ABM 인더스트리스 2026년 3분기 실적 컨퍼런스 콜: EPS 및 현금흐름 전망 상향

핵심 요약

• ABM 인더스트리스는 2026 회계연도 3분기에 2.1%의 자체 성장과 2.1%의 인수 기여분을 포함해 전년 동기 대비 4.2% 증가한 23억 달러를 소폭 상회하는 사상 최대 매출을 기록했다고 발표했습니다.
• 조정 희석주당순이익(EPS)은 1.04달러로 27% 증가했으며, 조정 EBITDA는 1억 3,960만 달러로 11% 늘었습니다. 부문 영업이익률은 전분기 대비 40bp 개선된 7.7%를 기록했습니다.
• 연초 대비 누적 잉여현금흐름은 전년 동기 4,240만 달러에서 1억 9,960만 달러로 증가했습니다. ABM은 보고 기준 연간 잉여현금흐름 전망치를 2,500만 달러 상향한 약 2억 1,000만 달러로 제시했습니다.
• 반도체, 마이크로그리드 및 데이터센터 사업은 첫 9개월 동안 26%의 자체 성장과 WGNSTAR 인수를 포함한 약 40%의 성장을 바탕으로 7억 7,500만 달러에 달하는 매출을 기록했습니다.
• 경영진은 2026 회계연도 조정 EPS 가이던스 중간값을 3.95~4.10달러 범위로 상향 조정했습니다. 자체 매출 성장률 전망은 상단에 가까운 3%~4% 수준을 유지했습니다.
• 테크니컬 솔루션스 부문은 3분기에 약 1,500만 달러 규모의 프로젝트 지연에 직면했습니다. 경영진은 지연된 매출 작업의 대부분이 4분기로 이월되고, 일부 적은 금액은 2027 회계연도 1분기에 반영될 것으로 예상된다고 밝혔습니다.

주요 재무 데이터

사업 및 운영 실적

비즈니스 & 인더스트리: 대형 영국 고객사 이탈과 서부 지역 중심의 기타 고객사 이탈로 매출이 2.6% 감소했습니다. 다만 비용 절감 및 운영 개선으로 매출 감소분을 상쇄하면서 영업이익은 7,500만 달러로 늘었고, 영업이익률은 30bp 개선된 7.4%를 기록했습니다.

에비에이션: 견조한 여객 수요와 히드로 공항 계약 물량 증가에 힘입어 매출이 12% 증가한 3억 2,810만 달러를 기록했습니다. 영업이익률은 항공유 가격 상승에 대응한 항공사 고객들의 비용 절감 요구로 6.8%에서 5.6%로 하락했습니다. 현재 공항 관련 매출이 에비에이션 부문 매출의 약 60%를 차지합니다.

매뉴팩처링 & 디스트리뷰션: 매출은 8%의 자체 성장과 WGNSTAR의 10% 기여에 힘입어 18% 증가한 4억 8,100만 달러를 기록했습니다. 영업이익은 4,050만 달러로 증가했지만, 영업이익률은 8.9%에서 8.4%로 하락했습니다. WGNSTAR 관련 무형자산 상각비 추가분을 제외하면 영업이익률은 9.2%였습니다.

에듀케이션: 매출은 2억 3,580만 달러로 소폭 증가했습니다. 인력 효율성 개선과 효과적인 비용 인상 관리에 힘입어 영업이익은 9% 증가한 2,300만 달러를 기록했으며, 영업이익률은 70bp 확대된 9.7%를 기록했습니다.

테크니컬 솔루션스: 2%의 자체 성장을 포함해 매출은 4% 증가한 2억 5,990만 달러를 기록했습니다. 견조한 HVAC 및 배터리 에너지 저장장치 사업 성과가 마이크로그리드 프로젝트 지연으로 일부 상쇄되었습니다. 영업이익은 2,150만 달러로 증가했으며, 영업이익률은 7.8%에서 8.3%로 개선되었습니다.

반도체, 마이크로그리드 및 데이터센터 사업은 현재 ABM 전체 매출의 11% 이상을 차지하며, 두 자릿수의 합산 영업이익률을 기록하고 있습니다. 첫 9개월 동안 반도체 매출은 자체 기준 65% 성장했으며, 약 2분기 분량의 WGNSTAR 성과를 포함하면 두 배 이상으로 증가했습니다. 마이크로그리드 매출은 자체 기준 17% 증가했고, 데이터센터 매출은 자체 기준 8% 성장했습니다.

또한 ABM은 미 육군 공병단에 마이크로그리드 또는 주 비상 전력 시스템을 공급하는 합작투자 계약을 최종 확정할 것으로 기대하고 있습니다. ABM 담당 지분 가치는 약 2,000만 달러 규모이며, 2027년 중 이행될 예정입니다.

