a maximum total net leverage ratio of 5.00 to 1.00, a maximum secured net leverage ratio of 4.00 to 1.00, and a minimum interest coverage ratio of 1.50 to 1.00, as well as other financial and non-financial covenants. In the event of a material acquisition, as defined in the Amended Credit Facility, we may elect to increase the maximum total net leverage ratio to 5.50 to 1.00 for a total of four fiscal quarters and increase the maximum secured net leverage ratio to 4.50 to 1.00 for a total of four fiscal quarters. Our borrowing capacity is subject to, and limited by, compliance with the covenants described above. At October 31, 2024, we were in compliance with these covenants and expect to be in compliance in the foreseeable future.

During 2024, we made $32.5 million of principal payments under the term loan. At October 31, 2024, the total outstanding borrowings and standby letters of credit were $1,335.3 million and $57.9 million, respectively. At October 31, 2024, we had up to $423.6 million of borrowing capacity.

Reinvestment of Foreign Earnings

We plan to reinvest our foreign earnings to fund future non-U.S. growth and expansion, and we do not anticipate remitting such earnings to the United States. While U.S. federal tax expense has been recognized as a result of the Tax Cuts and Jobs Act of 2017, no deferred tax liabilities with respect to federal and state income taxes or foreign withholding taxes have been recognized. We believe that our cash on hand in the United States, along with our Amended Credit Facility and future domestic cash flows, are sufficient to satisfy our domestic liquidity requirements.

Share Repurchases

Effective December 13, 2023, our Board of Directors expanded our existing share repurchase program by an additional $150.0 million of our common stock. We repurchased shares under the share repurchase program during the year ended October 31, 2024, as summarized below. At October 31, 2024, authorization for $154.5 million of repurchases remained under the Share Repurchase Program.

(in millions, except per share amounts)

(1) Average price paid per share and total cash paid for share repurchases do not include any excise tax for stock repurchases as part of the Inflation Reduction Act of 2022.

Proceeds from Federal Energy Savings Performance Contracts

As part of our Technical Solutions business, we enter into energy savings performance contracts (“ESPC”) with the federal government pursuant to which we agree to develop, design, engineer, and construct a project and guarantee that the project will satisfy agreed-upon performance standards. Proceeds from ESPC projects are generally received in advance of construction through agreements to sell the ESPC receivables to unaffiliated third parties. We use the advances from the third parties under these agreements to finance the projects, which are recorded as cash flows from financing activities. The use of the cash received under these arrangements to pay project costs is classified as operating cash flows.

Effect of Inflation

The rates of inflation experienced in recent years have not had a material impact on our Financial Statements. We attempt to recover increased costs by increasing prices for our services to the extent permitted by contracts and competition.

Regulatory Environment

Our operations are subject to various federal, state, and/or local laws, rules, and regulations regulating among other things, labor, wages, and health and safety matters, as well as laws and regulations relating to the discharge of materials into the environment or otherwise relating to the protection of the environment. Historically, the cost of complying with these laws, rules, and regulations has not had a material adverse effect on our financial position, results of operations, or cash flows.

Cash Flows

In addition to revenues and operating profit, our management views operating cash flows as a good indicator of financial performance, because strong operating cash flows provide opportunities for growth both organically and through acquisitions. Operating cash flows primarily depend on: revenue levels; profitability levels of our jobs; the quality and timing of collections of accounts receivable; the timing of payments to suppliers and other vendors; the timing and amount of income tax payments; the actual payments of contingent consideration made in excess of the acquisition-date fair value; and the timing and amount of payments on insurance claims and legal settlements.

(in millions)

Operating Activities

Net cash provided by operating activities decreased by $16.6 million during 2024, as compared to 2023. The decrease was primarily driven by the timing of working capital requirements. The decrease was partially offset by the absence of a $66.0 million payment of deferred payroll taxes done in 2023.

Net cash provided by operating activities increased by $222.9 million during 2023, as compared to 2022. The increase was primarily driven by a $143.8 million payment made for the Bucio settlement in 2022 and the related income tax benefit.

Investing Activities

Net cash used in investing activities changed by $109.8 million during 2024, as compared to 2023. The change was primarily related to the Quality Uptime Acquisition, completed in 2024.

Net cash used in investing activities changed by $179.5 million during 2023, as compared to 2022. The change was primarily related to the Momentum and RavenVolt acquisitions, completed in 2022.

Financing Activities

Net cash used in financing activities was $61.5 million in 2024, as compared to net cash used in financing activities of $186.3 million in 2023. The decrease in net cash used was primarily related to lower share buyback repurchases in 2024 and an increase in our book cash overdrafts.

Net cash used in financing activities was $186.3 million in 2023, as compared to net cash provided by financing activities of $235.5 million in 2022. The change was primarily related to a decrease in net borrowings from our Amended Credit Facility, as in 2022 we had higher borrowings to fund the Momentum and RavenVolt acquisitions and higher share repurchases in 2023.

