Henrik Slipsager - President, Chief Executive Officer James Lusk - Chief Financial Officer James McClure - Executive Vice President Tracy Price - Executive Vice President Sarah McConnell - Executive Vice President, General Counsel.

Andrew Whitman - Robert W. Baird Joe Box - Keybanc Capital Markets George Tong - Piper Jaffray Saliq Khan - Imperial Capital David Gold - Sidoti Adam Thalhimer - BB&T Capital Markets.

Good day ladies and gentlemen and welcome to the ABM Industries Q4 FY2014 conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session, and instructions will be given at that time. Should anyone require operator assistance, you may press star then zero on your touchtone telephone.

As a reminder, today’s conference is being recorded. I’d now like to turn the call over to your host for today, Mr. Henrik Slipsager, President and CEO. Sir, you may begin..

Thank you. Good morning. Joining on the call today are Jim Lusk, Executive VP and Chief Financial Officer; Jim McClure, Executive VP; Tracy Price, Executive VP, and Sarah McConnell, Executive VP and General Counsel. Today I’ll provide an overview of the 2014 fourth quarter and fiscal year that ended October 31.

Jim Lusk will discuss the details of our financial results. Jim McClure will then provide an update of our onsite business, and Tracy will comment on the company’s operational results for building & energy solutions as well as sales.

I will discuss air serv’s performance for the quarter and then conclude our prepared remarks with our outlook for fiscal 2015. There’s a slide presentation that accompanies today’s call. You may access this presentation now by going to our website at www.abm.com and under the tab Investors, you will see the Event tab.

This presentation will be the first listed.

Sarah?.

Thank you, Henrik. Please turn to Slide 2 of the presentation. Before we begin, I need to tell you that our 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.

These statements represent our current judgment of what the future holds. While we believe them to be reasonable, these statements are subject to risks and uncertainties that could cause our actual results to differ materially. These factors are described in the slide that accompanies this presentation.

During the course of this presentation, certain non-GAAP financial information will be presented. A reconciliation of those numbers to GAAP financial measures is available at the end of the presentation and on the company’s website under the Investors tab..

Thank you, Sarah. Now please turn to Slide 4 for an overview of our fourth quarter fiscal year highlights. Revenues were very good for our fourth quarter and up 5% from the same period last year. Janitorial posted top line growth of over 5% on strong organic sales, and this contributed to an over 13% increase in the operating profit.

Building and energy solutions had another very good quarter both in revenue and operating profit. BESG achieved top line growth of 18% and operating profit increased over 29%. The growth came from all three products of their business. Parking ended the year with good momentum.

They grew revenue by approximately 3% and operating profits were up almost 12% year-over-year. Air serv revenue was up 13%, benefiting from organic growth in the U.K. and improving revenue trends with our business related to U.S. commercial carriers. For the quarter, operating profit was up 15% compared to fiscal ’13 and on an adjusted basis up 10%.

During the quarter in our effort to maintain shareholder value, we acquired GBM Support Services, a U.K.-based enterprise. This not only adds to our growing presence internationally but also creates a platform to accelerate our growth strategy throughout the U.K.

We also acquired Airco Commercial Services, based in California with expertise in energy solutions and building controls. I’m very pleased with the initial performance of both these businesses. We repurchased 387,000 shares of stock, paid a dividend of $8.7 million, and now I’d like to make a few comments regarding fiscal ’14.

We achieved record revenues, exceeding the $5 billion threshold for the first time by generating the best growth we’ve seen since fiscal 2007. We generated recorded and adjusted operating profit of $153 million, up nearly 10% compared to fiscal ’13. We increased adjusted earnings per diluted share despite delay in taxes of WOTC.

Keep in mind that fiscal ’13 included a benefit of $0.17 of per diluted share from this work opportunity tax credit, of which $0.05 related to the retroactive reinstatement of ’12. We achieved significant growth in both our BSG business and our air serv business, 20.5% and 12.5% respectively.

Combined, these two sectors now represent 17% of consolidated revenue, up from 15% last year. That’s great progress and supports investments we made to acquire these enterprises and expand our presence in energy, aviation, government and healthcare verticals. We began repurchasing stock under our fifth main authorization.

For the year, we bought back 765,000 shares at a cost of $20 million. We acquired three companies for a total of $48 million net of cash, and we completed our realignment of our onsite services, creating savings exceeding $7 million for fiscal ’14 and on a cumulative basis since fiscal ’13 nearly $11 million. We paid $34.6 million in dividends.

