Ladies and gentlemen, welcome to the ABM first quarter 2018 conference call. As a reminder, today's call is being recorded. I would now like to turn the conference over to Susie A. Choi.
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 contain 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 a 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 Investor 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. It represents the culmination of a great deal of work to get all of this organized and stood up both operationally and administratively. While there is still work ahead of us, I cannot be more pleased at 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 strengths and growing our presence in the Aviation, Business and Industry, Education, Healthcare, and Technology & Manufacturing sectors. Our Technical Solutions segment is positioned to capitalize on our new structure as we intensify our cross-selling initiatives.
We are also making good progress with other key initiatives, such as centralized 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 are growing and view us as strategic partners as they expand their footprint. We also benefited from an increase in tag work in the quarter. Aviation continues to show promise in nascent service lines as we recently grew our catering logistics business platform with a multimillion-dollar award from a second client. As you recall, we just greenfielded this service over the past 12 months, and now we have a pipeline that is growing. Our adjusted EBITDA margin was 4.1% versus 3.6% last year. These results led to GAAP EPS from continuing operations of $0.42 for the first quarter and $0.26 on an adjusted basis. This reflects higher interest expense, amortization, and share count as a result of our GCA transaction.
We're also on pace to generate free cash flow in excess of $120 million this year. I'd like to discuss our progress against our key strategic priorities for the full year. As many of you may recall from our Investor Day, we described in great detail our transformative 2020 Vision journey and what we are building. We've restructured our organization, we are making back-office improvements, and we're investing in technology to streamline operations and enhance performance, increasing our earnings power over the long term. 2018 will be a pivotal year along our path to 2020, we're especially focused on a few key areas to drive our longer-term vision. First, we are more determined than ever to accelerate organic growth. With Scott Giacobbe at the helm as our Chief Operating Officer, our firm is embracing a new sales culture.
We are adding sales resources as part of our plan, through the end of February, we added more than 30 salespeople out of a targeted goal of 60 for the year. This will bring our total sales headcount to approximately 300. Sales roles are arguably the hardest roles to fill in any business at the moment. I'd like to think our success in attracting top talent has been related to how compelling our 2020 Vision is and the fact that we've developed robust support tools to enable effective selling. It may sound clichéd, salespeople want to sell. They need to be convinced that there is a holistic support structure that allows them to succeed. Anthony is going to discuss our segment performance shortly, each group has specific growth plans on where we believe we can leverage our strengths.
Some are focused by service line, some by geography, and some are focused by type of client within their industry group. For the most part, all have elements of everything I just described. The key for us is being strategic about how and where we find growth through our account plans and ensuring that we are not just growing indiscriminately. As an example of strategic growth, on the heels of B&I's blockbuster U.K. win for the Transport for London, B&I in the U.S. recently won a multi-year contract with the City of Chicago to provide facility services for city-managed properties, including police stations and libraries. This is a great example of how we are leveraging our global resume as a key differentiator and winning large, profitable contracts. Another key area of focus for us is the smooth integration of GCA, which is going really well.
We started the fiscal year concentrating on building an organizational structure that maximizes the combination of the two firms and aligns with our synergy targets. Since then, we remapped our operations across the enterprise to the new industry group structure, and our organizational realignment is now complete. This was a really important milestone. Operating as one combined entity lets everyone begin to focus on the future. I will tell you that this has only underscored what a great cultural match GCA is to ABM, both internally and externally with our new client base. Employees are excited to be part of a growing public company, and the client reception has been amazing, including some key renewals in the last 45 days. The next steps of integration involve IT, procurement, and marketing, which include system convergence, supplier alignment, and rebranding.
We remain on track to achieve the high end of our target synergy range of $20 million-$30 million by next year. We also continue to be focused on The ABM Way, which remains the key to unlocking operational efficiencies and margin expansion over the long term. We moved away from managing The ABM Way solely as a corporate function and pursued what we call an ownership model, which embeds teams within each industry group. We are staffing these teams with high-performing talent and investing in tools such as the Tag Pricer. For those of you who joined us on Investor Day, you may recall that the Tag Pricer is an app that we developed internally to facilitate the processing of work orders, or tags, as we call them, and improve efficiencies by reducing processing time.
