Greetings, welcome to the ABM Industries Q2 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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 of Investor Relations for ABM Industries. Thank you. You may begin. Good morning, everyone, and welcome to ABM's Q2 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 Q2 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. 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. 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 Q2 results. ABM generated solid results in the Q2, delivering 2.3% organic revenue growth and strong adjusted EBITDA growth. We achieved these results through our consistent focus on cost controls, implementing price escalations, and driving organic growth in our manufacturing and distribution, aviation and education segments. These factors more than offset the impacts from a still challenging labor market, continued supply chain constraints, lower work orders, and a slow recovery of office occupancy for commercial real estate. Our financial and operational performance speaks to the resilience of our business model, our end market diversification, and most importantly, the talent and dedication of our team. In all, ABM generated Q2 revenue of $2 billion with an adjusted EBITDA margin of 7.2%, which included the benefit of earnings from a prior period parking project, as discussed last quarter. Despite a more challenging macroeconomic environment than we anticipated, we remain on target to achieve our 2023 financial goals. We continue to be focused on driving growth across the company and capturing our share of the many opportunities before us. For the first 6 months of 2023, we generated $918 million in new sales, up from $791 million last year. We also continued to invest in our future, including our ELEVATE initiatives, which will enhance our operational efficiency and deliver an improved experience for both clients and our team members. I'll now discuss the demand environment for each of our industry groups. Let's begin with B&I. Office density rates in the Q2 remained at relatively stable levels at approximately 50% on a blended basis. Although commercial office space remains fairly well occupied Tuesday through Thursday, many employees continue to work remotely on Monday and Friday. This trend is likely to continue as employers accommodate remote and hybrid work. This pattern of office usage limits demands for certain higher-margin work orders, like carpet cleaning, freight elevator service, and large gathering cleanups, which are largely driven by office density. As a result of the reduction in office density, we are beginning to see a consolidation of office space in metro markets as clients reduce their footprint when their leases expire. Although we have not yet experienced a resulting contraction in scope of work, we anticipate that further increases in vacancy rates could create additional pressures on our business. We feel that we're very well-positioned, given our commercial real estate profile, which is heavily concentrated within Class A newer properties. Although Class A buildings are still impacted, it's to a much lesser degree than Class B and Class C properties. We also believe that as tenants migrate towards higher quality buildings, it will stabilize our multi-tenant portfolio. Additionally, a sizable portion of our commercial real estate exposure is in engineering, which tends to be more stable as HVAC and electrical systems need to be maintained regardless of occupancy density. Moving to aviation, activity in the leisure and business travel markets, including related parking and transportation, has essentially returned to pre-pandemic levels. Accordingly, as we go forward, we anticipate our aviation revenue growth will be reflective of the overall travel market growth rate, complemented by new business opportunities. In fact, we recently won a multi-million-dollar expansion of passenger transportation services at two major U.K. airports. We also expect continued growth in our ABM Vantage Parking solution, which enhances revenue for clients and improves the traveler experience. Demand in manufacturing and distribution continues to be solid, benefiting not only from expansion within existing logistics and e-commerce clients, but also from new business and new end markets. For example, we added over $30 million in new contracts in the semiconductor market in the Q2 alone. We also saw growth with a leading aerospace company, further highlighting our successful efforts to broaden our client base in attractive end markets. We expect revenue growth in our M&D segment to remain on pace for the remainder of the year. In education, the addition of sizable new clients in the Q4 of 2022 and new business wins in this fiscal year has helped drive mid-single-digit organic revenue growth in this segment. We have a strong pipeline of new business opportunities. I'm confident ABM will continue our positive growth trajectory given our competitive positioning. From a margin perspective, segment margin remains above pre-pandemic levels. We anticipate that further labor market normalization will support the margin progress we've achieved. Moving to technical solutions, the