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Greeting and welcome to the ABM Industries Third Quarter 2024 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 Mr. Paul Goldberg, Senior Vice President, Investor Relations. Thank you. You may begin.

Good morning, everyone, and welcome to ABM's Third Quarter 2024 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 third quarter 2024 financial results. A copy of that 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 get started, I would like to remind you that our call and presentation today contains predictions, estimates and other forward-looking statements. Our use of the words estimate, expect and similar expressions are intended to identify these statements, and they represent our current judgment of what the future holds. While we believe them to be reasonable, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially. These factors are described in the slide that accompanies our presentation as well as our filings with the SEC. During the course of this call, certain non-GAAP financial information will be presented. A reconciliation of historical non-GAAP numbers to GAAP financial measures is available at the end of the presentation and on the company's website under the Investor tab. And with that I would like to now turn the call over to Scott.

Thanks, Paul. Good morning and thank you all for joining us today to discuss our third quarter results. ABM posted another strong quarter driven by double-digit growth in Technical Solutions and Aviation and supported by the continued resilience of our business and industry segments. Once again, our team did a great job focusing on our clients and executing in still choppy commercial real estate markets, enabling us to generate solid organic revenue growth on an enterprise level and post-resilient margins. We delivered adjusted EPS of $0.94, which is slightly ahead of our expectations. ABM's business model, which last quarter I described as a consistent cash generating flywheel was in full force in Q3 as we leveraged our capital light model, scale and leading market positions to strengthen our enterprise through our internal ELEVATE initiatives especially our technology road map. During the quarter, we continued to make progress delivering our core janitorial and engineering services through advanced use of data and analytics such as our workforce productivity optimization tool or WPO as we call it. Simply said, WPO, which is being piloted at multiple sites is an analytics tool set that allows operators to easily identify opportunities for productivity improvements. It benchmarks productivity based on facility profiles to ensure we're operating as efficiently as we should based on the facility archetype. We've already begun to see benefits of this technology in terms of improved efficiency and client outcomes and look forward to more broadly implementing these new tools over the next couple of years. We also acquired Quality Uptime Services, which expands our position in the fast-growing data center vertical by adding new capabilities in uninterrupted power supply systems and battery maintenance. We were able to complement these growth and self-help initiatives with additional capital returns to our shareholders via our long-standing dividend. Continual investments to build and strengthen our core strategic investments in complementary services and markets that offer secularly high growth rates and steady returns of capital to our shareholders via our long standing dividend are the key initiatives in our go-forward plan. Our diversification, scalability and the essential nature of the services we provide, all underpin the consistency and resiliency of our results, which, in a sense, fuels our strong cash flow. Now let me quickly run through what we're seeing in our markets before I turn it over to Earl for the financials. Our B&I segment has remained quite resilient, benefiting from our diverse client and service mix, our leading market position and our penetration in the higher-performing Class A segment of the market. We've also done a nice job diversifying geographically and we continue to renew business throughout the US such as the janitorial business of the MetLife building, a large marquee property here in New York. Although we're not ready to say commercial real estate market is rebounding, things seem to be firming up and pressure to return to offices is definitely on the rise. This was highlighted by a recent survey conducted by CBRE, whereby 38% of the 225 corporate real estate executives polled that they plan to expand their office space in the next three years. This is up from 20% in last year's poll. Also 37% of those surveys anticipate downsizing versus 53% in the prior year. We're also closely monitoring this dynamic situation and talking with our clients about their plans. We believe we need another quarter or two to get a clearer picture of the timing and scope of the potential recovery, but we're optimistic. Our manufacturing and distribution markets continue to be healthy driven by a generally strong industrial economy, secular growth in the US semiconductor and data center markets and the general trends towards onshoring manufacturing in the US. We've continued to win new business in these markets and have invested in important resources to further leverage these trends. These robust markets and our growth initiatives addressing them have helped to partially mitigate the previously discussed rebalancing of work from a large client. I'm also proud of the team as we have proactively let some other business go where we were not receiving appropriate value for the service we are providing. I have confidence that our M&D segment will quickly return to mid-single-digit organic growth once the rebalancing annualizes, if not before. Aviation is having an amazing year and there are markets remain very healthy. We have emerged as a clear leader in the Aviation facilities management space driven by the industry's best team and by our technology leadership, including our award-winning ABM clean product line. I'm thrilled our Aviation segment has grown to be a $1 billion business but I'm even more encouraged by the margin improvements we've made over the last few years. It's a clear indication of the value we provide and our strategy around client segmentation. Although we aren't expecting to continue to deliver double-digit growth quarter after quarter as the sector normalizes, I have no doubt Aviation will remain strong going forward. Education remains solid. Although it's not our fastest-growing segment, it is typically very stable and provides a foundation of earnings and cash flow that can be utilized across ABM. We also believe there's an opportunity to grow in education especially with larger school districts, colleges and universities, which can greatly benefit from our ABM Performance Solutions offering known as APS. As a reminder, APS is our single source operating model which delivers integrated end-to-end facility services, generating cost and operating efficiencies through one contract, one invoice and one source of accountability. Like we've done with Providence School District, Utica University and others, we remain focused on bringing new APS clients aboard. Lastly, regarding Technical Solutions, our microgrid business is thriving, driven by a large contract won last year. And while our RavenVolt team progresses on that contract, we continue pursuing numerous other opportunities with several other prospects seeking traditional microgrids as well as the battery energy storage systems. We expect the need for energy resiliency and redundancy will only grow over time. Similarly, we know the proliferation of AI will drive significant growth in data center and mission-critical infrastructure and we have a growing position in this market. While our bundled Energy Solutions business is still soft, we believe the anticipated reduction in interest rates later this year and beyond that, will improve projected ROIs and hopefully restart the market. In all, we feel good about our markets. So there are still challenges to overcome both macro and specific to our industry. We had a great third quarter and have confidence we will finish the year well. As such, we are raising our full year guidance for adjusted EPS and now expected to be in the range of $3.48 to $3.55 versus our prior range of $3.40 to $3.50. With that, let me turn it over to Earl to walk you through the details and I'll be back shortly with some final comments.