Dividends

On December 5, 2024, we announced a quarterly cash dividend of $0.265 per share on our common stock, payable on February 3, 2025, to shareholders of record on January 2, 2025. We declared a quarterly cash dividend on our common stock every quarter during 2024, 2023, and 2022. We paid total annual dividends of $56.5 million, $57.5 million, and $51.9 million during 2024, 2023, and 2022, respectively.

Material Cash Requirements from Contractual and Other Obligations

As of October 31, 2024, our material cash requirements for our known contractual and other obligations were as follows:

• Debt Obligations and Interest Payments – Outstanding payments on our Amended Credit Facility were $1,335.3 million, with $32.5 million payable within 12 months. We have future interest payments based on our hedged borrowings under our Amended Credit Facility of $15.7 million, which is payable within 12 months. The interest payments on our remaining borrowings under the Amended Credit Facility will be determined based upon the average outstanding balance of our borrowings and the prevailing interest rate during that time. See Note 11, “Credit Facility,” in the Financial Statements for further detail of our debt and the timing of expected future principal and interest payments.
• Operating and Finance Leases – We enter into various noncancelable lease agreements for office space, parking facilities, warehouses, vehicles, and equipment used in the normal course of business. Operating and finance lease obligations were $160.0 million, with $37.4 million payable within 12 months. See Note 5, “Leases,” in the Financial Statements for further detail of our obligations and the timing of expected future payments.
• Service Concession Arrangements – As defined under ASU No. 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services, our leased location parking arrangements are represented as service concession arrangements. We had contractual payments for these arrangements of $71.4 million, with $25.0 million payable within 12 months.
• Information Technology Service Agreements – Information technology service agreements represent outsourced services and licensing costs pursuant to our information technology agreements. We had contractual payments for these agreements of $117.1 million, with $49.7 million payable within 12 months.
• Benefit Obligations – Expected future payments relating to our defined benefit, postretirement, and deferred compensation plans were $38.1 million, with $3.4 million payable in 12 months. These amounts are based on expected future service and were calculated using the same assumptions used to measure our benefit obligation at October 31, 2024.
• Contingent Consideration Payable Connection with Our Acquisition of RavenVolt – At October 31, 2024, contingent consideration of up to $75.0 million in cash may be paid in calendar year 2025 if the RavenVolt business achieves certain financial targets in calendar year 2024, as defined in the merger agreement. We expect the RavenVolt business to achieve the aforementioned financial targets for calendar year 2024, and as such, we currently expect to make a $75.0 million payment in May 2025 for calendar year 2024.

In addition, our material cash requirements for other obligations, for which we cannot reasonably estimate future payments, include the following:

• Multiemployer Benefit Plans – In addition to our company sponsored benefit plans, we participate in certain multiemployer pension and other postretirement plans. The cost of these plans is equal to the annual required contributions determined in accordance with the provisions of negotiated collective bargaining arrangements. During 2024, 2023, and 2022, contributions made to these plans were $565.9 million, $574.6 million, and $555.1 million, respectively; however, our future contributions to the multiemployer plans are dependent upon a number of factors, including the funded status of the plans, the ability of other participating companies to meet ongoing funding obligations, and the level of our ongoing participation in these plans. Amounts of future contributions that we would be contractually obligated to make pursuant to these plans cannot be reasonably estimated. See Note 12, “Employee Benefit Plans,” in the Financial Statements for more information.
• Self-Insurance Obligations – We may make payments for exposures for which we are self-insured, including workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. At October 31, 2024, our self-insurance reserves, net of recoverables, were $517.3 million. As these obligations do not have scheduled maturities, we are unable to make a reliable estimate of the amount or timing of cash that may be required to settle these matters. See Note 10, “Insurance,” in the Financial Statements for further detail.
• Unrecognized Tax Benefits – At October 31, 2024, our total liability for unrecognized tax benefits was $7.9 million. The resolution or settlement of these tax positions with the taxing authorities is subject to significant uncertainty, and therefore we are unable to make a reliable estimate of the amount or timing of cash that may be required to settle these matters. In addition, certain of these matters may not require cash settlements due to the utilization of credits and net operating loss carryforwards as well as other offsets, including the indirect benefit from other taxing jurisdictions that may be available.
• Contingent Consideration Payable in Connection with Our Acquisition of RavenVolt – At October 31, 2024, contingent consideration of up to $205.0 million, of which $34.1 million has been accrued as of October 31, 2024, in cash may be paid in calendar year 2026 if the RavenVolt business achieves certain financial targets in calendar year 2025, as defined in the merger agreement.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements other than unrecorded standby letters of credit and surety bonds. We use letters of credit and surety bonds in the ordinary course of business to ensure the performance of contractual obligations and to collateralize self-insurance obligations in the event we are unable to meet our claim payment obligations. As we already have reserves on our books for the claims costs, these do not represent additional liabilities. The surety bonds typically remain in force for one to five years and may include optional renewal periods. As of October 31, 2024, these letters of credit totaled $57.9 million, and surety bonds and surety-backed letters of credit totaled $854.7 million, respectively. Neither of these arrangements has a material current effect, or is reasonably likely to have a material future effect, on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in accordance with United States generally accepted accounting principles (“U.S. GAAP”) requires our management to make certain estimates that affect the reported amounts. We base our estimates on historical experience, known or expected trends, independent valuations, and various other assumptions that we believe to be reasonable under the circumstances. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. There have been no significant changes to our critical accounting policies and estimates for the year ended October 31, 2024. We believe the following critical accounting policies govern the more significant judgments and estimates used in the preparation of our Financial Statements.