demand environment for EV charging infrastructure and microgrids remains positive as our ATS backlog exceeds $440 million. After a slow start to the year, hampered by macroeconomic concerns, market conditions are slowly improving for our infrastructure solutions business, as evidenced by a significant contract win with a school district in western Pennsylvania, which includes upgrades for lighting and HVAC, as well as multiple building enhancements. Turning to eMobility, as we discussed on our last call, we expect the pace of EV charger installations to accelerate in the second half of the year as we begin to deliver on several new programs, including one for a large automotive dealer network. RavenVolt generated approximately $30 million in Q2 revenue, completing multiple projects, including the installation of power resiliency systems for two major retailers and a multinational consumer goods company. Similar to EV, we expect growth to accelerate in the back half of this year as long-awaited materials begin to arrive. Overall, we continue to be excited about the long-term outlook for ATS and believe we're at the beginning of what will be a multiyear runway of strong growth. To support this growth opportunity, we recently announced our plan to construct an electrification center that will establish ABM as the clear leader in electrification infrastructure turnkey solutions. The planned facility in the Atlanta area will house multiple solutions serving the eMobility, power resiliency, and electrification sectors, creating a first-of-its-kind EV ecosystem hub. Turning to ELEVATE, we made significant headway on our planned initiatives during the Q2, including the initial successful deployment of our cloud-based ERP system and 15 integrated boundary systems. Our initial implementation focused on our education segment, the results have been more than encouraging. As we progress forward, future implementations will move through each industry segment on a programmed and managed pace as we leverage our collective learning and experience. In addition, we extended the reach of our workforce productivity and optimization tool, which provides our teams with advanced analytics for productivity levels across their portfolios. This capability has been critical for optimizing labor usage in our commercial real estate markets. We're also approaching the pilot launch of a new mobile application for our frontline team members, a key digital enabler for the ELEVATE program. Lastly, we continue to make progress on our ESG journey. For the first time, ABM has been named to the DiversityInc List of Noteworthy Companies. This, among many other distinctions and awards, reflects our culture and our drive to lead the way in DE&I. I couldn't be prouder of where our company is heading, despite the macroeconomic headwinds and the challenges in commercial real estate. The mixture of our end markets, the resiliency of our culture, and the extraordinary talent of our teammates will allow us to continue on our accelerated path. Now I'll turn it over to Earl for the financials. Thank you, Scott. Good morning, everyone. For those of you following along with our earnings presentation, please turn to slide 5. Q2 revenue increased 4.5% to $2 billion, comprised of organic revenue growth of 2.3% and growth from acquisitions of 2.2%. Moving on to slide 6. Net income in the Q2 was $51.9 million, or $0.78 per diluted share, up 6% and 8%, respectively, as compared to last year. The increase in GAAP net income was driven by higher income from operations, especially in our aviation segment, and tight expense controls, partially offset by higher interest expense, labor costs, and lower volume of higher margin work orders. Adjusted net income was flat at $60.2 million. Adjusted earnings per diluted share was $0.90, up 1% from the prior year period. Adjusted net income and adjusted EPS primarily reflect higher income from operations and effective cost controls, offset by higher interest expense. Adjusted EBITDA increased 15% over the prior year to $137 million. Adjusted EBITDA margin was 7.2% versus 6.5% last year. This performance was boosted by the recognition of revenue connected with the previously mentioned aviation parking project, as associated expenses were recorded in prior periods. Excluding the impact from the parking project, adjusted EBITDA was $124.4 million, up 5% over last year. Adjusted EBITDA margin was 6.6%. Now turning to our segments results, beginning on slide 7. B&I revenue declined half a% year-over-year to $1 billion. Organic revenue declined 2%, mainly reflecting a lower volume of work orders, including disinfection, versus the prior year, and expected attrition of certain client contracts from the ABLE acquisition. Operating profit in B&I decreased slightly to $76.2 million. Operating margin was 7.6%, essentially flat with the prior year. Aviation revenue increased 22% to $227.2 million, marking the eighth consecutive quarter of year-over-year revenue growth. This improvement was driven by the recognition of the previously mentioned parking project revenue, as well as increased leisure and business airline traffic, along with related growth in parking activity. Aviation's