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Greetings and welcome to the ABM Industries First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Paul Goldberg, Senior Vice President, Investor Relations for ABM Industries. Thank you. You may begin.

Good morning, everyone, and welcome to ABM's first quarter 2023 earnings call. My name is Paul Goldberg, and I'm the Senior Vice President of Investor Relations at ABM. With me today are Scott Salmirs, our President and Chief Executive Officer; and Earl Ellis, our Executive Vice President and Chief Financial Officer. Please note that earlier this morning, we issued our press release announcing our first quarter 2023 financial results. A copy of the release and an accompanying slide presentation can be found on our website abm.com. After Scott and Earl's prepared remarks, we will host a Q&A session. But before we begin, I would like to remind you that our call and presentation today contain predictions, estimates and other forward-looking statements. Our use of the words estimate, expect and similar expressions are intended to identify these statements, and they represent our current judgment of what the future holds. While we believe them to be reasonable, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially. These factors are described in the slide that accompanies our presentation, as well as our filings with the SEC. During the course of this call, certain non-GAAP financial information will be presented. A reconciliation of historical non-GAAP numbers, GAAP financial measures is available at the end of our presentation and on the Company's website under the Investor tab. And with that, I would like to now turn over the call to Scott.

Thanks, Paul. Good morning and thank you all for joining us today to discuss our first quarter results. ABM posted solid results in the first quarter, reflecting strong execution by the ABM team, amid a challenging operating environment. Organic revenue grew 1% even as we experienced a $35 million reduction in disinfection-related work orders versus the prior year period. Adjusted EBITDA was essentially unchanged from last year as we effectively mitigated much of the impact from higher wage costs, labor shortages and lower disinfection-related work orders. In all, ABM generated first quarter revenue of $2 billion with an adjusted EBITDA margin of 6.4%, which remained well above pre-pandemic levels, reflecting improved operational efficiency that we believe can be enhanced over time through our ELEVATE initiatives. So, I'm certainly pleased with our performance in the first quarter and that we remain on track to achieve our full-year outlook. Despite continued economic uncertainty and persistent inflationary pressures, our business remains resilient given the essential nature of our services. Our clients are increasingly focused on attracting talent and retaining customers by creating and maintaining environments that are inviting healthy and energy-efficient. We remain uniquely positioned to support them, given our financial strength and industry-leading capabilities, and the fact that we continue to innovate, has never been more appreciated or important to our clients. I'll now discuss the demand environment for each of our industry groups. Beginning with B&I, office occupancy rates in the first quarter remained at relatively stable levels at around 50% on a blended basis, though occupancy varies region by region and by day of the week. We don't expect significant changes to these trends in 2023 as employers continue to accommodate remote and hybrid work. So office occupancy will likely marginally tick up. Our expectation is that through 2023 B&I will be the steady performer we are accustomed to. Moving to Aviation, following a rapid recovery in travel last year, consumer and business travel, including parking and transportation has largely returned to pre-pandemic levels. As a result, we anticipate that our Aviation revenue growth rate in 2023 will be reflective of more normalized overall market growth as compared to the accelerated level we experienced in fiscal 2022. We do expect continued growth in our ABM Vantage parking solution, which is proving to generate higher revenue for our clients, while improving the traveler experience. That all being said, labor cost inflation and worker availability remain ongoing challenges in this segment, in part exacerbated by the lengthy TSA background check process that we've spoken about. I'm pleased to announce that after quarter end, we received formal approval on the parking project we discussed last quarter. As you'll remember we had completed much of the work in 2022, but we were awaiting final client approval in order to recognize the revenue and associated earnings. The project revenue will be recognized in Q2. Moving on demand in Manufacturing and Distribution continues to be