I’m very satisfied with the company’s consolidated performance as we remain on track [indiscernible] to enhance not only our growth but also our capabilities as a provider of integrated facilities services. Now I’d like to turn the call over to Jim Lusk for a financial review of our fourth quarter.

Jim?.

Thank you, Henrik, and good morning everyone. Turning now to Slide 5, as Henrik noted, revenues of $1.3 billion for the fourth quarter were up 5% compared to the prior year, including organic growth of $46.6 million or 3.8%. Gross margins for the 2014 fourth quarter were 10.9%, flat compared to the fourth quarter of 2013.

SG&A expense for the fourth quarter increased $1.3 million or 1.4% to $92 million, primarily as a result of higher costs associated with additions to our sales force. Amortization of intangible assets for the fourth quarter decreased by $0.2 million to $6.9 million.

Our effective tax rate for the three months ended October 31, 2014 and October 31, 2013 were 34.7% and 33.9% respectively. The year-over-year difference is primarily from the lower work opportunity tax credit.

Adjusted net income, which excludes items impact to comparability, was up $2.7 million to $29.7 million for the fourth quarter as a result of higher operating margins. Now turning to Slides 6 and 7, days sales outstanding at quarter end were 53 days, up one day on a year-over-year basis but down one day sequentially.

Cash generated in operating activities for the quarter ended October 31, 2014 was $63.7 million. This was an increase of cash generated of $12.7 million compared to the same period in fiscal 2013, primarily related to the timing of collecting receivables and payment to vendors.

Turning to insurance, total insurance claim liabilities at October 31, 2014 were $349.7 million, down $8.3 million compared to the fourth quarter of 2013. For self insurance claims paid during the quarter, the total cash paid was $23.6 million, down $1.5 million year-over-year.

As we discussed in the third quarter call, one of the accomplishments we achieved in fiscal 2014 is improvements to our safety and risk management programs. I, along with the executive team, continue to focus on this critical area. As Henrik noted, we repurchased 387,500 shares at an average price of $25.81 for a total cost of $10 million.

We had an additional $30 million outstanding under the 2012 authorization. Yesterday we announced our 195th consecutive dividend and increased the amount of $0.16 per share, continuing the long established pattern as evidenced by the chart on the bottom half of Slide 7. I would now like to turn the call over to Jim McClure..

Thank you, Jim. Please go to Slides 9 and 10. I’ll now provide some operational highlights of our onsite services for the fourth quarter and fiscal year before turning the call over to Tracy. Janitorial top line growth for the quarter was 5.3% compared to 2013, with revenue of $666.1 million.

Janitorial sales momentum continued with jobs starting in our sports and entertainment, automotive, industrial, financial services and high tech verticals. All four of our regions posted top line gains with the west and northeast regions achieving year-over-year revenue growth in the fourth quarter of 8.6% and 5.7% respectively.

Tag revenue was strong in the quarter and compared to fiscal 2013 grew 7%. Looking at the year, revenues grew 4.1% to $2.6 billion, primarily from net new business.

For the fourth quarter, the janitorial segment earned $38.7 million in operating profit, an increase of $4.6 million or 13.5% primarily related to the new business we’ve added across all four of the regions, realignment savings, and lower expenses as a result of safety initiatives.

Operating profit margins increased by 42 basis points to 5.81% compared to the fourth quarter of fiscal 2013. Operating profit for the fiscal year was $144.4 million and was up 6.6% compared to fiscal 2013. Operating margin for the fiscal year was 5.59%, an increase of 13 basis points over 2013.

Moving to facility services, revenue as expected decreased by $5.7 million to $147.1 million as we continue working diligently to replace revenue lost in earlier quarters. We have recently won a few national jobs in our automotive and high tech verticals that should make comparables improve later in fiscal 2015.

Despite the lower revenue, operating profit improved 4.9% to $8.5 million, a good job by the team. For parking, revenue was $156.7 million, up $4.4 million or 2.9% compared to 2013. Management reimbursement revenues were essentially flat at $74.7 million. This marks the best quarter of growth as we are benefiting from new jobs and improved economy.

Parking operating profit increased by $1 million or 11.9% as compared to fiscal fourth quarter of 2013. Operating profit margins increased by 48 basis points during this period. The increase in operating profit margins were primarily from lower labor expense from the realignment of our onsite operational structure and improvement in safety programs.