operating profit was $23.6 million, including $12.6 million of parking project earnings versus $9.6 million in the prior period. Margin was 10.4% compared to 5.2% last year. Adjusting for the parking project, operating profit was $11 million, and margin was 5.1%. Turning to slide 8. Manufacturing distribution revenue grew 5% to $373.2 million, reflecting favorable market demand and expansion with clients in the life sciences and semiconductor markets. Operating profit decreased 3% to $40.8 million, and operating margin declined 80 basis points to 10.9%. The decreases in operating profit and margin primarily reflect labor cost inflation and changes in mix. Education revenue increased 6% to $216.7 million, benefiting from the addition of new clients in the Q4 of fiscal 2022. Education operating profit was $11.8 million, essentially flat versus the prior year period, while margin was down slightly to 5.4%. Technical solutions revenue grew 15% to $168.4 million, driven by the contribution from RavenVolt. Organic revenue declined 6%, largely due to the timing of large EV charger installation programs, which are weighted to the second half of the year, and the delay of some infrastructure solution projects. Backlog in ATS is over $440 million, supporting our expectations for a strong back half of the year. Of note, RavenVolt generated nearly $30 million in revenue in the Q2, aided by the receipt of delayed materials. ATS operating profit was $10.2 million, and margin was 6%, compared to operating profit of $10.6 million and margin of 7.2% last year. 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 Q2 with total debt of $1.5 billion, including $58.6 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 Q2, we had available liquidity of $503.2 million, including cash and cash equivalents of $71.2 million. Free cash flow in the Q2 was $16 million, and we expect a solid back half of the year in terms of free cash generation. Interest expense was $21.1 million in the Q2, up $13 million from the prior year period, and up over $1 million sequentially from Q1. The increase was due to significantly higher interest rates, as well as year-over-year increase in total debt. Let's move on to our full-year fiscal 2023 outlook, as shown on slide 10. We now expect GAAP EPS to be in the range of $2.52-$2.72, up $0.09 from our prior outlook, driven by a benefit from changes in items impacting comparability, primarily related to the fair value of contingent considerations. Our outlook for the adjusted EPS remains unchanged at $3.40-$3.60. Interest expense is now expected to be around $80 million for the full year, reflecting recent Fed actions and the forward yield curve. This forecast is about $6 million above the high end of the previously estimated range. Our tax rate before discrete items is anticipated to be between 29%-30%. As mentioned last quarter, we expect to grow full year adjusted EBITDA at a mid-single-digit rate. Additionally, we are increasing the low end of the range for adjusted EBITDA margin by 10 basis points and now expect it to be between 6.5% and 6.8% for the full year. We now expect full year 2023 free cash flow to be in the range of $240 million-$270 million, before the final installment of our CARES Act payment of $66 million, which was made in Q1, and combined integration and ELEVATE costs of approximately $75 million-$80 million. This represents a $30 million decrease from our prior forecast, largely driven by expected working capital needs to support growth in our ATS segments in the second half and higher interest expense. With respect to the cadence of quarterly adjusted EPS, we expect approximately 45%-50% of full year adjusted earnings per share to be generated in the first half of the fiscal year, consistent with our prior guidance. We anticipate Q3 adjusted EPS will not be materially different from Q2 2023. Let me turn it back to Scott for closing comments. Thanks, Earl. In late 2021, around the time we announced our initial ELEVATE targets, the average U.S. inflation rate for the full year of 2021 was 4.7%. The 10-year T-Note was approximately 1.5%, the unemployment rate had trended down to 4% from the pandemic high of 15%. Today, the 10-year T-Note rate is over 200 basis points higher. Inflation peaked at 9% in 2022 and is currently close to 5%, the job market for blue-collar labor is as challenging as it has ever been. Despite these headwinds, we've delivered on our financial goals, expanded our business and service offerings, and achieved important progress towards our 2025 targets. Today, ABM is stronger and better positioned than ever before. Our success reflects our resilient business model, the benefits from our ELEVATE investments, and consistent execution by the ABM team. As we move forward, I'm confident in our ability to build value for our stakeholders as we work tirelessly towards achieving our goals. Underpinned by the strength of our core business, ABM continues to evolve into a higher growth, higher margin facility solution provider. With that, let's take some questions. Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Sean Eastman with KeyBanc Capital Markets. Please proceed with your question. Hi, team. Thanks for taking my questions. I just wanted to start on ATS. It sounds like, you know, RavenVolt is blowing and going now. It sounds like the EV charging side is on pace for a second-half ramp. I just wanted to round that out with discussion on the Bundled Energy Solutions piece and just how, you know, customer decision making is trending in light of the, you know, the weak macro conditions. Yeah, no, that's a great question, Sean. Look, it's still slow, probably slower than we'd like, but it's not a reflection of our market share or our sales pipeline, or even the viability of the offering. It's more about the fact that, you know, what we've seen just across the board, some clients are in pause mode right now, right? You know, the economics get a little bit more challenging in that segment because of interest rates. We just won. You know, I mentioned in my opening remarks, we won a really nice job in Western Pennsylvania, and the pipeline is strong. I think for us, it's waiting for clients to pull the trigger because it's upgrades that they know they need. Because if you look at the core of it, right, you're retrofitting a facility that needs retrofitting, right? It's a question of, you know, getting the school board together and getting the high sign to pull the trigger. We're as confident as ever. It's just a little bit more on the delay side, but we're hoping the back half will be stronger. That's the nice thing about ATS, because we're so diversified. In addition to, you know, the Bundled Energy Solutions, as you point out, we have the microgrid solution now with RavenVolt. Our EV is starting to ramp up, and we do have a core electrical and mechanical business on top of that we don't talk about a lot, but that's also part of the underpinning. It's nice to have diversification in that segment. Okay, thanks for that, Scott. I guess maybe just to finish it off on ATS, I mean, where should the margins be? Obviously, the first half we've had supply chain, we've had kind of a project timing, air pocket. I mean, I'm just trying to get an expectation for where we should be run rating when everything's up on plane for ATS? Yeah. Historically, when it's humming, it's high single digit, right? Yeah. There's no reason that it won't get back to that. I think it's like, you know, that higher margin stuff, which is the Bundled Energy Solutions and the microgrids, are the ones that just haven't kicked in yet, right? Even Sean EV, which we said is lower margin, that's really because we've been playing in the dealership market, you know, which is like onesie, twosies. If you have a large-scale contract with an automaker like BMW, you're putting two or three in per dealership. It's not the scale you want. We're moving more to a fleet orientation, where we can go to a facility and put in 100 chargers and get the scale. That's part of our ramp-up strategy as well. I'm confident over time, we'll squarely get back into that high single-digit margin range. Okay, got you. one more. Just relative to the work order dynamic, I feel like over the past 2 years, we've been, you know, anchored You know, in terms of, like, work orders going from pandemic highs down to normalized. Now we're talking about lighter vacancy rates and, you know, maybe that normalized work order level having some downside. How should we think about that, Scott, and whether there's, you know, risk to margins around, you know, a step down to below normal work orders? What have we seen historically there? Yeah. Look, I think we're getting back down to pre-pandemic levels, and that's really a reflection right now of hybrid work, right? Here's a way to think about it. Maybe this will give you some clarity, right? You know, when you think about work orders, right, it ranges from people calling for the freight elevator because they're getting furniture deliveries. They're having a birthday celebration, they want 2 porters to come up because they're having a pizza party, right? It's spotting on stained carpets, right? All those one-time things, and now when people are in the office 3 days a week instead of 5 days a week, you get less of those calls on the Mondays and Fridays. We were still stabilized during hybrid at a higher rate than we were pre-pandemic, and we're really encouraged by that. I think the overlay now that's brought it down incrementally more is just the state of the economy. You know, people are watching what they're spending, so I think that's a little bit of an overhang. You know, if I were to look into the future when we have a recovery, I'm willing to bet that work orders will pop back up again and pop back up again at higher than pre-pandemic levels. I think we have this temporary double overhang now, but, you know, just to round out the question, I do not think on a% basis, we are gonna see much more deterioration. You know, volumetrically, maybe because revenues can be compressed a little bit, but that'll be on dollars, not margin%. I feel like we're where we are now is kind of pretty stabilized. Okay, thanks. I'll turn it over. Appreciate it. Thanks, Sean. Thank you. Our next question comes from line of Justin Hauke with Baird. Please proceed with your question. Hi, good morning. Good