strong, and our team is doing an outstanding job of driving organic growth by expanding the served markets and bringing on new clients. As an example, ABM has won nearly $50 million of new business in the U.S. semiconductor manufacturing market over the past 12 months. This area is experiencing renewed growth, driven by the recent enactment of the CHIPS and Science Act. This legislation provides approximately $280 billion to fund domestic research and manufacturing of semiconductors. We expect revenue growth in our M&D segment to remain solid for the remainder of the year. Turning to Education. The addition of sizable new clients in the fourth quarter of 2022 helped drive solid mid-single-digit organic revenue growth in this segment. We have a strong pipeline of new business opportunities in the fiscal year, and I'm confident ABM will win our fair share given our competitive positioning. While labor cost inflation in non-unionized markets continues to be a challenge for the segment, we incrementally reduced over time this quarter by filling open positions more quickly than in 2022, and our focus on hiring in this area should prove beneficial in the near term. In Technical Solutions, we continue to see the benefits from the demand for electric vehicles and the consequent need to expand EV charging infrastructure. This shift to EVs will be a multi-year trend, providing ample opportunity for ABM in the future. After several quarters of strong growth, our EV-related revenue declined in the first quarter, primarily reflecting program timing and supply chain delays. Demand remains strong and we expect the pace of EV charger installations to pick up in the second half of the year as we begin to deliver on recently won programs. RavenVolt continues to experience strong customer demand for its microgrid solutions and the sales pipeline continues to grow, though first quarter installations were impacted by some lingering supply chain constraints in what is typically a seasonally slower period. Total ATS backlog has grown significantly to nearly $450 million supporting our outlook for strong full-year revenue growth, escalating in the back half of the year. From a strategic perspective, we've continued to make progress on our ELEVATE initiatives. Most notably, we're developing a new mobile app for our frontline team members. This app will facilitate a smoother time and attendance experience, offer greater clarity on work schedules on tests and pride quick access to shift change notifications. We should begin piloting this app by the middle of this year with a rollout plan for 2024. We're also beginning to scale a workforce management tool that enhances visibility into labor productivity levels across our portfolio of accounts. These advanced analytics will enable more efficient labor management over time and also provide actionable insights to enhance the efficiency of lower-performing buildings. We're also in the final stages of testing our cloud-based ERP financial system for its initial deployment. This segment-by-segment rollout will begin midyear as part of our ELEVATE technology roadmap. From an IT and innovation standpoint, we are at an exciting time for ABM as a great deal of hard work begins to get embedded across the organization. Lastly, our team has been making some great progress on our ESG journey, which resulted in a couple of nice accolades for ABM. We were recently recognized by Newsweek as one of America's Most Responsible Companies. And we also won the prestigious SEAL Business Sustainability Service Award. We also formally launched an initiative called ABM Impact Groups, which are voluntary employee-led groups, whose aim is to foster a diverse inclusive workplace aligned with ABM's mission, values and business strategy. Before I turn it over to Earl, I want to make a few summary comments. I couldn't be proud of the entire ABM team, who continue to deliver solid results, despite challenging market conditions. ABM's resilience and our ability to adapt, innovate, scale and deliver results in dynamic conditions is truly a hallmark of our company. As we move forward, I'm confident that our team will continue to provide our clients with extraordinary service and build value for our shareholders. Our business is supported by a substantial base of recurring revenue in our janitorial, engineering and parking services. Where we serve more than 20,000 clients and we will continue to invest organically and in adjacent businesses with large addressable markets and high growth rates and margins, which were certainly demonstrated with the ramp-up of our EV charging business and the acquisition of RavenVolt. As we execute this strategy, we see ABM evolving into a higher growth, higher margin facility solutions provider underpinned by the resilient strength of our core businesses. Now, I will turn it over to Earl for the financials.