Good morning, everyone. As Scott mentioned, we are quite pleased with our third quarter results, which are a representation of the trends we've experienced over the last three quarters, namely steady organic growth on an enterprise level, strong execution and solid cash generation. I'd like to take the moment to recognize our team for the great work they've done this year. For those of you following along with our earnings presentation, please turn to Slide 5. Third quarter revenue of $2.1 billion increased 3.3%, comprised of 2.8% organic growth and the balance driven by our recent acquisition. Organic revenue growth was led by Technical Solutions and Aviation, which both grew double-digits, while Education posted mid-single-digit growth. Our B&I segment remained resilient, declining by only 1% benefiting from our diverse client and service base. Lastly, as expected, manufacturing and distributions revenue declined 1% as the rebalancing impact we have previously discussed began to materialize. Moving on to Slide 6. Third quarter net income of $4.7 million or $0.07 per diluted share was down year-over-year. This decrease was primarily attributable to a $73.2 million year-over-year impact from prior year and current year adjustments to contingent consideration related to the RavenVolt acquisition as well as the absence this year of a $22.4 million employee retention credit that was recognized in last year's third quarter. We also recorded unfavorable prior year insurance adjustments and higher corporate investments as planned. These items were partially offset by improved segment operating results and lower elevated costs. Earnings per share further benefited from a lower share count. Of note, the contingent consideration adjustment relates to RavenVolt significantly improved 2024 performance, as Scott mentioned, and the increased likelihood of a payout under their acquisition earn-out plan. Adjusted net income of $59.5 million and adjusted earnings per diluted share of $0.94, increased 13% and 19%, respectively, over the prior year period. These increases were largely driven by improved segment operating results, especially in Aviation and Technical Solutions, partially offset by higher year-over-year corporate costs. Adjusted EPS also benefited from a lower share count driven by share repurchases last year. Adjusted EBITDA increased 2% to $128.1 million and adjusted EBITDA margin of 6.4% was consistent with last year. Now turning to our segment results beginning on Slide 7. B&I revenue of $1 billion declined 1%. We continue to benefit from our end market diversification, including our geographic footprint, our exposure to the sport and entertainment and health care markets and from our mix of higher performing Class A properties. This purposeful positioning has aided us in avoiding a more significant impact resulting from the soft commercial real estate market. Operating profit in B&I declined 1% to $77.8 million, while operating margin remained flat at 7.7%. Margin benefited from our continued focus on price realization and cost management. Aviation revenue grew 13% to $268.4 million, driven by healthy travel markets and new business wins from both the airport and airline sides of the business. As Scott mentioned, Aviation is well on track to be a $1 billion segment for ABM this year in large measure due to our advantaged ABM clean service line. Aviation's operating profit was $17.8 million, up 52% and margin was 6.6%, an increase of 170 basis points. Operating leverage on higher volume and favorable service mix were significant contributors to the increase in margin. Turning to Slide 8. Manufacturing and distributions revenue declined 1% to $377.1 million primarily due to the expected rebalancing of work by a large e-commerce customer, which we discussed on prior calls, partially offset by growth with other clients. We continue to work hard to offset the rebalancing through the addition of new business and