morning. Good morning. I wanted to ask, just to kind of, you know, big picture, clarify some of the guidance moving pieces, because, you know, with the margin moving up a little bit, despite the, and the EPS held, despite the incremental interest expense, just the moving pieces on that, what was a little bit better and a little bit weaker? Maybe specifically the corporate cost control, which it seems like that's continued to kind of come in a little bit better than expected. Maybe just the outlook for what you're looking at for corporate for the back half of the year. Sure. Absolutely. I'll take that on. When we look at kind of what happened throughout quarter two, you know, we continued to see some headwinds in the shape of, you know, lower work orders, you know, which actually has had a dip in the margin, as well as continued pressure in the labor market. We've continued to see labor inflation, which, you know, good news is we've been able to offset a large majority of that through price escalations. When we looked at the quarter, we also had the flow-through from last year's parking project that was able to offset that. When you look at the call-up in margins, part of that was actually the flow-through that we actually got from the previously deferred parking. What we feel really good about is that in spite of, you know, the continued challenges that we're seeing in margins. If you actually even back out, you know, the flow-through of the parking project from last year, our margins for the quarter were 6.6%. You know, in spite of the continued challenges that we're actually seeing, we feel really, really pleased that we're still being able to deliver within, you know, the midpoint of our range. Just the corporate expense, maybe like a $ run rate, what you're kind of thinking back half of the year? I would say that, you know, when we look at corporate expenses, I would say that the, you know, expect an average of about $60 million in corporate expenses, excluding kind of like the items impacting comparability. Yeah. Okay. Great. I guess the second question I had, just on the parking segment, I mean, even backing out the one time here, your organic growth rates there have been really strong, and it kind of sounded like in the prepared remarks that maybe you're expecting that to kind of decelerate when you talked about, you know, more market trends. I just wanna understand what you mean by that and what you're thinking about for kind of the growth rate of that segment. What is the market trend for the back half of the year? Sure. I mean, look, I think, it, you know, generally speaking, like from an industry standpoint, I think parking revenues are kind of stable now, right? You know, hybrid work is in place, so it is what it is. You know, 'cause, like, for us, we have our parking business in two kind of key segments: the real estate side, commercial real estate, and then on aviation. I think, you know, in both of those segments, we're pretty stable, right? I think it's more normalized now. What we're excited about is we have our ABM Vantage offering, which is something that's really, you know, it's a new technology, it's insightful, it works, you know, to help give insights to clients on revenue management. For us, it's about this new productized offering that's gonna help us accelerate it. You know, we're hoping that in the parking segment, not only will we continue to grow, but hopefully a little bit ahead of the market because of some of the innovative stuff we're doing. I would say, you know, walking that back in large measure, we're kind of at stabilization in the parking business as an industry. Yeah, I apologize. I meant the aviation segment, and the adjusted for the parking item. You know, your growth rate there has been, you know, in the high single digits. I guess what I was more asking about is, you know, what is your expectation for the deceleration from that? Or why was it so strong in the first half? Is that just kind of the recovery in aviation volumes, and now you're saying those are recovered, and they should kind of moderate to a more low single digit, or? That's right. No, that's exactly right. You know, travel has been, well, you know, right? Anything around travel and leisure has been so up. I think, you know, at this point, and I think we did say it a little bit in the prepared remarks, we feel like, you know, we are back to pre-pandemic levels and maybe even then some, because we do think there's a bunch of people that are catching up, right, in terms of travel. I think you'll see more of a stabilization, but still, you know, nice, steady growth. Great. Okay, thank you very much. You got it. Thank you. Our next question comes from the line of Faiza Alwy with Deutsche Bank. Please proceed with your question. Yes. Hi, good morning. Hi. I first wanted to follow up again on the technical solutions side of the business. Walk us through, you know, you mentioned that you have project backlog of $440 million. Are you expecting that all of that will be recognized as revenue this year? Just, you know, walk us through the timing of, you know, what's going on with the project delays and when do you expect to fulfill those