경영진 가이던스

• 조정 EPS: 2026 회계연도 기준 3.95~4.10달러로, 3분기 실적 호조에 따라 중간값이 상향 조정되었습니다.
• 자체 매출 성장률: 3%~4%로, 경영진은 해당 범위의 상단 수준 실적을 계속해서 예상하고 있습니다.
• 총매출 성장률: WGNSTAR의 약 1%포인트 기여분을 포함해 4%~5% 범위의 상단 수준으로 예상됩니다.
• 부문 영업이익률: 2026 회계연도 기준 7.7%~7.8%입니다. 경영진은 4분기 영업이익률이 이 범위를 의미 있게 상회할 것으로 예상하며 8%를 넘어설 가능성도 시사했습니다.
• 정상화된 잉여현금흐름: 사업 전환 및 통합 비용, 최종 레이븐볼트(RavenVolt) 언아웃 지급금 및 추가 구조조정 비용 차감 전 기준 약 2억 8,500만 달러입니다.
• 보고 기준 잉여현금흐름: 기존 전망치인 1억 8,500만 달러에서 상향된 약 2억 1,000만 달러입니다.
• 이자 비용: 약 1억 1,000만 달러입니다.
• 정상화된 세율: 일회성 항목 차감 전 기준 29%~30%입니다.

경영진은 지연된 마이크로그리드 프로젝트가 진행됨에 따라 4분기 테크니컬 솔루션스 부문이 두 자릿수의 자체 성장을 기록할 것으로 예상하고 있습니다. 2027 회계연도의 경우, 비즈니스 & 인더스트리 부문은 연중 중반 무렵 자체 성장세로 돌아서고, 매뉴팩처링 & 디스트리뷰션 및 테크니컬 솔루션스 부문은 견조한 성장을 지속하며, 에듀케이션 부문은 한 자릿수 초반의 자체 성장을 거둘 것으로 전망했습니다.

리스크 및 주시 영역

• 테크니컬 솔루션스 부문은 프로젝트 타이밍에 따른 분기별 변동성에 계속 노출되어 있습니다. 3분기 프로젝트 지연은 한 고객사가 다른 자본 지출 프로젝트를 우선시하기로 결정함에 따라 발생했습니다.
• 비즈니스 & 인더스트리 부문은 고객사 이탈, 재택근무 트렌드, 북캘리포니아 지역 내 경쟁사들의 공격적인 가격 책정으로 인한 압박을 지속적으로 받고 있습니다.
• 항공유 가격 상승이 항공사의 수익성과 에비에이션 부문 이익률을 압박하고 있으나, 경영진은 그 영향이 안정화되는 추세라고 설명했습니다.
• WGNSTAR 관련 무형자산 상각비가 매뉴팩처링 & 디스트리뷰션 부문 이익률에 부담을 주고 있습니다. ABM은 2026 회계연도에 약 1,200만 달러의 무형자산 상각비를 배정했습니다.
• WGNSTAR 인수에 따른 평균 부채 증가로 인해 3분기 이자 비용은 전년 동기 대비 420만 달러 증가한 2,950만 달러를 기록했습니다.
• 경영진은 대부분의 최종 시장이 건실하다고 판단하면서도 광범위한 거시경제적 불확실성을 예의주시하고 있습니다.

애널리스트 Q&A 주요 내용

• 경영진은 데이터센터 프로젝트 파이프라인이 전년 동기 대비 수배 규모로 커졌으며, 단기적으로는 코로케이션 사업자가 주요 목표 대상이라고 밝혔습니다. 공식적인 전망치를 제공하진 않았으나 ABM은 시간이 지남에 따라 데이터센터 매출이 견조한 두 자릿수 성장을 이룰 것으로 기대하고 있습니다.
• 언급된 고성장 매출의 약 15%~20%는 프로젝트 기반 매출입니다. ABM은 완료된 프로젝트를 반복적인 유지보수 계약 및 장기적인 고객 관계로 전환하는 비율을 높이는 것을 목표로 하고 있습니다.
• WGNSTAR는 ABM이 이전에 제시했던 연간 매출 가이던스인 1억 2,000만~1억 3,000만 달러를 상회하는 실적을 기록 중입니다. 경영진은 또한 통합된 반도체 고객군 전반에서 2~3건의 초기 교차 판매 성과를 거두었다고 언급했습니다.
• ABM은 긍정적인 현금흐름 전망이 주로 대금 회수 개선, 운전자본 집행 능력 강화, 그리고 안정화된 ERP 시스템 기능의 활용 확대에서 기인한다고 밝혔습니다.
• 경영진은 향후 3~5년 내에 에비에이션 부문 매출 비중을 공항 약 70%, 항공사 약 30%로 구성하는 것이 바람직할 것이라고 언급했으나, 이는 공식 목표라기보다 지향하는 방향이라고 강조했습니다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Greetings. Welcome to ABM Industries Third Quarter 2026 Earnings Call. [Operator Instructions] Please note that this conference is being recorded.

At this time, I'll turn the conference over to Paul Goldberg, Senior Vice President, Investor Relations. Thank you. You may now begin.

Paul Goldberg

Good morning, everyone, and welcome to ABM's Third Quarter 2026 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 David Orr, our Executive Vice President and Chief Financial Officer.

Please note that earlier this morning, we issued our press release announcing our third quarter 2026 financial results and outlook. A copy of that release and an accompanying slide presentation can be found on our website, abm.com. After Scott and David'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 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 a 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.

Scott Salmirs

Good morning, everyone, and thank you for joining us. We had a strong third quarter, particularly when you consider some of the puts and takes across the business. We delivered record quarterly revenue, 27% adjusted EPS growth and exceptional year-to-date cash flow, despite project timing in Technical Solutions and the anticipated impact of client exits in B&I. I think the quarter demonstrates both the resilience of our portfolio and our ability to execute operationally even when individual parts of the business don't move in a straight line.

