Scott Salmirs: Sure. So I think I’d start off by saying we have a $450 million backlog in ATS comparing to this time last year, which was probably like $300 million. So the backlog is super strong. And for us, it’s always been a back half of the story, Sean. If you can go back years and you look at ATS, and it’s always been a back half story. So we feel really good about where we’re sitting now. The supply chain, I will tell you the supply chain has been loosening up a little bit, right? Because what’s been happening is the delays, although they’ve not gotten much better from a timing standpoint, they’ve stabilized, right? So I mean, I could just give you an example. Like pre-COVID to order a chiller, you’d have a 24-week wait.
Now it’s 52 weeks, right? But it’s stabilizing at 52 weeks. And we’re doing a lot of preordering right now. We’ve looked for alternate suppliers because a lot of the stuff, whether it’s chillers, EV chargers, switchgear was coming from China. And when they had their lockdown policy, they weren’t producing. So we had our teams flying all over the country locking up alternative suppliers. So we’re in the process of catching up now. And that’s why we feel so confident in the back half of the year because I’ll remind you, and I think you know this, but when we say $450 million in backlog, those are signed contracts. We just haven’t turned the wrench yet. So it’s not sales pipeline, it’s actual contracts. So that’s why we feel so confident about the back half.
Sean Eastman: All right. Thanks for that Scott. That’s helpful. And then moving over to M&D where the growth has just been super strong and resilient. Maybe a little more color on what’s happening there. I mean, are these new facilities? Are you kind of taking share in some existing facilities? And also, if you could comment on ABM’s ability to staff up to meet that growth and keep costs under control, that would be an interesting discussion.
Scott Salmirs: Yes. I mean, look, we’re just so pleased that we pivoted to this segment because if you remember, this is kind of a new industry group that we recently stood up and it was a good call. So they continue to see amazing opportunities. We’re focused on pharmaceutical now. E-commerce is slowing down a little bit. But make no mistake, it’s still pretty robust, right? It’s just not the outsized growth from the big e-commerce companies that you know about, right? But we still see so much headroom. We talked a little bit about — in the prepared remarks about semiconductors, and we just got a really large contract in the semiconductor space that’s a multimillion dollar contract that we think could quadruple over the next few years.
So super focused on all the areas around manufacturing and distribution because it’s — from a directional standpoint, we think we’re right on point. So we’re not backing off on growth estimates. Over the next few years, this is going to be a solid industry growth.
Sean Eastman: And Scott, maybe just on the team’s ability to bring the labor in to support these growth rates, this was a concern for the Street as revenue started to recover. So, just seeing, a segment with that kind of level of organic growth in this labor environment, maybe comment on the execution there on the labor availability side?
Scott Salmirs: Yes, so always a challenge, right? Anyone who would say it’s not, it would be foolish, right? It’s always a challenge. But you also have to remember, though, when we’re winning facilities, there’s already existing labor there. So it’s not like you’re starting from zero, right? So when we take over a big site, there’s a full staff, right? So that’s helpful. And then one of the things that makes, ABM so, I guess, interesting from a client’s perspective is we have this branch network, right? So, we have offices in every city where we’re probably already the number one service provider. So we have access to labor. We have fully built out networks of HR recruiters. So that branch network that we have across the country is a huge advantage because if we were – if one of our competitors were to pick up one of these sites in an area where most likely they wouldn’t have business, they’re starting from zero.
They don’t have the infrastructure that ABM has. And I think that’s what’s been so compelling on our client pitches. We deal – we show them a map of ABM offices all over the country in the branch network. And it’s just a homerun, because then you also known as you’re growing and you light up facilities across the country, there is an almost 100% chance that ABM is going to have a branch network system in that area. So that’s what’s become so compelling.
Sean Eastman: Interesting, thanks Scott, thanks team.
Scott Salmirs: Got it.
Earl Ellis: Thank you.
Operator: Thank you. Our next question comes from the line of Andy Wittman with Baird. Please proceed with your question.
Andy Wittmann: Oh great, thanks for taking my questions. Good morning everyone. I guess I wanted to ask on the work order decline. Scott, you started your prepared remarks noting that there is a $35 million year-over-year reduction in these work orders. I was just wondering, that’s actually a pretty good chunk of business, obviously it has implications on your margins as well. I was just wondering, how did that compare to what you were expecting? Obviously, work orders have been trending down. But I thought previously that – thought that this was stabilizing. So is this the stabilized decline at $35 million or is this a little bit more – is this down a little bit more than maybe you would have thought?