projects? Sure, Faiza. That won't all be recognized this year. You know, typically speaking, ATS in general has always been a back half of the year story. You know, just to put some color around it, you know, we do a lot of work in school systems, so think about the fact that in July and August, the schools aren't occupied, especially the K through 12. That's the time that you go in, and you do a lot of the infrastructure work. That's why, that's why a lot of this is back half loaded, right? You know, for us, you know, backlog means, again, signed contracts that get initiated. A lot of that's gonna happen in Q3 and Q4, really more Q4 than Q3, and that'll be the initiation. I can't give you a precise, you know, exactly how much of the $440 will be in year, it's a really strong sign that we have, you know, backlog at that level. You know, it's think of it as initiating the projects in Q4, and they ramp into through Q1 and even a little bit into Q2. Okay. Just so I'm clear, 'cause, you know, the delays are related, is it more supply oriented, or is it more, you know, demand oriented? I was under the impression that it was more supply related, but some of your comments today are leading me to believe that maybe it's more on the demand side, aren't ready to. No, actually, you know, sorry for jumping that. It's, yeah, no, it, you know, Faiza Alwy, it's a combination of both, right? It's a little bit on demand side, on the Bundled Energy Solutions, on the microgrids, it's all about the supply chain. You know, specifically batteries and some of the switchgear. Now, you know, we are encouraged because what was happening, and I think you would see this from some of the competitors in our industry. At the beginning of the year, what would happen is, something would take 10 weeks, then you know, 10 weeks to get the item, then maybe a month later, you'd get another order for something, and you'd go to the manufacturer, like, "Oh, no, now it's taking 12 weeks." Then you'd call again, and like, "Yeah, well, now it's taking 14 weeks." It's all starting to stabilize now, that's the key for us. If something pre-pandemic took 6 weeks and now it's taking 10, as long as it stays taking 10, you could be planful, you can manage around it, and we're seeing that stabilization. The majority of the problem, especially on the RavenVolt side, has been supply chain-oriented, definitely not demand oriented. The pipeline is really, really robust. Okay, 'cause sorry, I'm just a little unclear. That's why I just wanna follow up because so if it is on the RavenVolt side, right, like, that wouldn't impact your organic revenue. You know, explain to me a little bit more in terms of what's driving, you know, the decline in organic revenue. Yeah, let's just pull out RavenVolt for a second, right? There's 2 core segments there. There's EV, and there's Bundled Energy Solutions. Both of those are more demand side, and for different reasons. EV, because we were just winding down a big project with a dealership, and we're now ramping up a big project with an automotive company. You're seeing that delay to the back half. That was just timing, but demand timing, not supply chain timing. The other one is Bundled Energy Solutions, which is what I talked about a few seconds ago, which is really the fact that we have the backlog, we have the orders, but clients aren't pulling the trigger because they're just doing a general pause. Again, we're starting to see that loosen up a bit now that I think the market is thinking that interest rates are starting to stabilize. If it is what it is, then you start making those decisions. Got it. Thank you. Thank you for indulging me in all, on all that detail. Just maybe if I can follow up on the ELEVATE initiatives, right? You mentioned a few things. Give us a sense of, you know, how you're thinking about timing there. I know you've talked about the, you know, the end state being maybe a couple of years ago. Talk about how, you know, how you're thinking about getting to that end state. What are some of the, you know, next initiatives that we should expect going forward? Sure. I mean, look, we are on track with ELEVATE. You know, the big core, you know, in terms of infrastructure, is our ERP transformation, and that's a 2-year process because we're doing it by industry group. We just had the successful launch of our education group, literally like a month ago, and it's gone way better than we even expected, right? 