GDI Integrated Facility Services Inc.

Good morning, ladies and gentlemen, and welcome to the GDI Integrated Facility Services, Inc. Second Quarter 2023 Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 9, 2023. I would now like to turn the conference over to Stéphane Lavingue. Please go ahead.

Thank you, operator. Bon matin à tous. Good morning, all, and welcome to GDI's conference call to discuss our results for the second quarter of fiscal 2023. My name is Stéphane Leving. I'm Senior Vice President and Chief Financial Officer of GDI. I'm with Claude Bigrat, President and CEO of GDI, and David Inchi, Executive VP of Corporate Development. Before we begin, I would like to make you aware that this call contains forelooking information, and we ask listeners to refer to the full description of the forelooking safe harbor provision That is fully described at the beginning in the MD&A file on Sutter at the end of last night. I will begin the call with an overview of GDI's financial results for the second quarter of fiscal 23, and then I will invite Claude to provide his comments on the business. In the second quarter, GDI recorded revenue of $609 million, an increase of $83 million, or 16% over Q2 of last year, which is mainly due to organic growth of 12%. We recruited and adjusted a bid of $34 million in the quarter, a decrease of $4 million, or 11% over Q2 of last year. On a year-to-date basis, revenue increased by $179 million, or 18% to reach $1.2 billion, compared to $1 billion last year. Organic growth was 13% year-over-year, and revenue growth from acquisition was 2%. Adjusted a bit down, the first half amounted to $67 million, a decrease of $7 million or 9% over the corresponding period of 2022. Now, moving to our business segments. Our Business Service Canada segment recorded revenue of $144 million in Q2, a decrease of $1 million or 1% compared to the second quarter of 2022. This segment reported the adjusted bid of $13 million compared to $19 million in the second quarter of 2022, representing a decrease of $6 million. Our Business Services USA segment recorded revenue of $180 million in Q2, representing an increase of $16 million when compared to Q2 of 2022, mainly attributable to the Canadian acquisition in August 2022 and the appreciation of the U.S. dollar relative to the Canadian dollar. This segment reported adjusted a bid of $13 million in both second quarters of 2023 and 22. Both business services segments expressed slack to slight negative organic revenue growth that is attributable to a lower amount of COVID-19-related extra services as compared to Q2 of 2022, which also led to lower adjusted EBITDA margins. Now, our technical service segments recorded revenue of $264 million, or growth of 33% over Q2 of last year, with 31% organic growth revenues. The segment generated an adjusted EBITDA of $12 million, representing an adjusted EBITDA margin of 5%. Revenue growth from the business is attributable to a strong increase in project revenue and higher service revenue compared to the previous year. Finally, our corporate and other segments reported a revenue of $21 million and a negative adjusted EBITDA of $4 million compared to revenue of $18 million and negative adjusted EBITDA of $2 million in Q2 of 2022. The corporate and order segment is composed of GDI IFF, GDI janitorial product manufacturing and distribution business, as well as GDI corporate costs and elimination of intercompany transactions. I would like to turn the call now to Claude that will provide further comments on GDI performance during the call.

Well, thank you, Stéphane. Bonjour à tous. Good morning. And thank you all for taking the time to participate in our earning call this morning. I'm pleased to report that GDI delivered another decent quarter, like Stéphane stated, with $609 million in revenue or 16% growth over Q2 last year, including a double-digit organic growth rate of 12%. As expected, our business Service Canada segment continued to experience a reduction in EBITDA margin as we have been adjusting to the new post-COVID operating environments especially in the Class A office market, as we expected. I'm happy to say, however, that we feel we are approaching the end of the decline and expect EBITDA margin to begin to stabilize in the second half of 2022. Our business service, USA Business, has a good quarter, generating EBITDA that was in line with the prior year. We're also seeing an increase in bidding activities in both our business service business and I am optimistic regarding organic growth in the coming quarters. Our technical service business is continuing to perform well. Ainsworth delivered organic growth of 31% in the quarter as it executed on its record backlog while also generating higher levels of service revenue. Ainsworth EBITDA margin was 5% in what was usually the business second weakest quarter. Again, this quarter, the business was able to book as much as it built, and the backlog remains near record level. I remain very positive on the outlook for Ainsworth going forward. Our manufacturing and distribution business continues to progressively recover from its COVID-19 lows, and we have been seeing a gradual improvement in results almost monthly during 2023. Additionally, our integrated facility service business, is executing on its two inaugural contracts as it has been building a pipeline of potential opportunity across North America. Overall, I'm very happy with our GDI performance this quarter. We delivered strong revenue growth, our margin is stabilizing in the business service segment, and the outlook for LT levels of organic growth is positive across all our business segments. One area where we have identified for improvements going forward is our working capital management and some improvements in our SGLE cost structure. Our technical service business growth is for sure has generated a higher demand in working capital requirements. So as a result, and we're strong organic growth during 2023, we have made significant investment in working capital to support this growth. We are actively working to identify and implement short-term and long-term strategies to reduce working capital requirements across all our business lines, and we expect to see progress being made during the second half of this year. Our balance sheets remain strong, our leverage is within our comfort zone, and we have a healthy pipeline of strategic growth opportunity that we are actively working on. I'm looking forward to seeing our business perform in the second half of this year. So thank you again for your time today. And operator, you can please open the lines for questions.