Scott Salmirs: Yes so what it, says. Yes, that’s a good call out. No, I think this is – we’re almost at normalization. We had a little bit in Q2 as well last year, Andy, but we’re pretty much at stabilization. And that’s almost all related to kind of the disinfection work orders. But there’s also some general slowdown in regular work orders as well. Like there’s no question in this economic climate that people are pulling back a bit. So I think from – we’ll be lapping disinfection one more quarter, and then we’re done with that. And then could it trickle down another 0.5 point or a point possibly, depending on the economic outlook. So that wouldn’t be all that surprising to us, but again still, above pre-COVID levels.
Andy Wittmann: I got it, thanks that’s, helpful. I guess – I don’t know where to go next. Look, can we talk about the corporate unallocated segment results? The cost there was less than we’d expected and less than the prior run rate you’ve been previously running the adjusted corporate expense, around $60 million, $62 million, this quarter, $52 million? It’s a pretty big step down sequentially for what I usually think of something that should be relatively stable. So I was wondering maybe, Earl, if you could talk about some of the causes for that – and what you expect in this line specifically for the remainder of the year.
Earl Ellis: Yes, no. Thanks for the question, Andy. In light of the economic climate, we have been very, disciplined in cost management. So just to give you some examples, travel and entertainment has been cut to a bare minimum. When we look at all of our open headcounts, we’ve been very, disciplined in ensuring that we’re not filling headcounts unless they are value-added and/or mandatory. And so, if you look at in light of kind of like what’s actually happened in our P&L over the last quarter with lower disinfection revenue, we still actually have higher wages. So the wage increases that we saw last year have not abated. And although the teams are doing a great job in covering that, it still is having an impact on our overall margins and profitability. And as a result of that, we’ve been very, very diligent in cost management.
Andy Wittmann: Sorry, second part of that question on what you expect for the rest of the year. Is that – is this $52 million run rate kind of the right number or what do you think there – I don’t think – based on your answer, but I don’t know what to…?
Earl Ellis: Yes, no – yes we’re going to continue to manage the P&L. You might see an uptick in there, but not back to the $60 million mark that we’ve actually historically seen.
Andy Wittmann: Got it. So Scott, when you put it all together, we heard a little bit more interest expense or turning to the higher end of the range that, you’ve previously given. When you think about this guidance range, Scott, does – a little bit, does your commentary on work orders here and the interest expense, does that bias you to one side of the range? Could you care to comment on that?
Scott Salmirs: No look, we’re sticking to our guidance range. We feel good about it. It’s – again, it’s – nothing has really changed, Andy, other than we definitely see the climate is just not as robust. But we’re so good at managing to the bottom line and going after price increases pushing out – to offset labor. So it doesn’t bias me towards the bottom end. I still feel really good about the range and confident we’re going to hit it.
Andy Wittmann: Good, okay. Thanks guys.
Scott Salmirs: Thanks.
Earl Ellis: Thank you.
Operator: Thank you. Our next question comes from the line of Marc Riddick with Sidoti & Company. Please proceed with your question.
Marc Riddick: Hi, good morning everyone.
Scott Salmirs: Good morning, Marc.
Scott Salmirs: Good morning.
Marc Riddick: So I wanted to start on aviation. And maybe you could touch a little bit on maybe consumer travel transfer kind of the leisure side of things, at least. Was kind of one of the first things to recover post pandemic. I was wondering if you can talk a little bit about maybe what your expectations are there, going forward? It certainly seems as though folks are still out there traveling. Particularly, the flights are, more full than I would have liked. But maybe you could talk a little bit about what your expectations are going forward there. And then I have a quick follow-up?
Scott Salmirs: Yes, look, I think for the most part, we think the aviation sector has normalized. We’re kind of – we’re at business as usual, if you will, from the demand side, right? To your point, like travel is robust. So – and it’s been like that for, I would say, a quarter or two, right, at least. So we feel good about it. We feel good about our strategy of focusing on the infrastructure in terms of airports versus airlines, in terms of moving our mix of business. And you’ve seen a pretty significant margin tick up since pre-COVID as a result of that. So, we think the aviation sector is going to remain strong through the balance of the year.