we believe we have a clear path to positive growth in the second half of 2025. However, the impact of this rebalancing will continue for the next few quarters. Operating profit increased 8% to $40.9 million and operating margin increased 90 basis points to 10.9%. Profit and margin improvement was largely due to a favorable customer mix including some client rationalization for underperforming contracts. Education revenue increased 4% to $228.3 million, benefiting from the increased activity on a number of cost plus accounts. We also continue to win new business in the quarter with the addition of Auburn University, which will be onboarded early next fiscal year. Education operating profit was seasonally strong at $18 million, up 13% and margin was 7.9%, an increase of 60 basis points. This was largely attributable to improved labor efficiency. Technical Solutions revenue grew 25% in total to $209.7 million, including 20% organic growth and 5% from the acquisition of Quality Uptime Services. Organic growth was driven by a strong microgrid project activity. Bundled Energy Solutions and EV project activity remains soft. However, we expect a strong finish to the year in Technical Solutions, driven by constructive macro trends in energy resiliency and data centers and further progress on the microgrid projects we have already booked. Technical Solutions operating profit grew 56% to $17.9 million, and margin expanded 170 basis points to 8.5%. These improvements were a result of significantly higher volume and lower acquisition-related amortization. Moving on to Slide 9. We ended the third quarter with total indebtedness of $1.4 billion, including $57.9 million of standby letters of credit, resulting in a total debt to pro forma adjusted EBITDA ratio of 2.5 times. At the end of Q3, we had available liquidity of $513.9 million, including cash and cash equivalents of $86.3 million. Free cash flow in the third quarter was $64 million with third quarter comparables being impacted by the timing of accounts payable and the non-repeat of a $22 million employee retention credit received last year. Throughout the nine months of 2024, we have generated $152 million in free cash flow this year or $187 million after normalizing for in-year ELEVATE and integration costs. This is up $16 million or 9% over the last year's normalized free cash flow of $170 million, which is adjusted for the receipt of the employee retention credit, repayment of the CARES Act and in-year ELEVATE and integration costs. Cash flow generation continues to be a hallmark of ABM and is a product of our asset-light and flexible business model complemented by our consistent focus on working capital management. Interest expense was $21.2 million, slightly higher than prior year. Regarding third quarter capital allocation, we made one acquisition for $118 million. We also paid dividends of $14.1 million. We did not repurchase any stock in the quarter and the remaining authorization under our share repurchase program is $186 million. Now let's move on to our revised full year fiscal 2024 outlook, as shown on Slide 10. As Scott mentioned, we are raising our full year guidance for adjusted EPS based on our strong third quarter results and our confidence in a solid finish to the year. As such, we now expect full year 2024 adjusted EPS to be in the range of $3.48 to $3.55, up from $3.40 to $3.50 previously, representing a $0.07 increase at the midpoint. Adjusted EBITDA margin is expected to be around 6.3% for the full year. Our interest expense forecast is unchanged at $82 million to $86 million and the normalized tax rate before discrete items is expected to be between 29% to 30%. Lastly, full year normalized free cash flow is likely to be near the top end of our $240 million to $270 million range, if not a little higher. This forecast excludes the estimated $45 million of ELEVATE and integration costs. With that, let me turn it back to Scott for closing comments.