This leads to better project management and increases client satisfaction, which will ultimately lead to greater client retention. It will also provide valuable data, which through our AI functionality, will lead to pricing optimization over time. We've rolled the Tag Pricer out in the B&I Group, and it's being adopted and embraced. The rollout began in mid-November. Since then, we have seen the usage increase each month, with 15% of eligible tags being processed through the Tag Pricer in December to now over 30% and growing fast. This is tremendous adoption by any measure. Lastly, as you saw in our press release, we increased our full-year GAAP guidance outlook by $0.55 to a range of $1.88-$1.98 per share and $2.00-$2.10 per share on an adjusted basis as a result of the Tax Cuts and Jobs Act.
The excess cash generated from this new legislation will predominantly be used to de-lever. We will also look at how we can enhance frontline or manager training as well. As always, our capital allocation priorities remain reinvestment in the business, the distribution of our dividend, and de-leveraging. As you have heard here and on our Investor Day, we are positioning our 100-year-old company for the next 100 years. Everyone at ABM, more than 130,000 of us, are mobilized and ready to execute against our short-term and long-term goals for our business. Our 2020 Vision is predicated on organic revenue growth, margin and earnings growth, and free cash flow conversion. I cannot thank our employees enough, as they are the driving force behind the structural improvements we are making.
We have learned a great deal over the last two years, and our ethos of continuous improvement will continue to make our path to the future clear. I'll turn the call over to Anthony for further commentary on our fiscal and operational performance.
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 ABM's history, dealing with the most significant overhauls 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 preface 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 segments except for Technical Solutions. 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 operations was $28 million, or $0.42 per diluted share, versus $16.1 million or $0.28 per diluted share last year. Tax Reform had a significant impact on the year-over-year increase due to a one-time discrete tax benefit of $28.7 million due to the remeasurement of deferred tax assets and liabilities. Offsetting this was a one-time $7 million tax expense related to the repatriation of foreign earnings. The total GAAP impact from these items was $0.33. In addition, the reduction of our federal corporate income tax rate impacted the quarter by approximately $600,000. Our results also reflect the following items that are predominantly related to our acquisition of GCA.
Higher amortization of $10.7 million, which is embedded within each impacted reportable segment, higher interest expense of $11.1 million, and an increase in weighted average shares outstanding on a diluted basis to 66.3 million. Excluding the impact of segment-related amortization, our overall operational results benefited from GCA-related revenue, predominantly within the Education and Technology & Manufacturing segment. On an adjusted basis, income from continuing operations for the quarter was $17.4 million or $0.26 per diluted share. During the quarter, we generated adjusted EBITDA of $65.1 million, for an adjusted EBITDA margin of 4.1% compared to 3.6% last year. Let me dive into the segment results for the quarter, which are described on slide 12 of today's presentation. At our Investor Day in January, we provided a comprehensive overview of each of our business segments, which I hope you found helpful and which are now posted on our website.
Please note that as I discussed, GCA will have a large impact on our fiscal 2018 operating segment results in a number of ways. This quarter, we have introduced our new operating segments to better reflect our combined business and to align to the way we will manage the business going forward. Part of this process involved the intricate task of remapping overhead expenses, which was very similar to what occurred last year upon our 2020 Vision realignment. Due to the GCA acquisition and the remapping of overhead expenses, including allocations, our operating segment results will not be easily comparable on a year-over-year basis. To help you assess our operating performance during the first year of integration, we provided full-year operating margin guidance as part of our Investor Day presentation, which we are reiterating today. Moving to segments and providing a brief summary for each.
Business and Industry, or B&I, is our largest business with a steady and more mature growth profile, predominantly comprised of commercial real estate clients across a breadth of contracts. Revenues for the quarter increased 10.1% to $722 million versus last year, driven by $41 million of additional revenue related to GCA, including approximately $20 million in the vehicle services business, which has historically performed at a break-even operating margin. For the quarter, B&I exhibited good organic growth stemming from new janitorial wins, expansion of existing key accounts, and strong tag revenue. Operating profit for the quarter was $28.5 million for a margin of 3.9%. Excluding GCA-related amortization, the operating margin for this business was 4.2%.
As previously indicated, we anticipate a full-year operating margin in the low 5% range, and as you know, for each year, our first and second quarter operating margins are typically lower than the full-year average due to the timing of SUI taxes and other burdens. Also, as I cover the segment's full-year margin expectations, they are all inclusive of amortization. Aviation is a segment characterized by a larger concentration of contracts with several major airlines and airports, and with bid cycles and awards that tend to be clustered. The increase in revenues during the quarter related primarily to new growth and expansion we experienced in the last fiscal year, with revenues increasing 10.5% to $256 million this quarter. This was driven by organic growth attributable to parking, cabin cleaning, and catering logistics. GCA had a nominal impact of approximately $4 million in this segment.