Parking ended the year with their best quarter in terms of revenue growth and operating profit earned. The team did an excellent job all year managing their business and we enter fiscal 2015 in really good shape. Turning to security, the top line was at $94.2 million, down 3%.

Despite a number of cross-selling successes in our security business, as I mentioned on a prior call, there were some significant jobs that we lost that we remain disciplined on pricing. We are making progress replacing the revenue; however, I anticipate quarterly comparisons won’t improve until the second half of fiscal 2015.

For the year, with revenue of $383.1 million, security did manage a slight increase compared to fiscal 2013. Security generated operating profit of $3.8 million for the quarter, a decrease of $1.4 million compared to 2013. For the fiscal year, operating profits were down $0.5 million.

After two years of strong performance, it’s frustrating for me to see these numbers, but there are some good opportunities in the pipeline, so sales execution along with strong labor management across security’s job portfolio will be key to getting back to higher levels of profitability.

I want to make a couple of additional comments before ending my prepared remarks. First, I want to remind everyone that we have successfully completed the onsite reorganization and we are releasing a significant amount of opportunities to cross-sell.

This will of course take time, and we know future sales at times can be lumpy, but I am pleased with the consolidated growth achieved by the onsite business in fiscal 2014, especially from the janitorial team.

Lastly, our client retention levels for fiscal 2014 were acceptable at just over 92% for consolidated operations, but this can be improved upon. With the reorganization behind us, we can now renew our focus and efforts in this critical area.

I believe improvements will come gradually and anticipate seeing positive changes in the second half of fiscal 2015 as we work on enhancing our retention capabilities. I will now turn the call over to Tracy..

Thanks Jim. Continuing on Slides 9 and 10, I will provide an update on our building and energy solutions segment, which includes ABES, government services, and ABM healthcare support services. This was another strong quarter for the team, and we’re very pleased to share these results.

Starting with revenues, we accomplished an 18.3% increase to $135.7 million.

Excluding acquisitions, we achieved organic growth of 9% as we benefited from an increase in energy retrofit projects, service and maintenance contracts, and continued growth in our healthcare business, another outstanding quarter for the ABS team and reflective our continuing record backlog and strong sales momentum.

Revenue from our ABM healthcare support services was up 19.9% to nearly $27.7 million compared to fourth quarter of fiscal 2013. With year-over-year growth in revenue by ABES, contributions from ABM healthcare, government services and acquisitions, including our most recent, Airco, BESG generated operating profit of $10.1 million, up 29.5%.

In addition, adjusted EBITDA for the quarter was $13.4 million, up 24.2% year-over-year. Looking at fiscal 2014, I am truly proud of the results achieved by the BESG businesses with revenue increasing 20.5% to $483.8 million, driven by ABES up 25%, government up 12%, and ABM healthcare up 24%.

Operating profit grew 51% to $23.1 million compared to fiscal 2013, and adjusted EBITDA for fiscal 2014 was $34.8 million, an increase year-over-year of 29%, a tremendous effort by all three businesses and a nice turnaround by our government team. I’m very confident about the position as these business units as we enter into fiscal 2015.

Turning to Slide 11, I want to mention a few of the sales highlights from the past quarter and for the year. As previously communicated, we have reinvested in the company a portion of the savings from our onsite realignment mainly to enhance our sales and marketing capabilities and improved technology.

We are encouraged by the response to our differentiated approach, our integrated facility services, and our technical capabilities.

We continue to gain market share in a number of key strategic verticals with wins in our automotive, industrial and sports and entertainment verticals where our onsite businesses performed various services for five NFL teams.

Looking across the enterprise, we remain very excited about our long-term sales opportunities and the company’s position within the integrated facilities services market. I noted on previous calls we believe we’re in the early stages of a long-term opportunity to drive sales growth.

We now have nearly 2,200 leads submitted through the Solve One More program, and this is with a roll-out to only 20% of ABM’s over 300 offices. Closed leads are a little over 10% of the total, and the sales pipeline for Solve One More continues to grow and is now approximately $110 million on an annualized basis.

In addition, I’m very pleased with the progress we’re seeing with the sales initiatives. For example, just in California we’ve recently won over $18 million of new business from our executives collaborating on cross-selling opportunities.

While small in comparison to our consolidated sales, this is just the beginning of what we can accomplish as we really start to leverage all of the different leads being generated from our various sales programs. With that, I’ll turn it back to Henrik..

