ABM posted a strong Q2 fiscal 2026 with 6.1% organic revenue growth, record second-quarter revenue of $2.3 billion, and record first-half bookings of $1.2 billion, while the WGNSTAR acquisition drove high double-digit semiconductor growth. Management raised organic growth guidance toward the high end of 3%-4% and folded prior-year self-insurance adjustments into its EPS guide to de-risk Q4, even as B&I client exits and an equipment-heavy Technical Solutions mix pressured year-over-year margins ahead of an expected back-half ramp.
Good morning, everyone. Welcome to ABM's second 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 second 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. Before we begin, I would like to remind you that our call and presentation today contain predictions, estimates, and other forward-looking statements. Our words of these 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 to discuss ABM's second quarter fiscal 2026 results. We had a strong quarter. Organic revenue growth came in at 6.1%, and I'm especially pleased to report that our first half new sales bookings reached $1.2 billion, a new record for ABM. Organic growth was especially strong in Technical Solutions and Aviation, while in M&D, we saw healthy underlying organic demand complemented by the WGNSTAR acquisition, which is performing well and adding meaningfully to the segment's results right out of the gate. Education continued to post steady growth, and B&I was flat organically.
B&I was impacted by the exit of a large U.K. client during the second quarter and by our decisions to exit several other clients, especially on the West Coast, where commercial real estate markets have yet to fully recover, creating pressure in the market. Stepping back from the top line for a moment, we also executed well operationally. Margins improved sequentially, and free cash flow was up significantly in the first half compared to last year, which I'm very pleased with. As we look ahead to the second half, the setup is compelling. We expect volume to ramp meaningfully in both ATS and M&D, and service mix within ATS in particular should improve as the project pipeline matures and our backlog execution ramps sequentially. Layered on top of that, our cost discipline and price escalation actions are gaining traction.
Taken together, we expect these drivers to produce a significant step up in both earnings and margin as we move through the back half of the year. While the near-term macroeconomic environment remains dynamic, ABM operates in markets that offer a compelling combination of secular growth opportunities in areas like energy infrastructure, semiconductors, and airport monetization, alongside the steady, predictable revenue streams that have always been ABM's foundation. When taken together with the strong operating culture we have in place, ABM is well-positioned to capture the long-term growth opportunities ahead. Let me share more. Within Business & Industry, the prime office recovery continues to gain traction, although, as mentioned, the market is still experiencing some softness on the West Coast. U.S. office leasing is approaching 2019 levels. Net absorption turned significantly positive in the first quarter, the strongest since 2020, and prime vacancy rates continue to tighten.
New supply remains extremely limited, with the construction pipeline nearly 90% below its 2020 peak. The flight to quality dynamic continues to favor exactly the types of prime assets where ABM is concentrated, and we expect to see positive spillover into the next tier of high-quality buildings. This dynamic is translating into real wins. Last year, we were selected to service the new headquarters of the nation's largest bank here in New York City, and we recently followed that with a significant new facilities contract with another of the nation's leading commercial banks. These wins reflect both the strength of the office recovery and the confidence that world-class clients are placing in ABM.
Turning to M&D, the semiconductor build-out may turn out to be one of the most compelling growth stories in American manufacturing in 21st century. Over $645 billion in private investment has been announced across 140+ projects since 2020, with major commitments from companies such as TSMC, Micron, Intel, Samsung, and Texas Instruments. The WGNSTAR acquisition has significantly strengthened our presence in semiconductor fabrication environments, and the benefits are already becoming evident. During the second quarter, we secured tens of millions of dollars in new business and delivered high double-digit organic revenue growth across our semiconductor market. Beyond semiconductors, e-commerce growth and US manufacturing reshoring continue to support healthy demand across the segment, which will continue to benefit us. In Aviation, the fundamentals remain strong. TSA throughput is running close to 3 million passengers per day, and leisure demand remains robust.
Airport infrastructure investment is at elevated levels as aging terminals drive a sustained modernization pipeline, and our recent wins at Orlando International, Miami International, and LaGuardia Terminal B reflect the strength of that pipeline. While rising fuel costs will likely create some near-term challenges for our airline clients, the long-term trajectory of this business is positive, and our pipeline of new opportunities continues to evolve. In education, the numbers tell a compelling story. K-12 schools in this country average 49 years in age. There is an $85 billion annual funding gap for repair and modernization. Higher education construction spending in that area continues at near record levels. These dynamics should create durable, long-term demand for ABM services.