Thank you, Scott, and good morning everyone. For those of you following along with our earnings presentation please turn to Slide 5. First quarter revenue increased 3% to $2 billion, reflecting organic revenue growth of 1% and a 2% contribution from the acquisitions of Momentum and RavenVolt. As a reminder, we will anniversary the acquisition of Momentum in the second quarter. Moving on to Slide 6, net income in the first quarter was $38.5 million or $0.58 per diluted share, down from $76 million and $1.11 per diluted share last year. The decrease in GAAP net income partially reflected higher interest expense and labor costs. The absence of the benefit from a prior year insurance adjustment, lower volume of higher-margin virus protection services and the absence of a gain on sale of assets recorded in the prior year period. Adjusted net income decreased 18% to $52.7 million an adjusted earnings per share was $0.79, a decrease of 16% from the prior year period. The decreases in adjusted net income and adjusted EPS were primarily due to higher interest expense and wage inflation, partially offset by tight cost controls. Adjusted EBITDA of $122.7 million was essentially flat with the prior year period and adjusted EBITDA margin was 6.4% versus 6.6% last year. This performance largely reflects the decline in higher-margin disinfection services as well as higher labor costs, which were partially offset by price increases and effective cost management. Now turning to our segment results, beginning on Slide 7, B&I revenue increased 1% to over $1 billion, primarily driven by a contribution from acquisitions. Excluding acquisitions, organic revenue declined 1%, mainly reflecting a lower volume of disinfection-related work orders versus prior year. Operating profit in B&I decreased 9% to $75.9 million and operating margin was 7.3%, down 80 basis points from the prior year. Operating profit and margin declines were largely due to a change in business mix. Aviation revenue increased 6% to $212.3 million, marking the seventh consecutive quarter of robust year-over-year revenue growth. This improvement was driven by increased leisure and business airline traffic as well as related increases in parking activities. As Scott mentioned earlier, we will recognize the revenue for the parking project in Q2 as we now have received official client acceptance. Aviation's operating profit was $8.3 million versus $8.9 million in the prior year period and margin was 3.9% compared to 4.4% last year. Operating profit and margin reflect the impact of higher labor costs and labor availability challenges, partially offset by price escalations. Turning to Slide 8, manufacturing and distribution revenue grew 6%, to $380.5 million reflecting solid market demand and the addition of clients in new end markets such as Life Sciences and semiconductor manufacturing. Operating profit increased 1% to $40.9 million on higher volume, while operating margin declined 60 basis points, 10.7%. Margin was impacted by lower levels of disinfection-related work orders. Education revenue increased 4%, $214.9 million, benefiting from the addition of new clients in the fourth quarter of 2022. The new business pipeline in education remains favorable and we expect education to continue to post positive year-over-year growth in 2023. Education operating profit was $11.8 million, down 6% from the prior year period, while margin decreased 50 basis points to 5.5%. These declines were attributable to lower enhanced clean revenue as well as higher wages including overtime expenses, partially offset by price increases. Technical Solutions grew revenue 4% to $147 million driven by our recent RavenVolt acquisition. Organic revenue declined 9% mainly due to the timing of large EV charger installation program and the push out of some bundled energy solutions projects as well as last year's sale of customer contracts. Backlog in ATS is nearly $450 million and we are expecting a strong back half of the year, assuming supply chains are supportive. ATS operating profit was $7.2 million and margin was 4.9%. This compares to operating profit of $9.2 million and margin of 6.5% last year, after adjusting for a $7.7 million gain on the sale of customer contracts. The decreases in margin and profit were largely driven by changes in service mix and the amortization of intangibles related to the RavenVolt acquisition. Moving on to Slide 9, we ended the first quarter with total debt of $1.5 billion including $83.6 million in standby letters of credit, resulting in a total debt to pro forma adjusted EBITDA ratio of 2.6 times. At the end of Q1, we had available liquidity of $651.2 million including cash and cash equivalents of $87.9 million. Free cash flow in the first quarter, which is generally softer from a seasonable perspective, due to compensation and tax payments was negative $84.8 million, and included our final $66 million installment of our CARES Act repayment. Interest expense was $19.8 million in the first quarter, up nearly $14 million over the prior year period and about $4 million sequentially from Q4. The increase was due to significantly higher interest rates as well as a year-over-year increase in total debt. Now let's move on to our full year fiscal 2023 outlook, as shown on Slide 10. Our expectations for the full year are largely unchanged in the aggregate. We continue to expect GAAP EPS to be in the range of $2.43 to $2.63, with adjusted EPS to be in the range of $3.40 to $3.60. Interest expense is expected to be between $71 million and $74 million in 2023 and is trending towards the higher end of the range. Our tax rate before discrete items is anticipated to be between 29% and 30%. As we discussed last quarter, we expect to grow adjusted EBITDA at a mid-single-digit rate with an adjusted EBITDA margin between 6.4% and 6.8%. Full year 2023 free cash flow is expected to be between the range of $270 million to $300 million before the final installment of our CARES Act repayment of $66 million, which was made in Q1. And combined integration and ELEVATE costs of about $75 million to $80 million. And as we communicated last quarter with respect to the cadence of earnings, we expect approximately 45% to 50% of full year adjusted earnings per share to be generated in the first half of the year. With that, let me turn it back to Scott for closing comments.