Operating profit came in at $5.8 million for a margin of 2.3%. We continue to expect to end the year in the mid 3% margin range. Our new Technology & Manufacturing, or T&M segment, reported $232 million of revenue for the quarter. This was a combination of GCA revenue of approximately $59 million, as well as our legacy technology and legacy industrial and manufacturing client base. T&M is defined by a diverse client base with typically larger enterprise accounts where we see opportunities for integrated facility services. We remain excited for the potential growth in this business as we view the underlying industry fundamentals to have a longer-term, faster growth profile over time, primarily characterized by Silicon Valley and pharma clients. Operating profit came in at $16.9 million for the quarter for a margin of 7.3%. Excluding GCA-related amortization, the operating margin would have been 8.3%.
On a reported basis, we continue to expect low 8% operating margin range for this segment. Moving to Education. As you know, the now standalone Education segment was most heavily impacted by the acquisition. Revenue for the quarter was $206 million, reflecting approximately $140 million of GCA-related revenue. While we have started the year as anticipated on the top line, we are seeing some labor pressure in parts of the business due to the fact that the majority of the portfolio is in non-union geographies, which typically have a higher turnover and which can lead to overtime pressures. On the top line, we have also not yet anniversaried some of the lost ABM contracts we discussed in 2017. As a result, we expect the business to normalize during the latter part of this year. I also want to discuss seasonality for a moment, given the size of this new segment.
Contract servicing the K through 12 markets are typically awarded in the March through May timeframe, with work beginning over the summer as schools prepare for the new academic year. In higher education, contracts are awarded throughout the year, with the summer typically being a period when tag work is performed to prepare the schools for the coming year. Therefore, results may exhibit some seasonality from quarter to quarter, with normalization over time. Operating profit for the quarter was $9 million for a margin of 4.4%. Excluding the impact of amortization, operating profit margins were 7.5%. We continue to expect an operating margin range in the low 5%. Healthcare, which was part of our emerging industry segment last year, is now a standalone segment.
Revenues for the quarter were approximately $68 million, reflecting $8 million in GCA business, which was almost entirely within the non-acute commercial space, aligning with our business strategy for Healthcare. Excluding GCA amortization, operating margins were 4.3% for the quarter and 4% on a reported basis. We continue to expect to end the year with operating margins in the low 5% range. Technical Solutions is the only segment whose results were not impacted by our GCA integration. Revenues were $104 million for the quarter, down 3.4%. If you recall, we previously discussed the shift in timing, which was related to lower project bookings at the end of fiscal 2017. Bookings and our pipeline are off to a good start in our first quarter, with one of our best booking months ever in January.
With our focus on cross-selling and opportunities in both the government and commercial markets, we expect our project and revenue turn to begin to normalize in the second half. Also, we are excited that we booked an Education cross-sell during the first quarter with a school district in Georgia. This exemplifies our organization's focus on cross-selling into existing customers with our stronger new presence in the Education market. Operating margins were 5.3% compared to 7.3% last year. These margins reflect our investment in U.S. salespeople and support, as well as lower margins in the U.K. We continue to expect a high 8% operating margin range for the segment. Let me spend a few moments on the non-Aviation U.K. business in general, which is reflected in the B&I and Technical Solutions segment.
While small compared to ABM's total book of business, we have begun to see some impact to the business based on localized conditions impacting facility service providers in general. Market uncertainty has slowed some outsourcing decision-making and created a more competitive pricing structure in certain parts of the market. Our U.K. team is navigating these components deftly, we expect continued near-term margin pressure for this business. Turning to liquidity. We ended the quarter with total debt, including standby letters of credit, of roughly $1.3 billion and a bank-adjusted leverage ratio of approximately four times. During the quarter, we paid a quarterly cash dividend of $0.175 per common share for a total distribution of $11.5 million to shareholders. Our board has also approved our 208th consecutive quarterly cash dividend. Turning to our revised guidance outlook for the year.
As described in our press release, we are increasing our GAAP and non-GAAP guidance to reflect recent Tax Reform. We anticipate our GAAP guidance outlook to be heavily impacted by a one-time net discrete tax benefit of $0.33. Due to the complexity of reflecting the exact impact of the Tax Act, we continue to analyze the accounting impact and expect to refine these estimates throughout the fiscal 2018 period. We now expect GAAP income from continuing operations to be in the range of $1.88-$1.98 per diluted share, compared to our previous range of $1.33-$1.43 per diluted share. On an adjusted basis, we are raising our guidance outlook to $2.00-$2.10 per diluted share compared to our previous range of $1.70-$1.80 per share.