Thanks, Earl. While we're very pleased with our performance in fiscal 2024, we know ABM can be even more. Supported by a resilient, flexible and cash generative business model, our investment in technology, new capabilities and most importantly, our people, we are positioned for sustained success. We're expanding our core through cross-selling, advanced analytics and innovative go-to-market strategies with additional opportunity on the horizon. These initiatives are being complemented with investments in new capabilities like microgrids and mission-critical services, which we believe will drive higher growth rates expand margin over time and further set us apart from the competition. Thanks again for joining our call today. And with that let's take some questions.

Thank you. At this time we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Tim Mulrooney with William Blair. Please proceed with your question.

Scott, Earl, good morning.

Good morning.

Good morning.

So on the guide, just real quick, it looks like your previous expectation, I think, was more for EPS to be kind of balanced between the third quarter and the fourth quarter. But now based on your guide, it looks like you expect the third quarter to be maybe $0.10 or so higher than the fourth quarter in EPS. Is this just a simple case of more revenue being pulled into the third quarter than you were initially expecting or are there other factors that warrant consideration here?

Yes. No, thanks for the question, Tim. When we look at the Q3 quarter, we were really pleased with the performance across the portfolio. But in particular, our Technical Solutions business and especially RavenVolt really outperformed why you're not necessarily seeing that flow through to the Q4 to the same extent is really what you're going to see in M&D. And as we talked about, we're actually experiencing that rebalancing of one of our major customers in M&D. That started in Q3, but will fully ramp up in Q4. And we'll actually see that impact over the next several quarters.

Okay. That's very helpful. Thank you, Earl. And my second question is on segment margins because we're seeing some really nice improvement here across a lot of these segments, I mean, Aviation was 6.6%, I think, in the quarter. I think our model was about 5.5% and M&D came in at 10.9%. I think we were at 10.0%. So I know the EPS beat here was driven by ATS to a large degree. But also want to note the profitability across a lot of these segment margins here. So my question is, are these improvements that I'm seeing here, are these sustainable do you think as we move into 2025 or was there something about the third quarter that helped lift profitability here like maybe a working days dynamic or something like that, that isn't necessarily expected to carry forward.

No. I mean I don't think there was anything unusual. I think we're just performing at a high level our resilience and what we've been talking about quarter after quarter is really coming true. We're excited about the results as you are, and it's really nice, Tim, as you point out, when you could see it across the board like this. So there's no watch-outs ahead for us. Earl just talked about M&D going to kind of trend down a little bit year-over-year. But you pull that out of M&D and you're going to be back to mid to high single-digit growth. So we're feeling good across the board.

Okay. Thank you, Scott. I'll update my expectations on profitability here in the model and congrats on the nice quarter. Thank you.

Thanks, Tim.

Thank you. Our next question comes from the line of Faiza Alwy with Deutsche Bank. Please proceed with your question.