Thanks, Earl. I'm very excited about the future of ABM. Nobody in our industry matches the scope of our services, the scale of our operations or the strength of our balance sheet. I'm confident we'll deliver a solid 2023 and continue to make progress toward our 2025 goals. With that, let's take some questions.

[Operator Instructions] Our first question comes from the line of Tim Mulrooney with William Blair. Please proceed with your question.

Hi. This is Sam on for Tim. Thanks for taking our questions here. I guess to start, I think we had a lot of discussions around labor availability and the difficulties in finding labor. I was hoping you could also comment on how labor turnover has been trending over the last few quarters and if any of the platform investments that you're making might meaningfully bring that up?

Sure. Thanks, Tim (sic) [Sam]. Look, I think we're starting to see a little bit of a stabilization on turnover. It's still not great, right? The market is still tough. But for us, we've been really doubling down on talent acquisition. We have a new leader that's been with us for about a year, and we're building that team, and we're getting some really good traction. And we're also supplementing it with tools we have, what we call a team member retention tool that's doing analytics. We have -- we've talked before about the fact that ABM now has data scientists onboard, and we're just looking at all this data and figuring out where the turnover is, where it's more acute and how to attack it. And it's worked out. I mean, even in a segment like Education, where we had much higher turnover just because of the nonunion nature of it, we're starting to see more applicant flow, more people starting jobs because we've attacked it with tools.

Okay. I appreciate the color there. Maybe pivoting to our eMobility business. Many of the folks that we speak to are initially surprised that you're one of the largest installers of EV chargers. And my sense is, as you install more microgrid solutions, that same surprise will show up. I guess, can you help explain why you're able to come in and provide these solutions at such a large scale? Is it that you're working with the same point of contact as your other services or maybe leveraging the same labor? Just anything to help us understand that better would be helpful.

Sure, Tim (sic) [Sam], it's about focus, right? This is something we've been on for two or three years now. We saw the signs on EV and we built a team around it, and we've just been able to scale it. No pun intended, there's a lot of energy around it in our organization, and we feel really, really good about it. And we had a little bit of a slowdown in Q1 because we had a major installation with a large dealership that was rolling off, and we are starting another massive installation of over 1,000 charges with a top three automaker. And that, we thought was going to start a little earlier than it's kicking off. So that's why you see in Q1 a little bit of a dip, but the pipeline is super strong and we feel really great about it.

Excellent. Appreciate the color.

Great.

Thank you. Our next question comes from the line of Sean Eastman with KeyBanc Capital Markets. Please proceed with your question.

Hi team, nice start to the year. And thanks for taking my questions. I just wanted to start on ATS since that's kind of where the -- some of the noise is in the first quarter. It sounded like from Earl's comments that we're assuming some improvement in the supply chain in the second half. I just -- in light of that, I wanted to understand the nature of the supply chain-related delays early in the year so we can track them.

Sure. So I think I'd start off by saying we have a $450 million backlog in ATS comparing to this time last year, which was probably like $300 million. So the backlog is super strong. And for us, it's always been a back half of the story, Sean. If you can go back years and you look at ATS, and it's always been a back half story. So we feel really good about where we're sitting now. The supply chain, I will tell you the supply chain has been loosening up a little bit, right? Because what's been happening is the delays, although they've not gotten much better from a timing standpoint, they've stabilized, right? So I mean, I could just give you an example. Like pre-COVID to order a chiller, you'd have a 24-week wait. Now it's 52 weeks, right? But it's stabilizing at 52 weeks. And we're doing a lot of preordering right now. We've looked for alternate suppliers because a lot of the stuff, whether it's chillers, EV chargers, switchgear was coming from China. And when they had their lockdown policy, they weren't producing. So we had our teams flying all over the country locking up alternative suppliers. So we're in the process of catching up now. And that's why we feel so confident in the back half of the year because I'll remind you, and I think you know this, but when we say $450 million in backlog, those are signed contracts. We just haven't turned the wrench yet. So it's not sales pipeline, it's actual contracts. So that's why we feel so confident about the back half.

