Ladies and gentlemen, welcome to the ABM's First Quarter 2018 Conference Call. As a reminder, today's call is being recorded. I would now like to turn the conference call over to Susie A. Choi. Thank you. Please go ahead.

Thank you all for joining us this morning. With us today are Scott Salmirs, our President and Chief Executive Officer, and Anthony Scaglione, Executive Vice President and Chief Financial Officer. We issued our press release yesterday afternoon announcing our first quarter fiscal 2018 financial results. A copy of this release and an accompanying slide presentation can be found on our corporate website. 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. These statements represent our current judgment of what the future holds. While we believe them to be reasonable, these statements are subject to risks and uncertainties that could cause our actual results to differ materially. These factors are described in the slide that accompanies our presentation. During the course of this call, certain non-GAAP financial information will be presented. A reconciliation of those numbers to GAAP financial measures is available at the end of the presentation and on the Company's website under the Investors tab. I would now like to turn the call over to Scott.

Thanks Susie and good morning. We appreciate everyone joining us today as we discuss our performance for our first quarter which was announced yesterday. Today, I'm particularly happy because these results now reflect our new operating segments as ABM and GCA are now fully combined and represents the culmination of a great deal of work to get all of this organized and set up both operationally and administratively. And while there is still work ahead of us I cannot be more pleased with where we stand today. We embarked on an important journey with our 2020 Vision and this represents another milestone on our path. We are now leveraging our strength and growing our presence in the aviation, business and industry, education, healthcare, and technology and manufacturing sectors and our technical solutions segment is positioned to capitalize on our new structure as we intensify our cross selling initiatives. We're also making good progress with other key initiatives such as center wise procurement, shared services and the deployment of the ABM Way. Let me first turn to the quarter's performance. I'm pleased with our start to the new fiscal year. As I stated in the press release, our results met our expectations as we delivered total revenues of $1.6 billion, an increase of 19.7% versus last year. This was driven predominantly by our first full quarter of GCA related revenue and enterprise organic growth of 3%. Also keep in mind that on a year-over-year basis our results for the quarter exclude the Government business which we sold during the third quarter of fiscal 2017. Organically, revenue growth was driven by strength within our Business and Industry and Aviation segments. Our Business and Industry segment had good expansions with some larger scale clients who were growing and view us as strategic partners…

Thank you, Scott and good morning everyone. Before I begin the financial review on today's call, I want to convey my enthusiasm for our expectations for the remainder of this year as we are already off to an exciting start. Given the recent tax reform and our ongoing integration of GCA, both of which we will discuss in great detail today. Before I do so, I want to express my gratitude to our entire financial organization for yet another quarter of tremendous work. As you can imagine, concurrently navigating the complexities of integrating the largest acquisition in ABMs history, dealing with the most significant overhaul of the U.S. tax code in more than 30 years and reorganizing our financial reporting structure as a newly combined ABM and GCA business was no small feat. I commend the entire finance team for closing a historic first quarter on many levels. With respect to GCA, let me present today's conversation with a reiteration of the acquisition's impact on our business. We covered this at Investor Day, but as a reminder, on a segment basis, GCA impacted all of our business segment except for Technical Solutions. And our overall results are reflective of the higher amortization, interest expense and share count solutions that resulted from the transaction. Additionally, this year's first quarter also excludes the contribution from our previous Government Services business which we divested at the end of the second quarter last year. Moving to results which are described in today's earnings release and presentation, total revenues for the quarter were $1.6 billion, up 19.7% versus last year, driven by GCA revenues of roughly $252 million and good organic growth within the business and industry and aviation segment. Organic growth for the quarter was 3%. On a GAAP basis, our income from continuing…

Thank you. [Operator Instructions] Our first question comes from the line of Michael Gallo from CL King. Please go ahead.

Hi, good morning.

Good morning, Mike.

Good morning.

Scott, my question is on GCA, and you had four or five months to look through the integration to see how they are doing some things and I was wondering some of the bigger opportunities you think about in terms of exporting, best practices from GCA over to how you're doing things at ABM, what kind of opportunities you see there relative to your original expectations and whether you think that might be an area of upside relative to what you thought in terms of synergies? Thanks.

Yes, that's a great question, Michael. So I'd say we're off to a really fast bar on cross-selling and we just were talking about the pipeline and it has been just a lot of traction in opportunity from these accounts. Then we really have the opportunity to have technical services as a lever to enhance our clients, so that's been really good. And as we talked about before, we're just getting a lot of learnings about how they operated from a shared service standpoint and we've actually stood up a group that's working on our internal rewiring we're calling our transformational office specifically from the learnings that we've had, so we think that's going to be helpful over the long-term. So you know it's not just kind of topline and bottom-line, it's a lot of the learnings inside the organization as well.

Are you saying in terms of specifics and best practices that you want to call out or any examples that are kind of notable that they are doing things in a way that you see an opportunity to export that over and do in a lot more efficiency at legacy ABM?