$1.65 to $1.75 for adjusted net income per diluted share, $1.45 to $1.55 for net income per diluted share. This guidance excludes potential benefits associated with the work opportunity tax credit should Congress reenact that credit.

The reenactment of the calendar 2014 WOTC credit could provide a benefit of an additional $0.10 per diluted share in fiscal ’15. If Congress were to extend the WOTC credit for calendar ’15, the company could have a further benefit of $0.08 per diluted share in fiscal ’15, making a total of $0.18 in addition.

One less work day for fiscal year, which is expected to reduce labor expense by approximately $4 million on a pretax basis, in addition with the other items listed on Slide 13 which contribute to the EPS guidance we have provided. As is customary, our guidance is exclusive of any future acquisitions.

At this time, we should like to open the call for questions.

Operator?.

[Operator instructions] Our first question today comes from the line of Andrew Whitman of Robert W. Baird. Your line is open. Please go ahead..

Good morning, guys. Thanks for taking my questions. Henrik, I wanted to start out with kind of looking at fiscal ’14, kind of year in review here.

When you look at the realignment savings, can you quantify what you saw this year in ’14 versus ’13, and recognizing that some of that did get reinvested, but the gross savings I think would be helpful to give us some context on that..

I think the gross savings, as we said before, was around $7 million, which was accomplished for the year, and we reinvested around--between $2 million and $3 million in sales and marketing..

Got you, okay. That’s helpful. Then maybe not last quarter but the quarter before that, you talked about start-up costs being a factor to the margins in that quarter.

You haven’t talked about it recently here, but I’m just kind of curious - where are you on that curve? Would you say start-up costs in the quarter were about normal, better or worse, just to give us some context to understand the underlying margin performance I think would also be helpful. .

Right. Start-up costs in general is a good thing because it means we’ve got new business, but the reason we called it out in an earlier quarter was because we had one particular very big job with start-up costs exceeding our normal start-up expenses.

That’s the only time we’re going to call it out, so I will say now this quarter and every quarter hopefully going forward, if we don’t have some very unusual major start-ups, we won’t call it out..

Got you, okay. That’s helpful. Then just on air serv, you mentioned that there was a million dollar kind of one-time item. I think some detail around what was one-time about it, what the costs were would give us some context there as well..

Yeah, it was associated with some write-offs, some receivables on disputed businesses with a couple of clients..

Okay, that’s helpful. Then maybe on for Jim - I just wanted to dig into last quarter’s insurance revaluation.

When you look at the Q, Jim, it looks like there was a $6.3 million adjustment that was cumulative for the first three quarters, so I guess the question is maybe just to verify, is the insurance--the new rate at which you’re accruing, should it be thought about at about $2 million per quarter difference, recognizing that it was $6 million divided by 3, and therefore an $8 million benefit to the year from your new systems on the safety initiatives you’ve made? Is that a fair way of thinking about it?.

In general, yes. Basically we book our actuarial report once a year, and we do our best to estimate what that’s going to be as we accrue each quarter, and then when the third quarter comes up, we kind of true it up. So what you said is--.

Yeah, I just want to add one thing, Andrew, because I think it’s very important to understand this piece.

The basic comparison you’re going to have is year-over-year, so through our safety programs where we have a lot of cost associated with the safety program invested in the year, that resulted in pretty much a $2 million savings per quarter, not a one-time type benefit in the third quarter but a retroactive situation because we were somewhat conservative in first and second quarter before we saw the result of the safety program.

So if you do a year-over-year comparison, we have a $2 million benefit per quarter associated with it as a gross amount net of costs associated with the program, and it’s a benefit going forward, so it’s not a one-time kind of issue..

Yeah, totally makes sense.

Then just one final technical question and I’m going to jump back in the queue, but in the guidance, Jim, is there incremental buyback assumed, or should we assume that the 57.2 that you reported for the quarter is the share count that’s assumed in that guidance?.

Right now, it will be part of our capital program and we’ll see what we do. But we do have $30 million still outstanding that we can do..

Yeah, and if you look at the $30 million, Andrew, that’s not really going to move the needle from an earnings per share point of view..

Yeah, that’s true.

But Jim, just to [indiscernible] here, I guess, if you did the buyback, would the guidance shade slightly higher, or it is included in the number?.

Well you have a margin of $0.10, plus or minus $0.05 is not going to change anything..