On the revenue side, most of the business performed largely as we expected. Aviation and Manufacturing & Distribution continued to deliver strong growth. Education performed as expected, while B&I reflected the client exits we have discussed over the last several quarters. Technical Solutions was the one area where revenue came in below our expectations, driven by certain project deferrals from an important client. Based on our discussions with that client, we believe this is principally a timing issue rather than a change in the underlying demand environment, and we expect a meaningful portion of that activity to move into the fourth quarter.

What I'm particularly pleased with this quarter is our execution on profitability and cash flow. The cost actions we've been driving throughout the year, combined with disciplined working capital management, resulted in 27% adjusted EPS growth, 40 basis points of sequential segment margin improvement and an increase of over $150 million in year-to-date free cash flow.

Cash generation has historically been an important strength of ABM. Following the disruption associated with our ERP implementation, we've been very focused on restoring our performance, and the progress is increasingly visible in our results. Given our performance through the first 9 months, we are raising our full year free cash flow outlook.

I want to spend a few minutes on the part of the ABM story that I think is becoming increasingly important. Our position in semiconductor, microgrids and data centers. Because some of these businesses are project-oriented and can be lumpy quarter-to-quarter, I think the year-to-date numbers provide the best perspective. Through the first 9 months, these businesses generated nearly $775 million of revenue, growing 26% organically and approximately 40% when including WGNSTAR. Together, they now represent more than 11% of ABM's revenue and carry a double-digit blended operating margin. So these businesses have become meaningful within ABM, and we believe they have significant runway ahead.

In semiconductor, we made a strategic decision several years ago to invest ahead of what we believe would be a significant expansion of advanced manufacturing capacity. We invested in industry expertise, developed relationships with many of the leading manufacturers and established a strong position supporting semiconductor facilities. WGNSTAR significantly expands that opportunity.

One way to think about it is to picture the fab as the bull's eye in the semiconductor facility. Historically, ABM has operated around the bull's eye, providing a broad range of services. With WGNSTAR, we now have the highly specialized technical capabilities to operate inside the bull's eye as well. That significantly expands our addressable opportunity and allows us to provide a much broader range of services to semiconductor clients. The results so far have been really encouraging. Semiconductor revenue grew 65% organically during the first 9 months and more than doubled when including almost 2 quarters of WGNSTAR, and we are still early in realizing the opportunities across the combined client portfolio.

In microgrids, including battery energy storage systems, we have approximately quadrupled the sides of the business since entering the market in 2022. Through the first 9 months, revenue grew 17% organically. The underlying demand drivers remain compelling as clients increasingly invest in power resiliency and redundancy. We're also focused on broadening the client base and increasing the recurring component of the business over time.

To highlight our progress on diversification, in the coming days, we expect to finalize a contract to build a microgrid or primary backup power for the Army Corps of Engineers as part of a joint venture with a strategic partner. The total value to ABM is approximately $20 million, and we expect the project will be executed in calendar 2027.

And finally, data centers. Year-to-date, revenue grew 8% organically, but we believe the opportunity ahead is considerably larger than what is reflected in that current growth rate. Our pipeline and backlog continue to build, including work with many co-location customers, and we expect a meaningful portion of that activity to convert into revenue fiscal 2027 and into 2028.

Taken together, these businesses represent an important evolution in ABM's portfolio. We have a large, resilient core business that generates significant cash flow, while at the same time building meaningful positions in markets benefiting from powerful long-term investment trends. We believe that combination can contribute meaningfully to ABM's growth and margin profile over time.

Let me step back and briefly talk about what we are seeing across our markets as we move into the fourth quarter. With the Business & Industry, the trends we discussed last quarter remain largely intact. And Northeast continues to be our strongest commercial real estate market, while the West Coast, particularly Northern California, remains challenging. We continue to be disciplined in how we pursue and retain business. Our objective isn't simply to maximize revenue. We want client relationships where we see a credible path to attractive returns over time. Looking ahead, we expect B&I to return to organic growth around the middle of fiscal 2027 as we lap the large U.K. client exit we've previously discussed.

In Manufacturing & Distribution, the environment remains very constructive. Technology continues to lead the way, particularly semiconductor, and we're also seeing healthy activity in e-commerce, pharma and broader industrial manufacturing. Based on what we see today, we believe M&D is positioned to sustain strong organic growth into fiscal 2027 and beyond.

In Aviation, passenger demand remains healthy. The near-term issue is pressure on airline economics from higher jet fuel costs, which is creating some pressure on our margins. We have incorporated that into our outlook and are actively working to mitigate the impact. And at the same time, our deliberate shift towards airports continues to improve the long-term profile of the business. Airports now represent approximately 60% of the Aviation revenue and provide greater consistency, broader cross-selling opportunities and more stable economics.

Education continues to be a consistent cash-generative business. The team is executing extremely well, and we expect low single-digit organic growth as we move into fiscal 2027.

And finally, in Technical Solutions, the underlying market fundamentals across energy resiliency, data centers and HVAC remains strong. As I mentioned earlier, Q3 was affected by certain project deferrals of an important client. These delays were not driven by interest rates, supply chain constraints or permitting challenges. The client made a decision to prioritize other capital projects during the quarter. We are now executing on many of those deferred projects, which should translate into significant sequential improvement in ATS revenue, operating profit and margin in Q4. More broadly, given the demand we continue to see across ATS, we expect another year of strong growth in fiscal 2027.