Yes, I mean essentially for us it's kind of their approach to the clients and being disciplined with standard operating practices is an example. If you look at ABM we may have 65 ways around numbers of doing invoices across the country, right by being very kind of open to doing whatever clients ask for and we looked at GCA and they narrowed it down to maybe a couple of ways to do it and they were prescriptive about that approach and when you do that and you do fine with your client to get efficiencies in the back office. So that that's a great learning, it's a great take away and long-term will give us good synergies.

Okay, thank you.

Thank you. Our next question comes from the line of Andrew Wittmann from Robert W. Baird. Please go ahead.

Thanks and good morning. I guess I wanted to dig into the sales force comments a little bit more here. Scott, you kind of quantify the number of people you're looking to hire 30 so far, 60 for the year. I guess how incremental is that from what you were thinking about when you initially gave guidance? And then can you talk a little bit about the sales productivity that you've been seeing on your sales force in the last quarter or two and specifically may be out of even the new hires? I guess what I'm trying to kind of get a sense of here is when do these investments start paying off and seeing tangible results and accelerating organic growth?

Yes, so just generally speaking, our sales force is in line with what we guided to. As I said in my speech it's difficult finding sales people right now, they are just on high demand and we're just - we're not going to compromise that because when you hire an ineffective sales person, it's just not a good thing, so we're being - again we're being very disciplined in how we're on-boarding people. And it does take time, it can take six to nine months before a salesperson can hit the ground running, build the book of business and starting to get some results. So I would say that's kind of the timing of it.

And I would also add Andy, it's also looking at the marketplace much more analytically around where the opportunities truly exist. And rather than just hiring across the portfolio we're really looking at market where we may have a stronger opportunity to grow the business and putting good people in that market and that's also causing us to look at our existing sales force and making the approximately actions around driving that long term behavior.

I think you're comfortable adding 20% plus to the sales force, are you seeing the early returns that give confidence there or the 60 the target for the year if you fall a little shy it sounds like Scott may be okay with that because you want the right people, is that potentially margin upside to the guide if you don’t get the hires and I guess my question is, is this the right pace given that that's a substantial increase and want to make sure that you get returns on them?

You know, we really feel good about it and we've just instituted a 16-week training program when we on-board our sales people with a checklist of things that has to happen every week. So for us it's the right pace of hiring. And remember we're doing it over a pretty broad spectrum, so even thought it feels like a lot, it may be incrementally one or may be two in a marketplace right? Especially and when you stratify that across the different industry groups right? So, we don’t think it's an over burden and we think if we're disciplined about who we hire and we have a great on-boarding program it's going to lead to better longer term success.

Got it. All right, then just may be a couple modeling questions and might more towards Anthony, and Anthony I want to talk about Technical Solutions, you've talked about this at length, but I just wanted to get a sense from you or maybe Scott it's from you, about how big that fourth quarter is going to be for you guys? Sounds like obviously you reiterated the moderation in the first half of the fiscal year, but I mean, are we looking at 40%, 50% of the operating profit coming in that fourth quarter, I just want to get some sense do we have an expectation of what to think about there?

Sure and I think it follows the cadence that we've had in the past being a second half story for the Technical Solutions business and really breaking apart between the U.S. and the U.K. business and looking at it from the U.S. perspective it’s truly a second half story and that would drive more than 50% of the operating profit in the second half and that's right in line with the way we're seeing the pipeline and the backlog in that business and the churn. So we are still extremely confident that that's going to continue to be a high single-digit grower not a low double-digit grower this year. The team is really excited about the opportunities both from prospects on the traditional business and also prospects on the cross-sell, so we feel pretty good about where this is heading from a U.S. perspective.

Okay, that's helpful and if you just keep going with you've just thinking kind of longer term about tax rate, you said you're going to pick up some incremental benefits in fiscal ’19, what do you think as you take your initial cut here is the right tax rate out there in ’19 where you get the full year of contribution from tax reform in these other things that are taking in?

It’s exactly the way that you need to look at it is obviously this year from a pure tax reform perspective we're getting 10, 12 sort of benefit, but we're actually not yet incurring some of the costs associated with limitations such as 152 [ph] and there's some additional limitations that are going to kick in ’19. So when you look at it from a pure rate perspective, even though we're going to get a full year on the absolute rate we are going to have some headwinds on those other items. So I would be modeling flat to slightly higher taxes in ’19, but for now I would just use ’18's rate as a good proxy for ’19.

Okay, all right. I'll leave it there, maybe I'll circle back in the queue in a bit, thanks guys.

Thanks.

Thanks.

Thank you. [Operator Instructions] Our next question comes from the line of Marc Riddick from Sidoti. Please go ahead.

Hi, good morning.

Hey, good morning Marc.

I wanted to touch base and maybe if you could bring us up to date a bit on you've gotten some feedback from some of the new education clients post GCA, you touched on this a little bit I suppose with some of maybe the other areas that you can expand and but I was just wondering if you could sort of update us on the feedback that you're getting from them and sort of maybe some of the differences that you're seeing there?