All right, thanks guys..

Thank you. Our next question comes from the line of Joe Box of Keybanc Capital Markets. Your line is open. Please go ahead..

Hey, good morning everyone. Jim Lusk, just from a high level, I guess I see the puts and takes from your guidance, which probably includes a $0.04 benefit from one less day offset by a penny or so of higher interest expense, and then the tax rate headwind.

But I guess what I’m trying to understand is net-net, is there anything else in that $1.65 to $1.75 that maybe isn’t called out in the slide deck that we can’t see that’s worth talking about?.

I think the basic strong operations of the business, which we--really, so nothing unusual that we haven’t talked about..

Okay, because I guess I would have thought that the net income growth would have been north of that 5 to 10% which the guidance is alluding to..

Well, it is guidance and it is for 2015, and hopefully we’re going to do better. We have great momentum in BESG. Jim has coming off a very strong year. It is our best view as of right now, the way it looks with the pluses and minuses, but there are no additional surprises and one-time benefits of course baked into the number..

And Joe, remember all that excludes the WOTC credits that Henrik mentioned in his remarks too. Those would make the number a lot bigger..

Of course, which is the prudent way to do it. Question for--I guess it’s probably for both Tracy and Jim McClure.

Can you guys just maybe help us a little bit to understand the magnitude of what the janitorial and the BES pipeline looks like, and maybe just directionally what your expectations are for organic growth rates in these businesses in FY15?.

I’ll speak - this is Jim. On the janitorial side, what we’re seeing with the onsite consolidation is we’re seeing much larger opportunities coming our way. So those are both good things and bad things - you could win and be happy, or lose and miss an opportunity.

So basically, the difference I see in the janitorial opportunities within onsite is we’re having the ability to package multiple services, which is giving us the ability to enter at a different level with our clients and to sell at a different level, and we’re able to get those bigger opportunities across our books.

So that’s the real benefit I’m seeing from onsite..

Then to follow up on the BESG pipeline, it’s as robust as we’ve ever had it. We’ve also added pretty dramatically to the sales headcount, so we have 120 people in sales driving that activity and carrying an ABM bag for all of the multiple services we’re providing.

The sales target for 2015 is $200 million just in our ABS business - that’s double from when ABM acquired us, so I think we believe we’re going to continue to see robust growth not only across the traditional ABES business but also in government and healthcare.

And I guess as evidenced by some of the early wins we’ve already had this year, we’re tracking quite well..

Let me just add one thing, Joe. We are not giving revenue guidance..

Understood, and appreciate that. I guess what I was just trying to understand is do the growth rates that we’ve seen this year, do they hold or do we see those kind of revert to the mean that--.

We believe that the growth is sustainable. As you can see, we had a very strong growth quarter in certain segments of the business. Unfortunately, we also had--well, security was not a good surprise from a growth point of view, and you’re always going to have one hiccup and six successes.

But we believe it’s sustainable, and I think if you look at the last three or four quarters, it’s pretty sustainable.

So we feel very strong about the fact that we’ve been able to turn this company much more into a growth oriented, growth focused company, especially with the addition of Tracy’s focus on sales and marketing, which has a tremendous impact on the whole company..

I appreciate that, thank you. I want to go back to Andy’s question earlier on the gross savings from the realignment.

I’m curious - have we realized the full benefits here, and then that reinvestment of about $2 million to $3 million, does that go away in FY15 so the net savings gets bigger?.

No. See, the wonderful thing about having growth is that we had to put some money into the machine to create the growth.

We had done that, and now you see the impact of the investment we made in that sales and marketing function, and as Tracy said, you might have heard, that he had increased the number of sales people pretty dramatically going into 2015 as well.

So you’ll see an ongoing effort on the sales and marketing side, and the gross savings is still around $7 million. You probably have a point that we might only have realized certainly for the year, it could be a little more for next year if you look at it year-over-year, so maybe an additional million or two but nothing material..

Okay, understood. Then just a last housekeeping item for you, I guess, Jim Lusk. Looking at the interest expense guidance, it looks a little bit above where we’re at currently in FY14.

Anything there we should be thinking about?.

We did have some small acquisitions later in the year, so that would be a piece of it, but nothing unusual. We’re not really expecting a major move on rates yet, although keep a look on the horizon..

Okay, great. Thank you, guys. I appreciate it..

