ABM Industries (ABM) Q3 2026 earnings call transcript

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

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 and 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 and 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 that performance, and the progress is increasingly visible in our results. Given our performance through the first nine 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 nine months, these businesses generated nearly $775 million of revenue, growing 26% organically and approximately 40% when including WGM Star. 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 And established a strong position supporting semiconductor facilities. WGMSTAR significantly expands that opportunity. One way to think about it is to picture the FAB as the bullseye in a semiconductor facility. Historically, ABM has operated around the bullseye, providing a broad range of services. With WGNSTAR, we now have the highly specialized technical capabilities to operate inside the bullseye 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 nine months and more than doubled 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 size of the business since entering the market in 2022. Through the first nine months, revenue grew 17% organically. The underlying demand drivers remain compelling as clients increasingly invest in power, resiliency, and redundancy.

We are 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 for 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 The client 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 in 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. In business and industry, the trends we discussed last quarter remain largely intact. The 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 UK client exit we've previously discussed. In manufacturing and distribution, the environment remains very constructive. Technology continues to lead the way, particularly semiconductor, and we're also seeing healthy activity in e-commerce, farmer, 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 aviation revenue and provide greater consistency, broader cross-selling opportunities, and more stable economics.

Education continues to be a consistent, cash-generated 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 remain strong. As I mentioned earlier, Q3 was affected by certain project deferrals at 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 preferred 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 would leave you with three 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 increase 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 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.

Thanks, Scott, and good morning, everyone. Let's start on slide 7. Revenue grew 4 year to an all quarterly record of slightly above billion driven by 2 organic growth and a 2 contribution from acquisitions primarily WGNSTAR Organic growth was especially strong in aviation and M which grew 12 and 8 respectively Education was up slightly while technical solutions posed to organic growth of 2 reflecting project timing which I discuss shortly B&I declined 3% as expected. We'll get into the segment details in a few minutes.

Turning to slide 8, as Scott mentioned, we deliver 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 benefitted from share repurchase activities completed earlier in the year. Suggested 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, 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 WGN STAR acquisition.

Excluding acquisition-related amortization, margin would have been 7.8%. Now let's turn to segment performance, beginning with slide The B&I revenue declined 2.6% in the third quarter, as expected, driven by the Q2 exit of a large UK-based client and the impact of certain other client exits, particularly on the West Coast. We expect revenue trends to be similar in Q4, though 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 margin 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 WGM STAR acquisition. A 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 WGN STAR 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 IVA-DA ratio was 2.9 times. We achieved our goal of leverage being blow three times 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 nine 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 nine 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.

Entrance expense in the quarter was $29.5 million, up $4.2 million from last year, reflecting larger average debt balances driven by our WGN-Star acquisition. This was partially offset, at the net income level, a 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 in-markets while remaining mindful of the broader economic uncertainty. As such, we are 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 WGN STAR acquisition is expected to deliver approximately one 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, Selecting year-to-date performance and slightly higher intangible amortization for WGN STAR, 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. The forecast for interest expense remains at approximately $110 million, and our normalized tax rates 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 four-year expectations.

We now expect normalized free cash flow of approximately $285 million I will now turn the call over to the Fiscal 2026 before the impact of transformation and integration costs, final Ravenvold 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 nine months of the year.

I also want to take a moment to recognize the efforts of our operators, 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.

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 and 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 will open up the line for questions.

Yeah thank you and good morning Scott I going to start off here with your high business Your semiconductors data centers microgrids they 11 of your business today But you know I curious what do you think that represent in terms of your sales mix a couple of years from now I know these high sectors are growing faster than the rest of your business but I also know the microgrids can be lumpy I really curious to get your broad thoughts on that Yeah, 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 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.

And what did you say, how the profitability of these three businesses combined compares to your corporate average? Yeah, so this is, we're talking about double digit versus our average, which is typically, you know, in the, you know, low single digits.

Okay.

You know, in terms of, you know, and that was more on the growth side, I should say, but, you know, you know where our EBITDA margins are in comparison to this. It could, you know, in a lot of cases, it could be double in these markets.

Okay.

Tim, you got it right. So 210 on an as-reported basis is the number we're targeting.

Yeah, 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 free all of that stuff and now it's just on a reported basis 210.