So as we enter the fourth quarter, I will leave you with 3 things. First, the majority of our end markets remain healthy. And where we do have pressure, we understand the issues and are actively managing them. Second, our operational execution continues to improve. Margins increased sequentially, cash flow has strengthened considerably, and the cost actions we've been taking are showing up in our results. And third, semiconductor, microgrids and data centers are becoming increasingly meaningful contributors to ABM, and we believe they have substantial runway ahead. We are raising the midpoint of our adjusted EPS outlook and raising our full year free cash flow outlook based on our strong third quarter results and our confidence in delivering in the fourth quarter. There's still work to do, but we feel good about the position we're in and the foundation we are building as we head into fiscal 2027.

And with that, I'll turn it over to David.

David Orr

Thanks, Scott, and good morning, everyone. Let's start on Slide 7. Revenue grew 4.2% year-over-year to an all-time quarterly record of slightly above $2.3 billion, driven by 2.1% organic growth and a 2.1% contribution from acquisitions, primarily WGNSTAR. Organic growth was especially strong in Aviation and M&D, which grew 12% and 8%, respectively. Education was up slightly, while Technical Solutions posted organic growth of 2%, reflecting project timing, which I'll discuss shortly. B&I declined 3% as expected. I'll get into the segment details in a few minutes.

Turning to Slide 8. As Scott mentioned, we delivered a strong earnings quarter. Net income increased 19% to $49.7 million or $0.84 per diluted share compared to $41.8 million or $0.67 per diluted share in the prior year. Adjusted net income was $61.5 million or $1.04 per diluted share versus $51.7 million or $0.82 per diluted share last year, reflecting increases of 19% and 27%, respectively. These significant year-over-year increases primarily reflect higher segment operating profit, lower tax expense and reduced ongoing corporate costs, partially offset by higher interest expense. Per share measures were further benefited from share repurchase activities completed earlier in the year.

Adjusted EBITDA increased $13.8 million or 11% over the prior year to $139.6 million, driven by higher segment operating profit and lower corporate costs. Segment operating margin increased 40 basis points sequentially to 7.7%. On a year-over-year basis, the segment margin was essentially flat as operational efficiencies in B&I, M&D and Education were offset by anticipated pressures in Aviation and higher amortization expense related to the WGNSTAR acquisition. Excluding acquisition-related amortization, margin would have been 7.8%.

Now let's turn to segment performance, beginning with Slide 9. B&I revenue declined 2.6% in the third quarter, as expected, driven by the Q2 exit of a large U.K.-based client and the impact of certain other client exits, particularly on the West Coast. We expect revenue trends to be similar in Q4, so we anticipate continued incremental margin improvement as our operational actions take further hold. Operating profit increased to $75 million and margin expanded 30 basis points year-over-year to 7.4% compared to $73.8 million and 7.1% in the prior year period. These improvements primarily reflect cost actions and operational improvements, along with the benefit of lapping certain lower-margin contracts entered into in the third quarter of last year.

Aviation grew 12% to $328.1 million, supported by healthy travel demand and the continued ramp of our Heathrow contract. Operating profit was $18.4 million with a margin of 5.6% compared to $19.7 million and 6.8% last year. Profit and margins were pressured by airline clients who are reacting to elevated fuel costs by seeking cost relief from their service providers. We factor this into our outlook and are actively managing the pressure through operational efficiencies.

Turning to Slide 10. M&D generated $481 million in revenue, an 18% increase year-over-year, including organic growth of 8% and 10% growth from the WGNSTAR acquisition. The strong organic growth was driven by continued client expansions across the segment. Operating profit was $40.5 million with a margin of 8.4% compared to $36.4 million and 8.9% last year.

On a year-over-year basis, the margin change primarily reflects ongoing investments in sales and industry expertise talent to support our long-term growth strategy as well as nearly $4 million in incremental amortization expense connected with the WGNSTAR acquisition. Excluding incremental amortization, margin was 9.2%, which we view as a solid base from which to expand as we outgrow the amortization and continue to cross-sell higher value solutions to our semiconductor and technology clients.

Education revenue rose slightly to $235.8 million and delivered excellent operating performance in the quarter, which is the seasonally strongest for profit and margin. Operating profit increased 9% to $23 million, and margin expanded 70 basis points to 9.7%. This improvement was driven by enhanced labor efficiency and effective escalation management.

Technical Solutions third quarter revenue was $259.9 million, up 4% year-over-year, including 2% organic growth and 2% from acquisitions. Organic growth reflected strong HVAC and battery energy storage system activity, partially offset by certain project delays in our microgrid business, driven by an important client. These delays were compounded by a difficult comparison against a very strong third quarter last year. Operating profit was $21.5 million with margin at 8.3% compared to $19.4 million and 7.8% last year. The increase in operating profit and margin was mainly driven by positive service mix, partially offset by impacts in our microgrid business due to project delays.

Looking to the fourth quarter, we expect significant sequential increases in revenue, operating profit and margin on higher microgrid activity as projects that shifted out of the third quarter move forward. As we discussed earlier in the year, the back half of the fiscal year and specifically the fourth quarter has historically been the strongest operating quarter of the year for Technical Solutions. This year will be no different.

Now turning to Slide 11. We ended the quarter with total indebtedness of $1.8 billion, including $22 million in standby letters of credit. Our total debt to pro forma adjusted EBITDA ratio was 2.9x. We achieved our goal of leverage being below 3x a quarter earlier than originally planned, reflecting strong sequential progress, driven by our robust cash flow.