Yes. Hi. Good morning. Thank you. So I wanted to follow up on the margin question. I made the same observation as I was looking at numbers this morning. And maybe I know you mentioned sort of labor efficiencies a few times. Maybe talk a bit more about like what's driving that? Are you seeing sort of wage rates come down or talk about some of the other dynamics that are helping margins across the board at this point?

Sure. That's great. So, yes, there's a couple of dynamics here. First on the labor front, we're feeling really good because wages haven't been rising to the same extent as they were in the last couple of years, right. And that's been widely publicized. You can read about that. So that's playing through for us. And also availability of labor is getting much better for us as well in terms of getting people on board quicker. And so that's been another great tailwind. And lastly, our workforce productivity optimization tool has been really great. And what that really does it lets one of our project managers whose and I'll give you like kind of anecdotal. A project manager is managing a 500,000 square foot building and he's looking at his labor and the productivity of the labor. And now that project manager can compare it to another 500,000 square foot building, either in their market or in a different market, and it helps give them kind of a true north about how efficient they are. And it could be as simple as making a course correction or actually just getting on the phone with the other project manager and ask them what they're doing. So it's just starting up now. I'd say I think the good news from my standpoint is we're at early, early stages in the rollout. So there's a lot more white space to go. So I think it's those dynamics, Faiza.

Great. That's very helpful. And then on the ATS business, I think, you're -- if I'm not wrong, I think you're alluding to maybe revenues being a bit lumpy from here. So talk a bit more about how you're thinking about that business? I know previously you've mentioned sort of what the backlog might be. Was there something in the quarter that was -- that kind of came in earlier? And just a bit more color on how we should expect the top line trends from here.

Sure. I think we're all kind of getting used to ATS being so much project driven now with our microgrid business. And there's so much that we can predict, but also things that we can predict, right. Because think of it as construction projects and a lot of it outdoors. So depending on the weather, we may get a delay depending on a community issuing a permit at a given meeting that we're projecting them to issue the permit on and that meeting gets delayed by a month. So there are things that are out of our control. But when we talk about our backlog being strong, that's booked business, and it's really just a question of timing. So for us, we get really comforted by a backlog that's strong and RavenVolt's backlog has never been stronger. And because it's money in the bank. It's just a question of when we're cashing the check to use the analogy. So it's something we're getting used to, but we have good line of sight kind of month-to-month, but sometimes it just drops into a different quarter. But we feel really good about Q4 now, at least the line of sight that we have.

Excellent. Thank you so much.

Thank you. Our next question comes from the line of Jasper Bibb with Truist Securities. Please proceed with your question.

Hey, good morning, guys. I wanted to ask about the B&I segment. Just any detail on segment revenue expectations for the fourth quarter. I think the prior view you had was low single-digit decline for the year, three quarters in seem to be running at the high end of that range. So any change there on where you think that business is going to end up in fiscal '24?

Yes. Look, I think, I love the way we're performing in B&I, right. It just shows the resilience, being down 1% year-over-year in this segment when every headline is talking about commercial real estate, we're really proud of. And it looks like the trends are starting to turn up as I talked about in my opening remarks. So we're not ready to call it as being over and that we're going to start rebounding to positive growth yet. I think we'll have a better line of sight to that, probably in the middle of next year to be safe. I think as more and more tenants have their leases start coming due and decide how much space they're taking or how much they're ramping down. But we feel really good about the segment and we're as proud of this as anything we've done in the last few years because if someone would have told us in two or three years from now, there's going to be a massive reset in commercial real estate but your revenues are only going to be down 1%. It would be hard to believe, right. So again I think this is all normalized right now. And we're just going to ride through the next few months, and hopefully, we stay exactly in this zone, but we're optimistic.

Thanks. That makes sense. And then you mentioned some of the moving pieces in the ATS in response to an earlier question. Just kind of hoping to get an update on maybe isolate a $180 million contract there. I guess how has that ramped up so far? And when do you expect that contract will hit the full, I guess, $90 million a year run rate?