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. In doing so, in the quarter, we were able to accelerate some of the collections for the quarter. It's just another step to stability on our transformation. Ultimately, that was the driver for the cash flow performance.

Is there anything that needs to still start? I'm just trying to understand the line of sight and the visibility on those deferrals. 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, and the microgrids in those projects are in that segment. But this quarter 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 I think what you're going to see in Q4 is double-digit organic growth in ATS.

Well, you know, without going into too much detail, I will tell you, like, you know, 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, you know, sequentially, the margins, you know, actually this quarter 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.

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

Yeah, and I would also point out that we've already had two or three cross-sells in 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 bullseye of the fab and outside, And now, you know, when you think about that and you say that, well, ABM has about 50 semiconductor clients that we were dealing with prior to WGN STAR, WGN STAR 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.

Yeah, 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.

David, I would say right now roughly 15 to 20 percent 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.

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 and this space is really important for us.

And then just on the, you know, 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, David, as you look at where we are, how should we think about cash flow in 2027? Are there any big expense items or anything else that we should keep in mind? 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 within the last nine months, used $100 million of our capital to buy back shares, and had $51 million of dividends, all the meanwhile driving below 2.9, driving below three times levered at the end of the day. We're excited about that, and I don't think there will be any surprises next year relative to cash flow, but we'll look forward to coming back and talk to you about that in December.

Sure.

So, as it relates to the data center question first, we have been doing a lot of mining in that area, And we bringing on sales assets for that too So you know and I think even said in my prepared remarks that the 8 organic you know I don believe it reflective of what we see over the next two or three years In fact our pipeline right now is a multiple of where it was at this time last year So we really optimistic that that will be over time very very healthy double 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.

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 piece of the puzzle. You know, from our perspective, it was a very strategic acquisition for us.

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.

Yeah, 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. You know, 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. And Northern California, you know, it's just, it's part of a trend right now. Even though there's strong growth in that market from AI, you know, it's not a people-heavy business.

And as we go through those spaces, you know, there's still a lot of work from home. And what's ended up happening, which is a unique thing right now, and it started in Southern California and now NorCal, which is the competitors are just pricing at places that we're just not willing to work at. And, you know, this has been a theme, David, as you know, over the last decade about ABM not wanting to work for free, right?

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 a lot of this will be behind us. And the proof in the pudding on this is you look at BNI and our margins are up 30 basis points, so sequentially from quarter over quarter. We're heading in the right direction. We're making the right decisions. We talk internally about no-regret decisions, and this falls into it.

So again, not systemic.

Thanks for taking my questions. I guess on the outlook, can you talk through why EPS midpoint is higher if margins are lower and most of the other items stay the same? Yeah, sure. So, I think it just reflects where we are nine months through the year. We have 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.

You know, 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 force, so it gives us that confidence.

I know there's no guidance for 20 for next school year, but how should that accelerate in FQ4 and going forward? Thank you. 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 two quarter fours 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 as an early start from the quarter.

So that's the single biggest driver.

Then I have a quick follow-up. We are real positive on our pricing approach. For medium-sized to 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. You know, 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 in discipline year over year after year. So I feel really good about that.

And, you know, if it landed three to five years from now at 70-30, I think we'd all be happy with that. And I think that's not, 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 of, it's an integrated approach. So, you know, 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.

Yeah, 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 We went in to pitch this with another company, so we're a component part of this. It's really thrilling because the provider picked us to partner with because of the work that we do in microgrids. 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.

Hopefully, this is the beginning of a really healthy future over time.

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. We feel really good about that segment. It's been a good performer.

And, you know, we're in this mode now with fuel costs and some of the pressures on airline profitability that, you know, hopefully what's going to in order 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, you know, we've all seen them before.

So, yeah, it's nothing, again, that is troubling to us over the long term.

Yeah, Tate, I would add too, obviously, a good chunk of the revenue growth in aviation is the start-up of the Heathrow contract in the UK, 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.

Yeah, 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 mixed change, but if you do look at the UK markets specific to itself, we are seeing some healthy growth rates over there, and we're continuing to invest in that team. And the team is doing a great job of driving growth and profitability.

So, a great market for us.

At this time, I will turn the floor back to Scott for final comments. Well, thanks everybody for joining in. Hope you have a happy fall. And everyone is back to work now. Summer is over. And we will see you in Q4 with our results and our full year guide for 27. But thanks, everybody. Thank you.