Thank you. Our next question comes from the line of George Tong of Piper Jaffray. Your line is open. Please go ahead..

Hi, good morning.

Could you provide some additional detail around strategies you’re pursuing to sustain janitorial growth in that mid-single digit range?.

Well, janitorial is just one piece of the strategy. The overall global strategy I think has been pretty clear of how we split up the business into onsite and on-demand business.

It’s clearly for me that janitorial is positioned in a way that, as Jim explained before, our ability to take on bids and start bigger jobs is going to give us growth that we haven’t seen in the past, so hopefully we can sustain the growth level that we’re seeing right now and hopefully can add some acquisitions here or there if needed..

Within onsite, we do have a much higher degree of cross-selling capabilities which adds to our ability to grow and sustain that number..

Okay. Then switching gears to the BESG segment, maybe provide a little bit of commentary around government trends there, if we’re starting to see sustainable improvement..

Well, government hit their plan in 2013. They hit their plan again in 2014. We have seen an uptick in activity there, and as a matter of fact one of the contracts that was cancelled unceremoniously three or four years ago when the government departed the Middle East has come back, and we’ve recently been awarded that.

We’ve been awarded another spot on the Eagle contract. We have expanded our business in Goa, so the government business is tracking quite well. We had a very robust good season, and we’ve had a very good Q1 coming out of the chute, so I anticipate we’re going to hit our numbers in the government business, which show pretty good double-digit growth. .

Got it, okay.

If we look a little bit at your recent sales investments, how much are you increasing sales staff by, headcount percentage growth-wise, and when do you expect to see these sales staff ramp productivity?.

So support staff, we haven’t really increased at all. The headcount that are doing direct sales, we have increased about 20% within our business segment, and I think the thing that you have to understand is there’s a very virtuous cycle in how we’ve strategically set the company up, as evidenced by what we’ve done in California.

We are leveraging and benefiting from the footprint of the onsite business, and the relationships that ABM has developed over 50 years inure to our benefit as we bring technical services into those markets where we have customers and client concentrations.

So to the extent that we can add sales headcount in markets where we have an existing heat map that shows a customer concentration for ABM, we don’t have the same start-up anxieties that a company would entering a market.

We’re coming into warm leads with existing clients, providing additional services and packaging them in a way that’s unique in the marketplace. So as we add headcount, they’re coming into a situation where maybe the normal run ramp to get them productive would be nine to 12 months.

These people are really knocking over some opportunities in the three to six month range, which allows us to reinvest to drive additional headcount sooner. So it’s not really a matter of how much money did you save because you took the synergies out of the back office consolidation that Jim did and then you spend it in marketing.

It’s how much--what’s the efficacy of those sales and marketing dollars, and how many more salespeople can you on-board to drive additional top line revenue and margin. .

Got it.

I guess last question - can you talk about your expectations for SUI rates and how that will impact margins, and comment on how you expect mix to drive margin performance going forward?.

Well we expect for this particular year, for ’15, worst case scenario I believe is they are flat; best case, an improvement. The problem with most of these rates is we won’t see them until January, February or March, but based upon our initial evaluation, they shouldn’t be worse than this year and hopefully they will be better.

That’s all I can give you. Unfortunately, that’s the way the world is..

And then mix?.

I’m sorry?.

Mix of the business, how that will drive margin performance?.

Well, if you’ve seen our growth, high growth in Tracy’s area, that business has much higher both gross profit and EBITDA percentage than the rest of the business. As I’ve explained over the years, the new mix that we see, I think I mentioned the special services of BSG and others now went from 15% of our business to 17% of the business.

Hopefully that’s going to be around 20% in this coming year, and with the higher margin it’s going to drive the overall percentage of profit and EBITDA on bottom line..

Thanks very much..

Thank you. Our next question comes from the line of Saliq Khan of Imperial Capital. Your line is open. Please go ahead..

Great, thank you. Good morning guys. Speaking on behalf of Jeff Kessler, we just had a couple real quick questions for you as well. One of the interesting things that you guys talked about was the fact that SG&A is going up because of the strategic hires that you were doing.

My question is not necessarily around the number of hires as a percentage of hires, more certainly around the types of training that you’re giving these sales people so you can continue to win more contracts and larger contracts as well.

What’s the differentiation there between these hires versus last hires in the type of training that they're receiving?.