We expect to drive leverage even lower by year-end. Available liquidity stood at $606 million, including $110 million in cash and cash equivalents. During the quarter, we closed on a $300 million accounts receivable facility. This diversifies our funding sources and reduces our marginal cost of borrowing relative to our existing revolving credit facility and also represents a meaningful enhancement to our overall capital structure.

As Scott mentioned, we had a very strong cash generation quarter, which has long been a hallmark of ABM. Third quarter cash from operations was $146.8 million, and free cash flow was $128.4 million. For the first 9 months, cash from operations was $275 million, and free cash flow was $199.6 million versus cash from operations of $101 million and free cash flow of $42.4 million in the prior year period. This represents an improvement of over $150 million in free cash flow during the first 9 months, driven by strong working capital management and ERP stabilization. As a result of our progress on cash generation year-to-date, we're raising our full year free cash flow expectations, which I'll discuss in a moment.

Interest expense in the quarter was $29.5 million, up $4.2 million from last year, reflecting larger average debt balances driven by our WGNSTAR acquisition. This was partially offset at the net income level and lower tax expense, which was $4.1 million below last year, reflecting certain discrete tax benefits recognized in the quarter.

Turning to our fiscal 2026 outlook on Slide 12. As Scott noted, we're encouraged by the relative health of our end markets while remaining mindful of the broader economic uncertainty. As such, we're raising the midpoint of our fiscal 2026 adjusted EPS range, which is now expected to be $3.95 to $4.10. This raise reflects our strong third quarter performance and our confidence delivering on our fourth quarter expectations.

As a reminder, our full year organic revenue growth outlook is 3% to 4%, and we continue to expect to be toward the higher end of that range. Aviation, M&D and Technical Solutions are expected to grow above that range, while B&I and Education are projected to be below that range. The WGNSTAR acquisition is expected to deliver approximately 1 point of additional revenue growth, bringing total growth to the high end of our 4% to 5% range.

We're modestly updating our segment operating margin outlook to 7.7% to 7.8% for fiscal 2026, reflecting year-to-date performance and slightly higher intangible amortization for WGNSTAR, which, in aggregate, accounts for 10 basis points of operating profit margin impact for the full year. That said, fourth quarter margin is projected to be meaningfully above the high end of that range, reflecting the anticipated seasonal improvements in ATS mix and the continued benefit of our operational actions across the portfolio.

Our forecast for interest expense remains at approximately $110 million and our normalized tax rate before any discrete items, including the possible extension of the work opportunity tax credit program, is still expected to be 29% to 30%.

As I mentioned earlier, we're encouraged by our progress generating cash and are raising our full year expectations. We now expect normalized free cash flow of approximately $285 million in fiscal 2026 before the impact of transformation and integration costs, final RavenVolt earn-out and any incremental restructuring.

On a reported basis, free cash flow is expected to be approximately $210 million versus our prior forecast of $185 million, a $25 million improvement that reflects the strong working capital performance we've delivered through the first 9 months of the year. I also want to take a moment to recognize the efforts of our operators and our finance and treasury teams who drove outstanding third quarter cash flow. These results are a product of discipline and focus on the fundamentals of working capital management.

With that, Scott, I'll turn it back to you for closing remarks.

Scott Salmirs

Thanks, David. Let me close with a couple of thoughts. We feel good about where ABM stands today. Our core business remains resilient. Cash flow has improved significantly, and we are making progress on margins and operating efficiency. At the same time, the investments we've made in semiconductor, microgrids and data centers have created meaningful growth platforms in markets where we believe demand will remain strong for years.

As we move towards fiscal 2027, our priorities are straightforward. Finish this year strong, execute on the opportunities already in front of us, continue improving margins and cash flow and allocate capital with discipline.

And finally, I want to thank our team. More than 100,000 people show up every day and deliver for our clients. Ultimately, the results we are discussing today come from their execution, expertise and the trust they build with our clients.

We look forward to sharing our fiscal 2027 outlook when we report fourth quarter results.

With that, we'll open up the line for questions.

Operator

[Operator Instructions] And our first question is from the line of Tim Mulrooney with William Blair.

질의응답

Timothy Mulrooney

Yes. Scott, I'm going to start off here with your high-tech business, your semiconductors, data centers, microgrids, they're 11% of your business today. But I'm curious, what do you think that will represent in terms of your sales mix a couple of years from now? I know these high-tech sectors are growing faster than the rest of your business, but I also know the microgrids can be lumpy. So I'm really curious to get your broad thoughts on that.

Scott Salmirs

Yes. So look, we're still super optimistic about that area of work. And it's going to continue becoming a more and more meaningful part of our business, just by the fact of the mix, right? Because it's growing double digits, where some of our other segments are more of GDP or GDP plus. So we will continue to be meaningful. And we also continue to invest in because it's not only executing on the work, which you have to do, obviously, in the highest of fashion. But we're hiring experts that understand this business. We're hiring sales associates. So this is an area that we think has a lot of trajectory for years and years to come.

Timothy Mulrooney

And what -- okay. And what did you say -- how the profitability of these 3 businesses combined compares to your corporate average?

Scott Salmirs

Yes. So this is -- we're talking about double-digit versus our average, which is typically in the low single digits. In terms of -- and that was more on the growth side, I should say. But you know where our EBITDA margins are in comparison to us. In a lot of cases, it could be double in these markets.