All right. Thanks for that Scott. That's helpful. And then moving over to M&D where the growth has just been super strong and resilient. Maybe a little more color on what's happening there. I mean, are these new facilities? Are you kind of taking share in some existing facilities? And also, if you could comment on ABM's ability to staff up to meet that growth and keep costs under control, that would be an interesting discussion.

Yes. I mean, look, we're just so pleased that we pivoted to this segment because if you remember, this is kind of a new industry group that we recently stood up and it was a good call. So they continue to see amazing opportunities. We're focused on pharmaceutical now. E-commerce is slowing down a little bit. But make no mistake, it's still pretty robust, right? It's just not the outsized growth from the big e-commerce companies that you know about, right? But we still see so much headroom. We talked a little bit about -- in the prepared remarks about semiconductors, and we just got a really large contract in the semiconductor space that's a multimillion dollar contract that we think could quadruple over the next few years. So super focused on all the areas around manufacturing and distribution because it's -- from a directional standpoint, we think we're right on point. So we're not backing off on growth estimates. Over the next few years, this is going to be a solid industry growth.

And Scott, maybe just on the team's ability to bring the labor in to support these growth rates, this was a concern for the Street as revenue started to recover. So, just seeing, a segment with that kind of level of organic growth in this labor environment, maybe comment on the execution there on the labor availability side?

Yes, so always a challenge, right? Anyone who would say it's not, it would be foolish, right? It's always a challenge. But you also have to remember, though, when we're winning facilities, there's already existing labor there. So it's not like you're starting from zero, right? So when we take over a big site, there's a full staff, right? So that's helpful. And then one of the things that makes, ABM so, I guess, interesting from a client's perspective is we have this branch network, right? So, we have offices in every city where we're probably already the number one service provider. So we have access to labor. We have fully built out networks of HR recruiters. So that branch network that we have across the country is a huge advantage because if we were - if one of our competitors were to pick up one of these sites in an area where most likely they wouldn't have business, they're starting from zero. They don't have the infrastructure that ABM has. And I think that's what's been so compelling on our client pitches. We deal - we show them a map of ABM offices all over the country in the branch network. And it's just a homerun, because then you also known as you're growing and you light up facilities across the country, there is an almost 100% chance that ABM is going to have a branch network system in that area. So that's what's become so compelling.

Interesting, thanks Scott, thanks team.

Got it.

Thank you.

Thank you. Our next question comes from the line of Andy Wittman with Baird. Please proceed with your question.

Oh great, thanks for taking my questions. Good morning everyone. I guess I wanted to ask on the work order decline. Scott, you started your prepared remarks noting that there is a $35 million year-over-year reduction in these work orders. I was just wondering, that's actually a pretty good chunk of business, obviously it has implications on your margins as well. I was just wondering, how did that compare to what you were expecting? Obviously, work orders have been trending down. But I thought previously that - thought that this was stabilizing. So is this the stabilized decline at $35 million or is this a little bit more - is this down a little bit more than maybe you would have thought?

Yes so what it, says. Yes, that's a good call out. No, I think this is - we're almost at normalization. We had a little bit in Q2 as well last year, Andy, but we're pretty much at stabilization. And that's almost all related to kind of the disinfection work orders. But there's also some general slowdown in regular work orders as well. Like there's no question in this economic climate that people are pulling back a bit. So I think from - we'll be lapping disinfection one more quarter, and then we're done with that. And then could it trickle down another 0.5 point or a point possibly, depending on the economic outlook. So that wouldn't be all that surprising to us, but again still, above pre-COVID levels.

I got it, thanks that's, helpful. I guess - I don't know where to go next. Look, can we talk about the corporate unallocated segment results? The cost there was less than we'd expected and less than the prior run rate you've been previously running the adjusted corporate expense, around $60 million, $62 million, this quarter, $52 million? It's a pretty big step down sequentially for what I usually think of something that should be relatively stable. So I was wondering maybe, Earl, if you could talk about some of the causes for that - and what you expect in this line specifically for the remainder of the year.