This guidance assumes a tax rate between 28%-30% for the fiscal 2018 year, compared to our previous guidance of 38%-40%, reflecting a reduction in our federal corporate income tax rate from approximately 35%-23%. This decrease is reflective of 10 months of the impact from the Tax Reform Act, but does not include other provisions of the Tax Act, which will become effective for us in fiscal 2019. This rate also excludes discrete tax items such as the 2018 Work Opportunity Tax Credit and the tax impact of stock-based awards, also referred to as FAS 123R. At this time, we anticipate a little more than $10 million in discrete tax items for the full year, which is an increase from the $9 million we originally anticipated.
This increase is due to our revised estimates for WOTC and 123R, we continue to refine all tax elements. While all other components of our guidance outlook remain unchanged, I want to discuss interest for a moment, given the broader context we are seeing in the marketplace. Through swaps, we have hedged approximately 50% of the floating component of our current outstanding debt to fixed rate at approximately 1.6%. Due to the increase in interest rate expectations for the future, these swaps have an unrealized mark-to-market gain of roughly $21.5 million. While we are hedged 50%, we continue to evaluate the interest rate market and its impact to our current and forecasted interest expense. Finally, as Scott discussed, our GCA integration is proceeding as planned, and we continue to expect to achieve synergies at the high end of our $20 million-$30 million range on a run rate basis.
We will begin to realize these synergies as we progress throughout the year. With that, operator, we are now ready for questions.
Thank you, ladies and gentlemen. We will now be conducting our question and answer session. If you would like to ask a question, please push star one on your telephone keypad now. A confirmation tone will indicate your line is in the question queue. You may push star two if you would like to remove your question from the queue. For any participant using speaker equipment, it may be necessary to pick up your handset before pushing the star key. One moment while we poll for questions. Our first question comes from the line of Michael Gallo from C.L. King. Please go ahead.
Hi, good morning.
Morning, Michael. Morning.
Scott, my question is on GCA. You've had four or five months to look through the integration, see how they're doing some things. 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.
Yeah, that's a great question, Michael. I'd say we're off to a really fast start on cross-selling, and we just were talking about the pipeline, and it's been just a lot of traction and opportunity from these accounts that never really had the opportunity to have technical services as a lever to enhance our clients. That's been really good. 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 transformation office, specifically from the learnings that we've had. We think that's going to be helpful over the long term. It's not just kind of top line and bottom line. It's a lot of the learnings inside the organization as well.
Anything in terms of specifics and best practices that you might want to call out or any examples that are kind of notable that they're doing things in a way that you see an opportunity to export that over and do it a lot more efficiency at Legacy ABM?
I think for us, it's kind of their approach to the clients and being disciplined with standard operating practices. As an example, if you look at ABM, we may have 65 ways, in round numbers, of doing invoices across the country. By being very kind of open to doing whatever clients ask for. 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're defined with your clients, you get efficiencies in the back office. That's a great learning. It's a great takeaway, 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, good morning. I guess I wanted to dig into the sales force comments a little bit more here. Scott, you kind of quantified 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? Then can you talk a little bit about the sales productivity that you've been seeing out of your sales force in the last quarter or two, and specifically maybe out of even the new hires? I guess what I'm trying to get a sense of here is when do these investments start paying off and seeing tangible results in accelerating organic growth?
Just generally speaking, our sales force is in line with what we guided to. As I said in my speech, it's difficult finding salespeople right now. They're just in high demand, and we're not going to compromise there because when you hire an ineffective salesperson, it's just not a good thing. Again, we're being very disciplined in how we're onboarding people. It does take time. It can take six to nine months before a salesperson can hit the ground running, build their book of business, and starting to get some results. I would say that's kind of the timing of it. I would also add, Andy, it's also looking at the marketplace much more analytically around where the opportunities truly exist.
Rather than just hiring across the portfolio, we're really looking at markets where we may have a stronger opportunity to grow the business and putting salespeople in that market. That's also causing us to look at our existing sales force and making the appropriate actions around driving that long-term behavior.
How do you get comfortable adding 20%+ to the sales force? Are you seeing the early returns that give confidence there, or is 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? I guess my question is this the right pace given that's a substantial increase and want to make sure that you get good returns on them?
We really feel good about it. We just instituted a 16-week training program when we onboard our salespeople with a checklist of things that have to happen every week. For us, it's the right pace of hiring. Remember, we're doing it over a pretty broad spectrum. Even though it feels like a lot, it may be incrementally one or maybe two in a marketplace, right? Especially when you stratify that across the different industry groups, right? We don't think it's an overburden, and we think if we're disciplined about who we hire and we have a great onboarding program, it's going to lead to better longer-term success.