Timothy Mulrooney

Yes. Okay. Appreciate that. David, I had one for you on the cash flow guide and then I'll hop. I think last time you communicated about this, you said you were targeting $250 million of free cash flow less, I guess, $55 million of nonrecurring cash expenses. So really, it was like $185 million, and now you're saying $210 million, which is $25 million higher. Is that right? Is all of that right? Is all that apples-to-apples?

David Orr

Yes, Tim, you got it right. So $210 million on an as-reported basis is the number we're targeting. As you said, we're really pleased with where we landed cash flow for the quarter and our raise of guidance there.

Timothy Mulrooney

Yes. No, it looks great. I just want to -- you kind of -- felt like you're changing the way we're talking about a little bit here. Before, it was like pre all of that stuff, and now it's, just on a reported basis, $210 million. Why did you raise the free cash flow guidance? Was it due to higher operating cash flow than you were expecting before? Or is it due to fewer of that $65 million bucket of nonrecurring charges than you previously thought?

David Orr

I think the way to reflect on it is we had a really strong working capital quarter. Specifically, I think from my perspective, the good news is we're starting to really leverage some of the capabilities of the new system. And in doing so in the quarter, we're able to accelerate some of the collections for the quarter. So it's just another step to stability on our transformation. And ultimately, that was the driver for the cash flow performance.

Timothy Mulrooney

Yes. Good execution. Congrats on a nice quarter.

Operator

The next question is from the line of Justin Hauke with Robert W. Baird.

Justin Hauke

Great. I guess I wanted to go back to the ramp in the fourth quarter. And Scott, I appreciate, you kind of walked through some of the moving pieces. But I guess I'm just curious on the deferred projects, just how much is already -- given that we're halfway through the quarter, I mean, how much has already started? Is there anything that needs to still start? I'm just trying to understand the line of sight and the visibility on those deferrals.

Scott Salmirs

Sure. And again, before I even answer that, you know we don't really look at this quarter-by-quarter. Year-to-date, in terms of just ATS in general, we have 10% year-to-date growth in the microgrids and those projects are in that segment. But this quarter, it was about $15 million in deferrals. And largely, almost all of those projects are going to land in Q4, a little bit in Q1 of next year. But we're already turning wrenches on those projects. So we're still not waiting to see if the deferrals are going to be put into action. So we're actively working on them now. And you think what you're going to see in Q4 is double-digit organic growth in ATS.

Justin Hauke

Okay. That's helpful. And then just on the Aviation, the margin concessions that you talked about with the fuel pressure that the airlines are seeing. And I appreciate that color that the -- 60% of what you do there now is with the airports and not the airlines. But can you quantify just what impact that had on the margin in the quarter?

Scott Salmirs

Well, without going into too much detail, I will tell you, like just first to level set, the segment is still really strong. Demand is strong. And I guess the best way to look at this is that we feel like that pressure is stabilizing. Sequentially, the margins -- a little -- actually this quarter, a modest improvement. So we feel like a lot of that impact is behind us, and you'll start seeing us accelerating over time. Now once we get a little bit of relief on fuel costs.

Justin Hauke

Okay. And then I guess my last one, just an -- I mean, because you're growing the -- all the high-tech businesses so fast, the 26% organic growth year-to-date that you called out in the release. Obviously, the intangible amortization that's been weighing on the manufacturing and distribution segment. But I guess, maybe it's a question for David. But can you remind us what's the bridge, the intangible for this year? And then how much of that falls off next year, given that, that's such a high-margin segment?

David Orr

Yes. We had about $12 million allocated to this year for the intangibles for next year. We'll have some modest falloff of that next year. But I think what I'm most excited about ultimately about WGNSTAR is, you may recall, we guided to roughly $120 million to $130 million of annualized revenue for WGNSTAR. They're tracking well above that now, and we see that kind of growth rate continuing into next year. So the good news is an enhanced growth rate will help us continue to outgrow the amortization expense.

Scott Salmirs

Yes. And I would also point out that we've already had 2 or 3 cross-sells over such a short period of time, which is really part of the thesis of this, and you heard in my prepared remarks how inside that bull's eye of the fab and outside, and now when you think about that and you say that, well, ABM has about 50 semiconductor clients that we were dealing with prior to WGNSTAR, WGNSTAR has 30-plus clients. So to be able to start cross-selling this, we're just seeing the start of it, but it's really positive.

Operator

The next questions are from the line of Faiza Alwy with Deutsche Bank.

Faiza Alwy

Scott, I want to follow up on the high-growth end markets. I know you've mentioned that there's a blend of project and recurring revenue. I'm curious if you could expand on that, like how much of your revenues are recurring? And is there a way to shift more of it to recurring? I guess I'm curious under what circumstances is the project-based versus recurring?

Scott Salmirs

Yes. So I mean -- so the goal is to make it more recurring. And kind of what that means on the most basic level is you do a project, and instead of walking away, you get a maintenance contract where you stay a client for the long term. And then hopefully, not only are you getting that revenue, but as other projects come up, you're right in the sweet spot for that. So that's a big focus of ours in the whole ATS areas, how do we, over time, blend the mix to be more recurring revenue.