Yes, no. Thanks for the question, Andy. In light of the economic climate, we have been very, disciplined in cost management. So just to give you some examples, travel and entertainment has been cut to a bare minimum. When we look at all of our open headcounts, we've been very, disciplined in ensuring that we're not filling headcounts unless they are value-added and/or mandatory. And so, if you look at in light of kind of like what's actually happened in our P&L over the last quarter with lower disinfection revenue, we still actually have higher wages. So the wage increases that we saw last year have not abated. And although the teams are doing a great job in covering that, it still is having an impact on our overall margins and profitability. And as a result of that, we've been very, very diligent in cost management.

Sorry, second part of that question on what you expect for the rest of the year. Is that - is this $52 million run rate kind of the right number or what do you think there - I don't think - based on your answer, but I don't know what to...?

Yes, no - yes we're going to continue to manage the P&L. You might see an uptick in there, but not back to the $60 million mark that we've actually historically seen.

Got it. So Scott, when you put it all together, we heard a little bit more interest expense or turning to the higher end of the range that, you've previously given. When you think about this guidance range, Scott, does - a little bit, does your commentary on work orders here and the interest expense, does that bias you to one side of the range? Could you care to comment on that?

No look, we're sticking to our guidance range. We feel good about it. It's - again, it's - nothing has really changed, Andy, other than we definitely see the climate is just not as robust. But we're so good at managing to the bottom line and going after price increases pushing out - to offset labor. So it doesn't bias me towards the bottom end. I still feel really good about the range and confident we're going to hit it.

Good, okay. Thanks guys.

Thanks.

Thank you.

Thank you. Our next question comes from the line of Marc Riddick with Sidoti & Company. Please proceed with your question.

Hi, good morning everyone.

Good morning, Marc.

Good morning.

So I wanted to start on aviation. And maybe you could touch a little bit on maybe consumer travel transfer kind of the leisure side of things, at least. Was kind of one of the first things to recover post pandemic. I was wondering if you can talk a little bit about maybe what your expectations are there, going forward? It certainly seems as though folks are still out there traveling. Particularly, the flights are, more full than I would have liked. But maybe you could talk a little bit about what your expectations are going forward there. And then I have a quick follow-up?

Yes, look, I think for the most part, we think the aviation sector has normalized. We're kind of - we're at business as usual, if you will, from the demand side, right? To your point, like travel is robust. So - and it's been like that for, I would say, a quarter or two, right, at least. So we feel good about it. We feel good about our strategy of focusing on the infrastructure in terms of airports versus airlines, in terms of moving our mix of business. And you've seen a pretty significant margin tick up since pre-COVID as a result of that. So, we think the aviation sector is going to remain strong through the balance of the year.

Great. And then just to shift back to the work order question. I was sort of curious about something. One of the things that - your quarter end at the end of January - at the end of January, and if I remember correctly, we had literally no snow in New York City your entire first quarter, which, there were times where a couple of good snowstorms through the country could have been pretty helpful with those kind of orders? I was wondering if - is there any extent to which that had any impact or maybe what you saw there or was that kind of a net, net now over the year?

Yes, it's probably not significant from a financial standpoint. It's funny, if you talk to the team running the Northeast, they wouldn't like the snowstorm too, I guess. But when you talk about kind of an $8 billion revenue company, it becomes insignificant.

Got you, thank you very much.

You got it.

Thank you [Operator Instructions] Our next question comes from the line of David Silver with CL King & Associates. Please proceed with your question.

Yes, hi good morning, thank you. I would like to maybe start just with a question about the trend in your Education segment. So I think you called out - during your prepared remarks, you called out some new wins that you thought would be meaningful in terms of growth trend going forward? So a couple of questions, but maybe could you characterize the value proposition or what drove that unusually good trend that you called out? And then secondly, would this be the type of new Education business that tends to carry with it maybe some ATS work possibilities? So kind of what are the drivers behind that recent pickup in business in your Education segment?

Yes. Look, it's like anything else. I think there's a couple of things. One, we have new leadership on our Education account over the past year or so, and it's paying real dividends for us. And there's just a renewed focus on value-added clients and it's just paid off, David. Our margins are still trending higher than they were pre-COVID. And if you look at an operating margin of 5.5% in this labor environment -- because what you have to remember is Education for us is almost all nonunion. And nonunion is where the pressure is on wage growth, right, because it's not part of a collective bargaining agreement where it's kind of a predicted wage growth. So you have higher wage growth, you have higher turnover, a lot more use of overtime. So we're super proud of the financial discipline and what we've been able to do in the Education Group. And we just think there's just tremendous opportunity. We've been investing in business development people in that area. We have new leadership, in fact, even on the business development side. So -- and our pipeline is bigger than it's ever been before. So yes, I'm glad you asked that question because we're super proud of how we've moved the Education Group from where it was maybe two or three years ago to where it is today. So --

And then just maybe a follow-on comment about the potential for ATS work to flow from that would be helpful. Thank you.