I think the differentiation is you’ve got a unified mindset across all of the business units that we’re going to do this the same way, every way, every day, in every market in every region. So we’ve implemented a challenger sales training program, we’ve leveraged up our sales force tools.

We’ve done face-to-face training for 15 different groups and workshops, 320 different participants. And you have to understand, in the past ABM was very operations driven and relying on the operators and the relationships to help garner additional incremental business from the existing customer base.

Now, we are truly leaning forward with a sales orientation and driving sales behaviors and activities, and it’s a new environment so some of this is crawl-walk-run - you’ve got to come up to speed and you’ve got to get fluid in what you’re doing before you see the success.

I think early signs are evident that it’s working and it’s been embraced, and even the legacy folks on the onsite business, the folks in the newer businesses that are acquired are all clamoring for the training. It’s been adroitly presented, well received, and it’s driving the results..

Great. I would assume that the contract wins that you’re talking about, particularly in California as well--in California, excuse me, is a by-product of the types of training that these sales people are receiving.

Is there any sort of insight you can give us on that pipeline or the $110 million pipeline that you had talked about across the overall company, what segments those might be in?.

Sure. It’s pretty broad-based. The $110 million we talked about is in the Solve One More pipeline, so what you can expect there is more of the same. The numbers on Solve One More for what business has closed versus what business has been quoted equates to about $250,000 per closed lead.

Remember, this is a nascent program that we did kick off in the west that has had tremendous productivity at this point. We’ve closed $42 million on that program year-to-date.

What is not captured in that number is what’s really, I think, unique and quite profound that’s happening at ABM, is their executive to executive selling that’s taking place that are not recorded in Solve One More, because that’s more of a point of service program for the employees.

But Jim’s team, because we’ve reorganized and restructured into onsite and these guys are wearing the multiple hats and having visibility into the other services that they hadn’t really provided directly before, they are communicating intra-company and then reaching across to the mobile and technical guys, so you’re seeing executive-to-executive collaboration in selling that hadn’t taken place.

That’s just in California - that’s been another $18 million. So if you look at a program that we literally kicked off about 18 months ago, driving $60 million of incremental additional revenue, I tell these guys it’s like compound interest. We have the customer, we have the opportunity to provide more services.

This is the lowest cost, highest margin way for us to grow the top line, and it’s bearing fruit. So it’s really for us a ground game. It’s about the resources to get to the other couple hundred offices we have, it’s face-to-face activity. It’s not something you can train the trainer or put out a webcast or do a video.

We have to get the people engaged in the local market, create the awareness, create the relationships, and then drive the activity. It’s programmatic, it’s well led, and it’s bearing fruit..

I think you guys are doing an absolutely fantastic job, and obviously people would envision that as the transformation continues to take hold, that the revenue, the uptick in the revenue is going to continue to increase as well.

The one interesting thing that you had mentioned earlier on the call was the fact that there was a contract, a series of contracts that you may have lost on the security side of the business, particularly because of your overall discipline when it comes to the pricing.

How is that going to change in the coming year? Would you be more lenient in regards to the types of pricing that you’re taking on, but you want to continue to go ahead and take hold and say, well, this is the price and we’re going to stick with it, just so we can make sure the types of clients [indiscernible] that we do want, we continue to get.

Thought process on that as well going forward?.

Well, I think we have a very, very strong position that we are competitive but we need to be paid for our services. We deliver a professional service.

We believe we’re delivering a better or equal service as anybody else, and the day we start only bidding on price, that will be the day, I think, that you’re going to see a very bad development in this company.

So yeah, we had to be disciplined and we’ll stay disciplined, and if you look at the overall growth in the business, I think that is a reflection of being disciplined. We could probably have a little higher growth, but that higher growth would result in lower margins..

Great, thank you all. Appreciate it..

Thank you. Our next question comes from the line of David Gold from Sidoti. Your line is open. Please go ahead..

Hey, good morning. A little bit of a follow-up there.

When we think about the growth that you’re benefiting from on the janitorial side, obviously pricing is not a factor but how do you think about it by way of market share versus growth, say, at existing clients? How should we think about where it’s coming from?.

Well David, it’s very difficult to do that one because there will always be growth within existing clients. Unfortunately, there will also be negative growth within existing clients. You will have clients selling [indiscernible]. We probably have in excess of 15,000 clients.

It’s impossible for me to give you exact details in square feet who has added, who has not added. I would say as a general statement, most of the business that Jim is adding on is mature business. What I’m trying to say here is it’s not new business going contract, so it’s pretty much all market share associated or related..