Got it. All right, just maybe a couple modeling questions that might go more towards Anthony. Anthony, I wanted 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 you obviously reiterated the moderation in the first half of the fiscal year, are we looking at 40%, 50% of the operating profit coming in that fourth quarter? I just want to get some sense that we have an expectation of what to think about there.
Sure. 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 it apart between the U.S. and the U.K. business. 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. That's right in line with the way we're seeing the pipeline and the backlog in that business and the churn. We're still extremely confident that that's going to continue to be a high single-digit grower, if 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. We feel pretty good about where this is heading from a U.S. perspective.
Yeah, that's helpful. Anthony, just keep going with you. Just thinking kind of longer term about tax rate, you said you're going to pick up some incremental benefits in FY 2019. What do you think as you take your initial cut here, is the right tax rate out there in 2019, where you get the full year of contribution from Tax Reform Act and these other things that are kicking in?
It's actually, the way that you need to look at it is obviously this year from a pure Tax Reform Act perspective, we're getting 10/12 of the benefit, but we're actually not yet incurring some of the costs associated with limitations such as 162(m), and there's some additional limitations that are going to kick in in 2019. 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. I would be modeling flat to slightly higher taxes in 2019. For now, I would just use 2018's rate as a good proxy for 2019.
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. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please push star one on your telephone keypad now. 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 if you've gotten some feedback from some of the new Education clients from post GCA. You touched on this a little bit, I suppose, with some of maybe the other areas that you can expand in, but I was 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.
Yeah. I think for us, having GCA now, even with the legacy ABM portfolio, we now bring the grounds perspective, which we never had before on the landscaping and grounds. That's been good. From their portfolio, we're bringing the Technical Solutions. It feels like a much more robust offering in K through 12 and on the university side. Just in the last two or three months, we renewed Volusia County Schools in Florida, which is a big K through 12 system, Hamilton County Schools in Tennessee, a big community college in Texas. I feel like our offering is really resonating and the team is pulling together with some really definitive wins in the last 45 days. I think there's just a lot of energy around the pipeline and our approach to the market now.
Okay, great. 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. We think that 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. I think more to come on that, but I think it's a big opportunity for us in the future.
Okay. You've covered a lot of this on 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?
It was probably even since the beginning of the fiscal year. Again, because you have to do these things with a certain pace and cadence. Again, it's difficult finding salespeople. 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. That's not a net number, 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. 60 is more of a gross add number rather than a net net, which may be closer to 50 or 45.
Okay. One last one from me. I wanted to go back to the Tag Pricer and the rollout there and how 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 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.
Yeah. I think the great surprise for us is the adoption rate and how happy our managers are, because it creates efficiency. A process that maybe 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 an app pretty instantaneously. People in the 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. To have an adoption rate over 30% in such a short period of time, we think is pretty dramatic. I think it's less about pricing optimization right now and increased profitability, because we're just rolling it out.
We're just getting the learnings, and we don't even have a baseline yet, because we just started using the tool.
Right.
Yeah, it probably won't be, realistically, till a year from now that we could start doing some year-over-year comparisons of that side of it. People are so happy these days to get efficiency tools so they can 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 follow-up from the line of Michael Gallo from C.L. King. Please go ahead.
Hi. Just on a follow-up on the Tag Pricer. I know you mentioned 30% of the tag work was going through that of late. I didn't hear you, and perhaps I missed it. Have you seen it 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 freeing them up from the back office?
Yeah, I think it's the latter, Mike, because this is a new initiative for us. For us, it's all about adoption, training. Hey, look, we're in phase 1 of this. There'll be a phase 2 of it in terms of even improving it. It's less about creating more tags right now or creating better margin right now. This is an efficiency play this year. Remember, it's only B&I. We haven't rolled it out to the other industry groups. I think there's just a lot more to come and a lot more from a learning standpoint, and the margin and kind of the frequency of tags is probably more of a 2019 story than a 2018 story at this point.
Right. Just as sort of a second part of this, I know this is kind of rolled out in the field. I was wondering if there's an ability to roll out something to the customer where the customers themselves could have an app and say, "Oh, I want the carpets cleaned," and they could actually reach out directly to ABM for certain services, or is that not something you'd contemplate?
Absolutely something that we're working on. Absolutely. We're looking at a lot of technology innovation, the goal is to get stickier with clients. 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. 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 gentlemen, 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 your participation, and have a wonderful day.