Yes, I think that's right. The relationship -- the working relationship between our Technical Solutions Group and the Education Group is super powerful. And so not only am I excited about the cross-selling opportunities, but I have to tell you, probably every single presentation we've been on for new business in the last year has included the Technical Solutions Group even if it was a janitorial contract because we're talking about the power to cross-sell. Because that's not a bad word, right? For clients that's value-add. So we'll go into a presentation on janitorial and say to them, by the way, if there's an energy efficiency contract or potential here, if there's EV charging potential. And if clients make decisions based on the breadth and scope of your portfolio. So it may not be immediate, David, but it's now in the background and it's part of our book of services. So I think it's going to be big in the future for us.

Very good. Thanks. I'd like to maybe shift over to your RavenVolt business. Admittedly, I'm still getting up to speed on microgrids and whatnot. But a new scan that I did before this call, I mean, it just kind of indicates that at least for high-profile microgrid projects, there tend to be, I don't know, a lot of delays, some pushback from the local utilities and this and that, in other words, things that don't maybe necessarily suspend -- sorry, cancel the business, but maybe building in more delays or more bureaucratic or administrative tasks before you can get to work. Could you comment since you've closed on RavenVolt, has there been a change in the operating environment? I mean, is there a more extended time period from when you identify the opportunity to when you sign a contract to when you actually can complete the work? Or is it kind of going as you anticipated when you first made the investment in RavenVolt? Thank you.

Yes, sure. There are a couple of things to unpack there. First of all, I'll start by saying we're as thrilled with RavenVolt acquisition and the team and the leadership as we've ever been from the day we bought them. So that's not changed. And in terms of the utilities and the pushback, I'm surprised that you're hearing that. We're not seeing that as much because there's so much talk out there about the electrical grids, around the country's ability to handle all the demand that's going to be put on from EV chargers, that microgrids and a lot of places is a welcome change to go off power grid and get power. So maybe there's some more administrative work. But like in terms of kind of utilities' desire for microgrids, we haven't seen a major change in that. And if there's anything that's out there as a little bit of a headwind the microgrids, I'd say it's the same thing in our bundled energy solutions group which is using a lot of the same equipment. There's supply chain issues which I talked about earlier. Granted, it's great that they're stabilizing now and we're getting a hold of it and we're preordering. So we're doing all that good stuff. But I think it's really about supply chain. It's really about supply chain. And we seem to be handling and being proactive on it and, again, not backing off on the performance. And we think it's just going to be a second half story.

Okay. Great. I'm going to squeeze one more and then this would be about interest expense. And again, it's -- I'm thinking of yesterday's comments by our Fed Chief. But I was just wondering a couple of things. First off, have you thought about or how do you think about the opportunity or the benefit of trying to lock in, I guess, interest rates in the current environment on the variable portion of your debt? Just using derivatives or whatever. But the -- just how you view the volatility in the particular rate that you're most sensitive to. And then if you could remind me in the variable portion, should we be tracking, I don't know, the two year treasury or is it SOFR, what particular rate base would your variable rate borrowings be most sensitive to? Thank you.

Yes. No, thanks for the question, David. I would say we're always looking at rate locks and kind of like our mix of fixed and variable debt. And in fact, last year, as we saw the ramp-up in rates, we were very active in investing in rate locks. And so just to put it in perspective, right now we're about 60% fixed, 40% floating. We actually like that mix at this point in time, but it's something we will continue to look at, absolutely. As far as our variable debt, it is actually based off of SOFR at this point in time.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Salmirs for any final comments.

Well, thanks all for participating. And as you can see, there's a lot of enthusiasm and energy in what we're doing here. And we're excited about the future, we're excited about our investments in ELEVATE. And we'll come back to you in Q2 with an update, but we're -- we feel like we're in a really good place now. So thanks for participating today.