'Cause the, you know, ERP implementations are always bumpy, and it went really well, and now we're planning our next industry group, which will happen early next year. The infrastructure side is on track and going better than we hoped. You know, other things are all in progress, right? We launched hyper-targeting for sales growth. You saw in or heard in the prepared remarks, we had another unbelievable first six months of the year in new sales. That's a reflection, not only of our sales team, you know, in terms of just the culture of our people, but the hyper-targeting tool. We're now piloting our workforce management, which is gonna create efficiency in the field. This month, we're releasing our ABM Connect, which is our digital application to start connecting us in real time to the people out in the field, which is gonna be a real game changer for us. Even that is probably a 12-18 month journey, if not longer, to actually get it deployed across 100,000 people, as you can imagine. Things are going as planned, we're... Hopefully, you can sense the enthusiasm. Great. Thank you so much. Thanks, Faiza. Thank you. We'd like to request that you please keep to one question and one follow-up each. Our next question comes from the line of David Silver with CL King & Associates. Please proceed with your question. Yeah. Hi, good morning. Thank you. I would like to maybe just drill down a little bit on the RavenVolt performance to date. I'm wondering if you know, maybe if you wouldn't mind discussing how the performance of the business aligns or how it compares to kind of your initial expectations. In particular, you know, I noticed you booked a change to the fair value of contingent consideration. Could you just maybe talk about what drove you to make that adjustment this quarter? Thank you. Sure. I'll take the first part of it. We're as encouraged as ever about RavenVolt. I think probably even more so than when we did the transaction, because microgrids are so compelling right now, and the backlog is phenomenal, and the team is phenomenal. I think, you know, if there was any level, I don't even want to use the word disappointment, it's just the supply chain, and you can't control that, right? It's the same thing that everyone in our industry is facing. Again, we see light at the end of the tunnel, and we're hoping for a strong back half of the year. I'll let Earl talk to the accounting treatment 'cause that's in his wheelhouse. Earl, you can take it away. Sure, Scott. On a quarterly basis, we do a mark-to-market valuation on the contingent consideration. When we look at the outlook, you know, as, you know, Scott just mentioned, we're still very positive on the deal model. However, there's some timing challenges as we are, particularly with regards to supply chain timing, which has actually deferred some of the revenue and earnings that would have actually happened in year 1 into future years. Just based on the GAAP accounting of that, you actually then discount that back with a, you know, at a high discount rate, which then resulted in this reduction in the liability. Again, I would really chalk it up to timing as opposed to anything different from a value case basis. Yeah, thank you. That's kind of where what I was wondering about. I appreciate you targeting that. My other question would be kind of more about the office market, the commercial market, which seems to be in the news quite a bit. You certainly addressed it right up front, but I'm just wondering if maybe you could, Scott, if maybe you would share kind of your, a multiyear outlook, a 2 or 3-year outlook. In other words, you're I think what you're saying is, you know, the office market, and the motivations and whatnot for the tenants has changed. You know, for yourself to keep growing in that area, I'm guessing you're gonna have to take share or, you know, offer higher, a bundle of higher value services. You know, from your perspective, I mean, what continued, I guess, evolution in your value proposition or in your offering into the commercial market, you know, will be necessary for you to kind of deal with the current trends towards lower occupancy rates and remote work or hybrid work arrangements, you know, in order to continue to maintain your position and ideally grow, you know, grow your share, grow your profitability in there? Thank you. Sure. Well, listen, there's certainly gonna be pressure in commercial real estate, right? That's pretty obvious, right? For us, so far, you know, as we've mentioned, it's really only been around the work order side because of hybrid and the economy. When you drill down into ABM's portfolio in B&I, you know, David, don't forget that, you know, or you may not have the insight to this, but a third of our revenues in B&I is around engineering and parking, right? Those are really stabilized depending on office density, because it doesn't matter how dense a floor is, you still need, you know, the quote, unquote "engineers" in the basement working on the mechanical and electrical equipment. That doesn't change. You know, parking, as we said, is stabilized. You're really talking about the janitorial piece that has some of the exposure. You look at ABM's portfolio, and we are way predominantly Class A buildings, newer buildings, bigger buildings, which are the ones that are gonna survive the best. If anything, we've seen those have positive absorption as compared to the rest of the market, because we're seeing B and C tenants from B and C buildings, rather, migrating into Class A buildings. I think, you know, for us, we're pretty protected. It'll be choppy for the next several quarters, there's no question about it. You know, leases expire even in A buildings, and as they take a little less space, you know, the next tenant has to come in. They're gonna have a year or so to build their space. There, there'll be some choppiness, but I think, again, we're so mitigated because of the portfolio that we have. Don't