Sure. So it's a contract that will run through '26 through at least the beginning of '26. And it's on a cadence. I think we said it's over 180 sites. So just think about kind of an even ramp from now until maybe Q1 of '26 and that can move a little bit, but it's baked into our numbers and how we're thinking about certainly the finish of this year and as we start or actually conclude our budgeting process for next year.

Thank you, Scott.

Thanks.

Thank you. Our next question comes from the line of Josh Chan with UBS. Please proceed with your question.

Hi. Good morning, Scott and Earl. Congrats on a good quarter.

Thank you.

Thank you.

Hi. Yes. So you mentioned data center several times in your prepared remarks. Is there a way that you can triangulate for us? What's your data center exposure? I know it might go in a couple of different segments, but some way to triangulate that would be helpful. Thank you.

Sure. It really runs across two of our segments. It runs across ATS and M&D and M&D is more handling clients that have big data centers within their facilities, whereas ATS is more project-driven where we're supporting mission-critical sites either through our electrical work or mechanical work or actually through microgrids. So it runs through both. But I mean to put it in context, right, the mission-critical business right now is nascent for us. We're, call it, sub $250 million in revenue on our $8 plus billion. But, I mean, we're so excited. You saw us leaning in with the acquisition of Quality Uptime Services that does UPS power, which is uninterrupted power, which every data center needs in terms of backup power and the team there designs and installs UPS. It's exactly where you want to be in the new AI data center generation. So we're really excited about how that's going to grow as well. But it is good to kind of put the revenue number in context to the enterprise.

Great. Thank you for that color. And then maybe specifically on M&D. I guess I was under the impression that margins might be pressured by the rebalancing, but you turned out to have a very strong margin quarter. So I guess what's the source of that strength? And as the rebalancing potentially ramps in the coming quarters, could margins sustain at current levels or will there be some pressure?

There'll be a little bit of compression. Next quarter is the quarter that will have the full effect of the rebalancing. But we interestingly, we're not looking at it as that dramatic internally because first of all, that client is still one of our biggest clients, and we're already starting to grow with them, again, believe it or not, after the rebalancing because we like to believe we're best-in-class. So that's a good tailwind for us. And then the rest of the business is doing so well. You guys know about the trends with manufacturing and onshoring. And we're squarely in the middle of that. We are really deep into the semiconductor market. I mean, literally, we're in Korea meeting with companies that are moving over here. So the M&D segment is going to be so powerful for us over the next few years. And this rebalancing is for us. We're thinking this is such a small bump in the road. And again we love the fact that we're picking up some sites. So it's good stuff.

Great. Thank you for your time and congrats on a good quarter.

Thank you.

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

Yeah, hi. Thank you. First question would be about the contingent consideration adjustment for RavenVolt. So I was wondering if you could put the $37 million adjustment this quarter into context. In other words, is that kind of a mark-to-market to get you caught up to where RavenVolt's year-to-date performances. Is that an estimate for the full, I believe it's a calendar year calculation or is this something that extends beyond this year? In other words, is it a judgment about not just the next few months or the current year for the incentive calculations and whatnot, but something beyond that. So just what is captured in the $37 million adjustment this quarter? Thank you.

Yes. No, thanks for the question, David. So we look at this every quarter to assess kind of where RavenVolt forecast is over the three-year period. And so if you think about it, this was an earn-out over a three-year period. So we actually have two years. It's on a calendar year basis, so we have '24 and '25. And so when we look at their projections over that period, we exactly to your point, we actually do a mark-to-market. And so this is looking at the full extent over that next two-year period as opposed to just this year. So good news is that versus where they're trending last year where they actually had a slow start. The business has definitely picked up with incremental business and new clients. So we feel very good where RavenVolt is positioned and really happy to actually have this earnout.