Yes, I mean so I think for us having GCA now even with the legacy ABM portfolio we now bring the ground's perspective which we never had before, landscaping and ground, so that's been good. And then from their portfolio we're bringing the Technical Solutions. So it feels like a much more robust offering in K-12 and on the university side and just last two or three months we renewed the [indiscernible] County schools in Florida which is a big K-12 system, Hamilton County schools in Tennessee, a big community college in Texas. So like I feel like our offering is really resonating and the team is pulling together with some really definitive wins in the last 45 days. So I think there's just a lot of energy around the pipeline and our approach to the market now.

Okay, great and I was wondering it might be a little early for this, but it can't hurt to ask I suppose, I was wondering if you had a general feel for the funding environment of the education markets and if you had sort of some thoughts around that?

That's hard to tell, I think as we've talked about before when you kind of look at the deferred maintenance in schools, it's really a problem and it's gotten a lot of notoriety lately. So we think there over time especially if there is any infrastructure funding that remains to be seen. But we think over time it's really going to play to the strengths of our Technical Solutions and our Engineering business. So I think more to come on that, but I think it's a big opportunity for us in the future.

Okay and then and you've covered a lot of this on the going back for a moment over to the additional sales folks, I was wondering what the timing and cadence was like of the 30 that you've brought on so far, was that sort of beginning of the year weighted or what was that cadence like?

So it was probably even across since the beginning of the fiscal year and I think you have to do these things with a certain pacing cadence and again it is, it's difficult finding salespeople right? But again, as I said before, as long as we have the right process we feel good that we're going to staff up and hit our goal of 60. And that's not a net number right because, there will be people that will drop out because we're being really good about looking at people's performance and if you cannot meet your performance goals, we'll be making the appropriate changes. So 60 is more of a gross add number rather than a net, net which may be closer to 50 or 45.

Okay and than one last one from me, I wanted to go back to the Tag Pricer and the rollout there and how that that's going. I was wondering if there were sort of some areas of low hanging fruit that you've seen so far, I mean granted it's very early, but I was wondering if you could, if there was a sense of surprise as to what's worked with it so far or what hasn't that type of thing? Thank you.

Yes, so I think the great surprise for us is the adoption rate and how happy our managers are because it creates efficiency. So a process that may be used to drag on for two or three days with all the transposing of numbers and filling out work orders now gets done right on now pretty instantaneously. So people in this system are just really happy that they're getting a piece of technology that's useful and helps them spend less time in the office and more time out with clients and managing the staff. So to have an adoption rate over 30% in such a short period of time we think is pretty dramatic. So I think it's less about pricing optimization right now and increased profitability because we're just rolling it out. We're just getting in the learnings and we don't even have a baseline yet, right because we just started using the tool. So yes, probably won’t be realistically until a year from now that we can start doing some year-over-year comparisons of that side of it. But you know, people are so happy these days to get efficiency tools, so they could be more effective again with their clients and their staff that it's been really exciting.

Okay, great. Thank you very much.

Thanks.

Thank you. Our next question is a followup from the line of Michael Gallo from CL King. Please go ahead.

Hi, just had a followup on the tag optimizer. I know you mentioned 30% of the tag work was going through that of late. And I didn't hear you and perhaps I missed it, have you seen that actually driving the overall level of tag business up or is it more just driving the efficiency and satisfaction among your employee base because it's really freaking them up in the back office?

Yes, I think it's the latter Mike. This is a new initiative for us right and for us it's all about adoption, training. Hey look, we're still - we're in Phase 1 of this. There'll be a Phase 2 of it in terms of even improving it. So it's less about creating more tags right now or creating better margin right now. This is an efficiency play this year and remember it's only at B&I. We haven't rolled it out to the other industry groups. So I think there's just a lot more - a lot more to come and a lot more from a learning standpoint and the margin and the kind of the frequency of tag is probably more of a '19 story than an '18 story at this point.

All right and then just a sort of the second part of this, I know this has kind of rolled out to the - in the field. I was wondering if there is an ability to roll out something to the customer where the customers themselves could have an app and they all want the carpet cleaned, then they could actually reach out directly to ABM for certain services or is that not something you can’t employ?

Absolutely something that we're working on, absolutely. We're looking at a lot of technology innovation and the goal is to get stickier with clients. So the more we can create platforms that the clients could be on sharing with our employees is the way we're going to increase our retention. So all that stuff is in the works and I would say more than ever nearer term rather than longer term.

Okay, thank you.

Sure.

Thank you. Ladies and gentleman at this time we have no further questions in queue. I would like to turn the floor back over to company management for closing comments.

Well, thanks everyone. Again, I want to just tell you how much I appreciate you making the time for this call and we’re excited about the start to the New Year and we look forward to being back with you in June to talk about our second quarter results. Have a great day.

Thank you. Ladies and gentlemen, this does conclude our teleconference for today. You may now disconnect your lines at this time. Thank you for participation and have a wonderful day.