Our strong retention rates and ABM Performance Solutions offering position us to capture an increasing share of this opportunity. Our recently awarded $25 million Detroit Public Schools contract is a tangible demonstration of that. In Technical Solutions, the tailwinds are as strong as we have seen. Nationwide battery storage installations were up 52% in 2025. AI is accelerating data center construction at double-digit pace globally, and microgrids are becoming essential infrastructure for the modern electric grid. This is precisely where ATS is most differentiated, sitting at the intersection of energy resiliency, electrification, and AI infrastructure. Another recent microgrid win with a major big box retailer, along with a variety of other energy storage and infrastructure projects booked this quarter, are proof points of what we believe will be a multiyear growth cycle for this segment. Now, looking specifically at the remainder of the year.
We expect strong results in Technical Solutions driven by higher volume and improved mix. M&D is also expected to deliver robust results as new business continues to come online and WGNSTAR ramps up. Education will continue to be solid. B&I revenue will likely moderate in the back half of the year due to client exits, including the large U.K. client I previously discussed. In Aviation, while air travel demand remains robust, we are watching the potential impact of rising fuel costs on our airline clients. Overall, though, our end markets remain largely constructive, and we continue to closely monitor the evolving macroeconomic environment. We remain focused on reducing leverage to below 3x, maintaining a disciplined approach to capital allocation, and executing against our full-year outlook as we operate with focus and financial discipline. With that, I'll turn it over to David.
Thanks, Scott. Good morning, everyone. Let's start on slide six. Revenue grew 8.4% year-over-year to a second quarter record of $2.3 billion, driven by 6.1% organic growth and a 2.3% contribution from acquisitions, primarily WGNSTAR. Consolidated organic growth was the strongest we've delivered since Q3 of 2022, with Technical Solutions and Aviation leading the way. By segment, Technical Solutions grew revenue 27%, Aviation was up 20%, and Manufacturing and Distribution grew 17%. Education grew 2%, while B&I was essentially flat. Overall, we remain pleased with the growth trajectory of the business, reflecting the resiliency and diversity of our end markets, as well as our investments in sales talent and industry expertise, which helped deliver record first half new sales bookings of $1.2 billion. Turning to slide seven.
Net income for the quarter was $43.1 million, or $0.73 per diluted share, compared to $42.2 million or $0.67 per diluted share in the prior year period. Adjusted net income was $52.9 million or $0.90 per diluted share versus $54.1 million or $0.86 per diluted share last year. These year-over-year changes primarily reflect higher interest and amortization expense, offset by lower tax expense and corporate costs. Per share measures were boosted by our recent share repurchase activities. Adjusted EBITDA increased $5.8 million over the prior year to $131.7 million. Segment operating margin increased 20 basis points sequentially to 7.3%. On a year-over-year basis, segment margin decreased 60 basis points. Primarily reflecting the impact of contracts that came online last year in M&D and B&I, as well as higher amortization expense related to the WGNSTAR acquisition.
We expect healthy sequential margin improvement in the third and fourth quarters, driven by improved mix in ATS and our ongoing price escalation and cost actions. Let's turn to segment performance, beginning with slide eight. B&I revenue was essentially flat with last year at $1 billion. This performance was driven by overall strength in our U.K. markets, partially offset by the mid-quarter exit of a large U.K.-based client and the impact of certain other client exits, particularly on the West Coast. Looking forward, we expect growth to moderate in the back half of the year, primarily due to the full run rate impact of the previously mentioned client exits. Operating profit was $76.7 million, and margin was 7.6%, compared to $83 million and 8.2%, respectively, last year. This margin change primarily reflects shifts in contract mix, along with increased investments in sales resources to support long-term growth.
Margin improved 10 basis points sequentially as we continue to make progress on our cost and price escalation actions. Aviation revenue grew 20% to $310.8 million, supported by healthy travel demand and the ramp of new contract wins, particularly our new Heathrow contract. Looking to the back half of the year, organic growth will remain strong but moderate from Q2 as we anniversary several large contracts that were brought on in Q3 of last year. Operating profit was $16.3 million, with a margin of 5.3%, compared to $16.5 million and 6.3% last year. Profit and margin were pressured by incremental weather-related costs, certain contract scope changes, and TSA-driven operational disruptions during the quarter, as well as by ramp-up costs for the new Heathrow contract. Turning to slide nine.
M&D generated $463.8 million in revenue, a 17% increase year-over-year, including organic growth of 7% and 9% growth from the WGNSTAR acquisition. The strong organic growth was driven by recent contract wins, particularly in the technology sector, along with continued client expansions across the segment. Operating profit was $40.6 million with a margin of 8.8%, compared to $39.9 million and 10% last year. As anticipated, margin increased 20 basis points sequentially. On a year-over-year basis, the margin change reflects the mix of newer contracts secured last year that are helping to drive organic growth. Margin was also impacted by $4 million in incremental amortization expense connected with the WGNSTAR acquisition. Excluding incremental amortization, margin was 9.6%, which we believe better reflects the underlying long-term earnings power and margin profile of the segment. Education revenue rose 2% to $232.2 million, primarily driven by escalations.