forget, again, as a whole, we're diversified. You know, we've been investing in end markets like ATS, manufacturing, and distribution, which is another hedge for us. And then lastly, David, what I would say is, you think about the ELEVATE investments and just hyper targeting, just in general, for on the growth side, to help us mitigate some of the compression in the real estate market. I think, you know, I think we're doing all the things we can, and we actively manage these challenges. We've seen some of these downturns before in segments. Look at even the pandemic, when schools were closed and airports were closed, and B&I accelerated. Now we may be in a period where there's less acceleration in B&I, but as we talked about, aviation is doing great and ATS is doing great. Thank you for that. I just have a quick one here, you know, you touched on ERP and what the history of many other companies has been with their different implementations, issues. I've, you know, I've certainly been an observer of a number of them. Just so I know, you know, in the event that maybe costs rise a little bit above expectations with the implementation of your ERP system, would that extra outlay be treated, would it be capitalized or would it be expense? Do you have a sense of that at this point? We're right on our target, so we're not talking about cost overruns at this point. We feel really good and have really good line of sight into what the expense profile looks like in the next couple of years. That's not in our narrative, cost overruns. Thank you. Ladies and gentlemen, our final question this morning comes from the line of Tim Mulrooney with William Blair. Please proceed with your question. Scott, Earl, good morning. Good morning. Good morning. Most of my question has been answered, so I'll keep this quick. Last, last quarter, y'all gave the headwinds from work orders. I think it was $35 million. You said you'd expect that, I think, to more normalize. You didn't mention it this quarter, is that because there really wasn't a headwind year-over-year, or if there was, can you quantify it for us? Yeah. We talking about maybe $15 million. it, you know, it hasn't been much, and again, I do think we're heading into this more stabilized rate right now. Yeah, I think this is, we're actually, given everything that's happening in the environment and where hybrid is, and as I said, where the overall economy is, we were actually, you know, pleased that it wasn't more acute. Yeah, 'cause, I mean, I think what we talked about last quarter was the anticipated reduction in disinfection-related work orders, which, you know, that will become a non-story, you know, starting in Q3, Q4, as that kind of, like, dissipates. I think what the, you know, the potential, you know, headwinds that we'll be seeing potentially in the future are really around just based on, you know, what Scott earlier alluded to with regards to, you know, hybrid, you know, the hybrid environment and the potential for reduction in work orders, where, again, right now, we're now at, kind of call it, you know, pre-COVID levels, which are typically about 5% of revenue. Yeah, that's kind of how I'm thinking about it, or how I interpreted Scott's comments earlier is like, look, pre-pandemic work order of 4%-5%. All else equal, you'd expect that to be higher on a go-forward basis, but there's some macro headwind stuff that's kind of pulling it back to that 4, 5%. If that's the right way to think about it? That's exactly how. Exactly right. Again, what I would reiterate is that even during, you know, before the economy started turning, you know, in the last few months, even before that, with hybrid, we were still above pre-pandemic levels. It's almost like kind of this new kind of cost control that we're seeing is what pushed us back to pre-pandemic levels. We're optimistic, Tim, that we're gonna get back above that when the economy turns. Understood. Last one from me, guys. Thank you. You know, does it make sense to prioritize your capital allocation on debt reduction near term versus M&A and buybacks and other things to help reduce that incremental interest burden, or are you comfortable at 2.6 times? Thank you. Yeah, no, good question. You know, when we looked at our cash flow, which generally is weighted more in the back half, we do feel like it's gonna provide us with, you know, ample flexibility to do both of those things, which it would include, you know, paying down debt in addition to potentially, you know, doing some very small share buybacks. When I talk about share buybacks, it really would be most likely limited to just the anti-dilutive nature of our share-based compensation. You know, the good news is we feel that, you know, with our strong cash flows, we'll be able to limit, you know, our net leverage exposure. All right. Thank you. Thank you. 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 wanna thank everybody for participating and the interest level, again, very much appreciated. We hope everyone is having a good start to the summer, and we're looking forward to coming back to you in Q3 with an update on all things ABM. Have a great summer, everybody. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.