Okay.

When you talk about or commented on the pick-up in tag work, could you give some sense for where that’s coming from, whether it’s certain industry verticals or areas that maybe were neglected before?.

Yeah David, the tag work is coming from our new organization structure, so we’re seeing it across the board and we’re in-selling multiple services. As a by-product of that, we’re also getting the enhancement on the tag business as well.

We’re out in front of them, they’re seeing us, and those opportunities are there because we’re pushing the services, and it’s a by-product of that environment. You’ll see that continuing in ’15..

Got you, so presumably naturally as that grows, we should see some nice margin contribution as well?.

Yes. As we all know, tag work does have a nicer margin than the contract basis, yes..

Got you, okay. One other - when we think about the WOTC claim, one, you can say your guess is as good as mine, but I’m going to get your guess is better.

What do you think happens there? And two, managing the business given the uncertainty there, does that change anything by way of both hiring and pricing as you go out to customers?.

Well, the WOTC credit has nothing to do with pricing. It’s purely treated as a tax issue. The WOTC credit was approved by the House, it’s in the Senate. I spent last week, part of the week in Washington DC and did see a lot of politicians - not my favorite thing, but [indiscernible].

The fact of life was--what I was told was that the Senate will take this up for a vote this particular week, this coming week, because I think they’re going on their six-month vacation on Friday.

So it’s very frustrating to be depending on politics in Washington, but I actually believe that this is going to get through based upon what I hear from both sides of the floor. But again, it is Washington, so you never--you can’t say never.

But again, the House approved it, it’s in the Senate, and hopefully they’ll vote on it today, tomorrow or Friday. .

Okay, but it doesn’t change anything in how much hiring you do or anything along those lines?.

No, because we have continued focusing on hiring to get those particular credits, so our [indiscernible] has been there, so our retroactive piece is going to be the $0.10 we talked about because it’s for the full calendar year. I’m not going to put percentages on it, but I feel very strongly that we will get the $0.10.

I think what’s in front of the senators is a one-year extension, not a two-year extension. If politics get back to normal, we hope that in 2015 there will be an additional vote on the ’15 WOTC credits, but learning from our experience this year, we didn’t include it in our guidance, so we hopefully can add it to our guidance after the first quarter..

Got you, okay.

Lastly, as we think about the reorganization now largely done with some benefit to come, presumably, later in the year, presumably you’re not one to sit on the sidelines by way of major projects, so does that put us back more aggressively in the acquisition market, or are there other projects around ABM that you’d like to undertake, or both?.

The acquisition market, we have, I would say, a decent pipeline. But as we’ve said before and I’m going to say again, it’s all opportunity driven. Our guidance excludes all kinds of acquisitions, but we are ready for the right acquisition at the right time.

We are finding responses out there with private equity and they are driving the price up, so sometimes we have to stay disciplined and wait until the right opportunity comes..

Perfect. That’s all I have. Thank you..

Thank you. Our last question comes from the line of Adam Thalhimer of BB&T Capital Markets. Your line is open. Please go ahead..

Hey, good morning guys. Nice quarter. Most of my questions have been asked. I did want to ask broadly about--I mean, Henrik, you just said in response to David’s question that you’re not seeing a lot of RFPs for new buildings, but most of the companies we cover see about 5% growth in non-res construction next year.

I just--how are you thinking about that in terms of your guidance, and if you get significant new construction kind of like you had back in 2007, could that be additive to the guidance?.

Well, new construction is [indiscernible] housing. I’ll give you examples of what we’ve seen in Chicago the last 10 years, is we see new construction but we see our existing buildings, the older buildings being closed up and then we move into new buildings.

So the way we look at it is occupied square feet, so if the 5% also means 5% new tenants and 5% increase in activity, that’s where we would see some benefit. But we don’t see that high growth level, because again the numbers you have is new construction and not necessarily the impact on old buildings..

Okay, fair point. Thanks guys..

Thank you, and that does conclude our Q&A session. I’d like to turn the conference back over to Mr. Slipsager for any closing remarks..

[end of Q&A]:.

Okay, thank you very much. I just want to thank all our employees for a wonderful year, wish them happy holidays. Thanks to our shareholders and investors - it’s been a great year, we believe, and we expect to continue this going forward, so thank you very much for your support. Thank you. .

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may all disconnect. Have a great rest of your day..