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Accounting Pronouncements

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We have market risk exposure related to interest rates and foreign currency exchange rates. Market risk is measured as the potential negative impact on earnings, cash flows, or fair values resulting from a hypothetical change in interest rates or foreign currency exchange rates.

Interest Rate Risk

We are primarily exposed to interest rate risk through our variable rate borrowings under our Amended Credit Facility, as further described in Note 11, “Credit Facility,” in the Financial Statements. Under the Amended Credit Facility, the term loan and U.S.-dollar-denominated borrowings under the revolver bear interest at a rate equal to one-month SOFR plus a spread. Euro- and sterling-denominated borrowings under the revolver bear at rate equal to the EURIBOR and SONIA reference rates, respectively, plus a spread. At October 31, 2024, we had total outstanding borrowings of $1,335.3 million. To limit exposure to upward movements in interest rates associated with our floating-rate, SOFR-based borrowings, we entered into interest rate swap agreements to fix the interest rates on a portion of our outstanding borrowings. At October 31, 2024, we had interest rate swaps with an underlying notional amount of $695.0 million and fixed interest rates ranging from 1.72% to 3.81%. Based on our average borrowings, interest rates, and interest rate swaps in effect at October 31, 2024 and 2023, a 100 basis point increase in SOFR, EURIBOR, and SONIA would decrease our future earnings and cash flows by $5.6 million and $5.4 million, respectively. As actual interest rate movements over time are uncertain, our interest rate swaps pose potential interest rate risks if interest rates decrease. As of October 31, 2024, the fair value of our interest rate swap agreements was an asset of $13.5 million.

Foreign Currency Exchange Rate Risk

We are primarily exposed to the impact of foreign exchange rate risk through our UK and Ireland operations where the functional currency is the British pound sterling (“GBP”) and Euro (“EUR”), respectively. As we intend to remain permanently invested in these foreign operations, we do not utilize hedging instruments to mitigate foreign currency exchange risks. If we change our intent with respect to such international investment, we would expect to implement strategies designed to manage those risks in an effort to mitigate the effect of foreign currency fluctuations on our earnings and cash flows.

a. Disclosure Controls and Procedures.

As of the end of the period covered by this report, our Principal Executive Officer and Principal Financial Officer evaluated our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and (2) accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.

b. Management’s Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of October 31, 2024.

Audit Report on Internal Controls Over Financial Reporting of the Registered Public Accounting Firm

KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Annual Report on Form 10-K and, as part of its audit, has issued its report, included herein, on the effectiveness of our internal control over financial reporting.

c. Changes in Internal Control Over Financial Reporting.

To support the growth of our financial shared service capabilities and standardize our financial systems, we continue to update several key platforms, including our HR information systems, enterprise resource planning system, and labor management system. The implementation of several key platforms involves changes in the systems that include internal controls. During the year ended October, 31 2023, we had a change in our internal control over financial reporting as a result of our implementation of a new ERP system and key boundary systems for the Education industry group that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. At the start of the year ending October 31, 2025, our Business and Industry and Manufacturing and Distribution industry groups migrated to this new ERP system and boundary systems, replacing our legacy systems in which the majority of our business transactions originate, are processed, and recorded. The remaining industry groups will transition to our new ERP system and boundary systems over the next two years. Our new ERP system and boundary systems are intended to provide us with enhanced transactional processing and management tools compared with our legacy systems and are intended to enhance internal controls over financial reporting. We believe our new ERP system and boundary systems will facilitate better transactional reporting and oversight, enhance our internal control over financial reporting, and function as an important component of our disclosure controls and procedures. Although some of the transitions have proceeded to date without material adverse effects, the possibility exists that they could adversely affect our internal controls over financial reporting and procedures.

Other than the change of our ERP system and boundary systems for the Education industry group, there have been no other changes in our internal control over financial reporting during the fiscal year 2024 identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.