David Orr

Yes. And Faiza, this is David. I would say, right now, roughly 15% to 20% of that revenue is on a project basis, which is still great for us because it means we're staying really connected with the client at good margins. And as Scott mentioned, over time, we'd like to return that to the recurring business longer-term contracts. But make no mistake, having a line of sight into this project work in this space is really important for us.

Faiza Alwy

All right. Great. That's very helpful. And then just on the -- you have strong cash flow improvement this year. I'm curious if you have -- I know it's early and you're not giving a '27 guide or anything like that. But David, as you look at kind of where we are, how should we think about cash flow in 2027? Are there any sort of big expense items or anything else that we should keep in mind?

David Orr

No big expense items out of the ordinary, I would say. Obviously, as I mentioned earlier, we're very, very pleased with our performance year-to-date on cash flow. When I step back and think about it, we've funded a roughly $250 million acquisition. And within the last 9 months, used $100 million of our capital to buy back shares and have $51 million of dividends, all the meanwhile driving below 2.9 -- driving below 3x levered at the end of the day. So we're excited about that. And I think -- I don't think there'll be any surprises next year relative to cash flow, but we look forward to come back and talk to you about that in December.

Operator

The next question is from the line of David Silver with Freedom Capital Markets.

David Silver

Yes. I guess first question, I would like to go back to Slide 6 and your discussion of your opportunities in technology. And in particular, I wanted to focus on the data center panel. So in my view, I mean, that's an area where there's a tremendous amount of growth or build-out that's going to occur over the next handful of years. From your perspective, Scott, maybe 2 questions. One is, have you been bidding for business for data centers that are kind of under construction? Or what is the cadence on contract, your pursuit of contracts and when they get awarded?

And then secondly, taking up your analogy of the bull's eye and the target and everything, is quality uptime kind of, in some sense, your path to getting inside the bull's eye of the more significant data center projects? And if that's the case, can you expand that geographically organically? Or is this the case where you're going to be looking for maybe similar service companies targeted -- in targeted geographies?

Scott Salmirs

Sure. Sure. So as it relates to the data center question first, we have been doing a lot of mining in that area and we're bringing on sales assets for that, too. So -- and I think I've said in my prepared remarks that the 8% organic, I don't believe it's reflective of what we see over the next 2 or 3 years. In fact, our pipeline right now is a multiple of where it was at this time last year. So we're really optimistic that, that will be, over time, very, very healthy double-digit growth in data centers.

And then with quality uptime, that's largely UPS power, which -- I think I've said this before on the call, but think of that as the transition between the power going out and the generator starting or the microgrid starting up, right? You would need these UPS batteries to transition through. So the way to think about quality uptime, it's just a big piece of the puzzle. It's a really important part. As we go selling to data centers, as we go selling to big retailers, anyone who's looking for power generation is also going to be looking for UPS power for the transition. So quality uptime is very, very important to the piece to the puzzle. From our perspective, it was a very strategic acquisition for us.

David Orr

And David, I would add, from a pipeline perspective, really the co-locators are our main target in the data center space. That's where we see the fastest and most robust part of our pipeline growing here in the near term.

David Silver

Okay. Great. I'd like to -- if you don't mind, I'd like to swing over to some of your comments about, I guess, over the last couple of quarters, but about just developments in the California market, in particular, or maybe the West Coast. But really, California, I mean, it is kind of a foundational business for your company. And then not too long ago, you did do the big Able Services acquisition. And certainly, there's a lot of headlines about business trends in that area in that geography. So just from a big picture perspective, Scott, I mean, what are the keys to kind of -- optimizing what you're doing in that geography here? I mean are the pressures more on the Able -- the integrated services side? Or is it more just standard B&I? And where do you think the opportunities are when the dust settles a little bit from the trends you're seeing?

Scott Salmirs

Yes, that's a good question. I'm glad you brought that up because I want to make sure it's clear that this isn't what we view as a systemic problem. It's really now migrated to Northern California. We had pressures early in the year in Southern California. That's stabilized. That's behind us now.

In Northern California, it's just -- it's part of a trend right now, even though there's strong growth in that market from AI. It's not a people-heavy business. And as we go through those spaces, there's still a lot of work from home. And what's end up happening, which is a unique thing right now, and it started in Southern California, now NorCal, which is the competitors are just pricing at places that we're just not willing to work out.

And this has been a theme, David, as you know over the last decade, about ABM not wanting to work for free, right? And so we think this is not systemic. We think you'll see this reverse. If the trend of what happened in Southern California holds in NorCal by mid next year, we think this -- all of this will be behind us. And the proof in the pudding on this is you look at B&I and our margins were up 30 basis points, so sequentially from quarter-over-quarter. So we're heading in the right direction. We're making the right decisions. And we talk internally about no regret decisions and this falls into it. So again, not systemic.

Operator

The next question is from the line of [ Brianna Camden ] with UBS.

Unknown Analyst

This is Brianna for Josh Chan. I guess on the outlook, can you maybe talk through why EPS midpoint is higher if margins are lower and most of the other items stay the same?

David Orr

Yes, sure. So I think it just reflects where we are 9 months through the year. We have a good line of sight on what we think the revenue is going to be for the full year. And we have a very prescriptive approach to margins in our forecast. I think you could expect margins north of 8% in the fourth quarter, and that tracks to basically what we did last year at 8.2%. And as you know, Q4 has just been historically a very seasonally strong quarter for us. So it gives us that confidence.