The segment delivered strong operating performance, with operating profit increasing 19% to $16.4 million and margin expanding 100 basis points to 7%. This improvement was driven by enhanced labor efficiency and effective escalation management. Our Education team continues to execute at a high level and win meaningful new business, such as a large ABM Performance Solutions contract from the Detroit Public School System, which will come fully online in the fourth quarter. We also expanded our scope with the University of Miami, a long-standing and important client. Looking ahead, we expect margin to improve in the third quarter, which is always a seasonally strong period for Education. Technical Solutions second quarter revenue was $267.3 million, up 27% year-over-year, including 22% organic growth and 6% from acquisitions.
Organic growth reflected robust activity in our data center markets, as well as strong growth in battery energy storage system and HVAC project activity. Additionally, we booked significant new microgrid business in the second quarter with a major big box retailer, which supports our expectations for a strong second half in terms of revenue and mix. Operating profit was $16.8 million, with a margin at 6.3%, compared to $13.4 million and 6.4% last year. The increase in profit was driven by significant volume growth. Margin primarily reflected service mix that was less weighted to design and engineering and more weighted to equipment-intensive infrastructure project services, as well as ongoing investments in growth. We expect the service mix to improve in the back half of the year, as has been our historical performance cadence within Technical Solutions. Turning to slide 10.
We ended the quarter with total indebtedness of $1.9 billion, including $23 million in standby letters of credit. Our total debt to pro forma adjusted EBITDA ratio was 3.2x. Available liquidity stood at $614 million, including $95 million in cash and cash equivalents. As expected, the WGNSTAR acquisition pushed leverage above 3x in the second quarter, and we expect to work it back down under 3x by the end of our fiscal year. Second quarter cash from operations was $66.2 million, and free cash flow was $22.4 million. For the first six months, cash flow from operations was $128.2 million and free cash flow was $71.2 million, versus a use of cash of $73.9 million and negative free cash flow of $107.8 million in the prior year period.
This year-over-year improvement of approximately $180 million during the first six months was driven by strong working capital management efforts and continued progress on our ERP stabilization. Turning to capital allocation. As mentioned, we're focused on reducing our leverage below 3x. As such, our near-term priority is debt repayment, but we'll remain flexible as potential value creation opportunities present themselves. At quarter end, $89 million remained under our existing authorization. Interest expense in the quarter was $28.1 million, up $4.2 million from last year, reflecting larger average debt balances driven by our WGNSTAR acquisition. Turning to our fiscal 2026 outlook on slide 11. As Scott noted, while we remain encouraged by the relative health of our end markets, we're mindful of broader economic uncertainty. Accordingly, we're maintaining our previously communicated fiscal 2026 adjusted EPS outlook.
As a reminder, our full-year organic revenue growth outlook is 3%-4%, and we now 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 one additional point of revenue growth, bringing total growth to the high end of our 4%-5% range. Segment operating margin is expected to be toward the low end of our range of 7.8%-8% for fiscal 2026, with margin expansion weighted toward the back half of the year, primarily driven by improved mix and volume in ATS. Interest expense is now forecasted to be approximately $110 million, driven by higher than forecasted interest rates. We plan to offset this headwind with additional cost actions.
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%-30%. We feel good about our progress generating cash and are confident in our expectations. As a reminder, we expect free cash flow of approximately $250 million in 2026 before the impact of transformation and integration costs, the final RavenVolt earn-out, and any incremental restructuring. Putting it all together, we continue to expect full-year adjusted EPS to be in the range of $3.85-$4.15. In addition, we've been actively implementing operational and process improvements to our insurance program over the last six months. We believe these changes will ultimately enable us to better predict the in-year impact of prior year self-insurance adjustments.
As such, our full-year fiscal 2026 outlook no longer excludes the expected impacts of such adjustments, which we believe provides greater predictability and transparency in our outlook going forward. With that, I'll hand it back over to Scott for closing remarks.
Thanks, David. In closing, I'm pleased with where ABM stands. We are growing, we are generating cash, and our end markets are largely constructive. We have more work to do, particularly in driving consistent margin improvement, but the trajectory is positive and the back half of the year gives us real opportunity to demonstrate that. We remain disciplined stewards of capital. Near term, that means staying focused on deleveraging. Longer term, it means continuing to shape our portfolio and invest in areas where ABM can become a more integrated and an important supplier to our clients and generate the most shareholder value. Lastly, I want to take a moment to thank our team. More than 100,000 people show up every day and deliver for our clients, and their commitment is what makes ABM's long-term story possible. With that, we'll open up the line for questions.