Okay. Great. Thank you for that. This next question, I guess, would be a little bit new business and then old business kind of question. But firstly I was just wondering if you could update us on your year-to-date new business success. I think you said for the first six months of this fiscal year, you were at $1 billion. Just wondering where do you think you might end up the year at or where were you at the end of the third quarter? And then more to the point, Scott, I heard you say something, I believe, for the first time this year, this time versus the few years that I've been covering you. But you talked about what would the word be firing some customers are walking away from some business. So when I first started listening to your conference calls, you used to tout your very high retention rates pretty regularly. And your comments this period about opting to walk away from some business due to returns and whatnot. I mean I think that's a change in your philosophy as to some extent. So I was just wondering if you could kind of talk about maybe the evolution or the shift in how you're thinking about retaining new business versus identifying and targeting, sorry, targeting new business versus opting to not service some of your current portfolio?

Sure, sure. So we're not going to update at this moment our sales, but we did hit a record, as you noted last quarter, we do the midpoint in year-end, but we are tracking to have another record year. I'll just leave it at that. We're doing really well on the new business front. And the firing customers, it's not really quite that dramatic as firing customer. But what will happen is we have thresholds of profitability that we have to meet and we've been really resolved about that. And sometimes it happens on a larger scale than on a micro scale because it does happen all the time. We take a lot of pride, David, in what we're doing here. And if we're not getting the value that we thought, we just we will walk away. And I think that says a lot about what we're doing and the value that we're adding. So every now and then we'd just like to point that out to make sure you guys all know that we do not see ourselves as a commodity business.

Thank you. Our next question comes from the line of Tate Sullivan with Maxim Group. Please proceed with your question.

Hi. Thank you. Scott, it's great to hear the progress and optimism about your microgrid business. Can you roughly quantify is it mostly projects with existing clients or not or is it largely cross-selling efforts, please?

It's mostly new clients, which is super exciting, but it's a strong mix. It's great because we bought this business and with that came a portfolio of clients, and we got established and now we're starting to cross-sell. We're starting to have conversations and interestingly, it's popping up and more and more bids for other things where we're seeing EV and microgrids combined together. So there's a lot of good stuff happening around the microgrid business. But to your point, it's a mix. And when we look at the future and the ability to sell into our $8 billion customer base, it gets us really, really excited. But again, it's a new business for us. And we're really putting points on the board now and we have a really strong backlog.

So understand the opportunity, but can it lead to some electrical subcontracting work for you for the rest of the building or has it in some cases?

Well, we do that already. We have an electrical division in our ATS group. That's a separate segment for us. And we're doing some contracted work all the time and now that we added Quality Uptime Services. It's just another tool in the toolbox to say, not only can we test your infrastructure and do mission-critical work there, but we could actually design and install UPS systems. We could do retrofits. We could do underfloor cleaning in the data center. We're really becoming a turnkey data center operator, which has been phenomenal.

Thank you.

Sure.

Thank you. Our final question comes from the line of Faiza Alwy with Deutsche Bank. Please proceed with your question

Hi. Thank you. I just had a follow-up. I wanted to talk about capital allocation. And I know you acquired a company back in June. So curious around how you're thinking about M&A versus cash return to shareholders? What did you like about that business? And should we expect more M&A from here?

Yes. I mean I can start off, Faiza. M&A continues to be part of our growth strategy and that was signified with the latest acquisition that you just mentioned of Quality Uptime. So we will continue to be balanced with our capital allocation between accretive M&A opportunities as well as share buyback. Obviously, we did a significant amount of share buyback last year, where we probably reduced our share count by 5% and as we actually saw some price dislocation. So we took advantage of that. But based on where we are right now, we are really happy not only with our current leverage, but also our capital allocation.

All right. Great. Thank you.

Thanks Faiza.

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.

I just wanted to thank everybody for listening and participating on the call today. We're excited about our results and optimistic about the future. And hope everybody had a really good summer and is excited about the fall and we'll be back to you with Q4 soon. Thanks, everybody.