Unknown Analyst

Can you touch a bit more on confidence around the margin ramping at Q4? And then maybe -- I know there's no guide for next fiscal year, but how should that accelerate in the Q4 going forward?

David Orr

Yes. I think the biggest margin accelerator in Q4, which has been very, again, historically consistent, is the ATS business has done anywhere between 11% and 13% operating profit margin for the last 2 quarter [ 4s ], in 2024 and 2025. We don't see this year being any different. In fact, we're really encouraged by the health of the backlog and what we're seeing early -- as an early start in the quarter. So that's the single biggest driver.

Operator

The next question is from the line of Marc Riddick with Sidoti & Company.

Marc Riddick

I wanted to touch on some thoughts as to the pricing dynamic that you're seeing in some of the key service areas and visibility there because it seems as though there's some crystallization that's beginning to form. But maybe you could talk a little bit about your comfort level as far as pricing and as well as the revenue mix benefit on that? And then I have a quick follow-up.

Scott Salmirs

Yes, we're really positive on our pricing approach. We have -- for medium-sized large contracts, we have a pricing council that goes through and we have hurdle rates that you have to hit. So that's been super helpful in terms of discipline escalations, really important part of our mix on pricing. We have to go out there every year and get wage escalations, and you know that's always been a historic strong point for ABM even in times when there was significant labor pressure. So it's a muscle strength we've built. So we don't think there's anything dynamic happening in the market that's going to hurt us from a pricing standpoint. If anything, I think we've just gotten stronger and disciplined year-over-year after year. So we feel really good about that.

Marc Riddick

Great. And then shifting gears over to Aviation. I really appreciated the commentary as far as the airport airline and what's going on with the airlines. Maybe talk a little bit about that mix shift that you've accomplished over the years and sort of maybe where you see that maybe settling out? What sort of a reasonable -- I mean we're at 60-40, I guess, now with airports and airlines. Maybe you could talk a little bit about what might be a reasonable target or a view and maybe the kind of time frame that you might have in mind there?

Scott Salmirs

Yes. It's kind of hard to predict, to be honest with you. I know our focus is on that. And if it landed 3 to 5 years from now, it's 70-30, I think we'd all be happy with that. And I think that's -- it's not necessarily even a reflection that we think the airlines are going to be weaker. I think there's going to be so much infrastructure going on in airports.

I think there's going to be an opportunity as airports upgrade around the country that they're going to want more enhanced services, and they're going to want the kind of service that we perform at LaGuardia, which we've talked about, where we're kind -- an integrated approach. So 70-30 is not necessarily scientific. It's just kind of a sentiment that we're thinking over time, but there's a lot that can happen in that industry. But we love the way we've been heading.

Operator

The next question is from the line of Tate Sullivan with Maxim Group.

Tate Sullivan

A couple of follow-ups, Scott. In the prepared remarks, you mentioned an award for the microgrid work for the Army Corps of Engineers. Is that a long-time customer of ABM? Is it related to an acquisition? I think you had a previous announcement with them, but just check in, please.

Scott Salmirs

Yes. No, this is part of a -- they're not a long-term client for us, which is even more exciting. Actually, it's part of a joint venture that we went in to pitch this with another company. So we're a component part of this. But it's really thrilling because the provider picked us to partner with because of the work that we do in microgrids. And as you can imagine, with the Army Corps of Engineers, we think there is a big addressable market within the government on these types of projects. So hopefully, this is the beginning of a really healthy future over time.

Tate Sullivan

And a follow-up on Aviation. You mentioned cost relief from the customers are seeing costs, but the revenue growth has been double digits the last 3 quarters. Are you continuing to see good traffic in the airports you're working?

Scott Salmirs

Yes. I mean the pipeline is strong. Whether or not it will be double digit, we'll do more when we talk to you in Q4 as we shape up and look at the pipeline. But we feel really good about that segment. It's been a good performer. And we're in this mode now with fuel costs and some of the pressures on airline profitability that -- hopefully, what's going to inure to our benefit is that we've been really good strategic partners, and we've made the concessions that we needed to make to kind of stabilize and hopefully grow those longer-term relationships. So it's things that you do in the airline industry when they go through these cycles. And we've all seen them before. So, yes. Well, it's nothing, again, that is troubling to us over the long term.

David Orr

Yes. Tate, I would add too, obviously, a good chunk of the revenue growth in Aviation and the start-up of the Heathrow contract in the U.K., which has been very successful for us. So as Scott said, we're just really, really happy with the growth profile there, and we'll continue to manage the operational challenges.

Tate Sullivan

And just on that -- you mentioned, Heathrow. Can you comment on your international mix with the U.K. -- after the U.K. client exit that you mentioned return to organic growth in B&I with Heathrow or can you quantify the international contribution?

David Orr

Yes. I mean, I would say it hasn't actually changed a whole lot. The loss of the TfL contract is a pretty good balance with the win of the Heathrow contract. So all in all, not a big mix change. But if you do look at the U.K. market specific to itself, we are seeing some healthy growth rates over there and we're continuing to invest in that team. The team has done a great job of driving growth and profitability. So a great market for us.

Operator

At this time, I'll turn the floor back to Scott for final comments.

Scott Salmirs

Well, thanks, everybody, for joining in. I hope you have a happy fall. And everyone's back to work now, summer's over, and we will see you in Q4 with our results and our full year guide for '27. But thanks, everybody.

Operator

Thank you. This will conclude today's [Audio Gap].