GDI Integrated Facility Services Inc.

Good morning, ladies and gentlemen, and welcome to the GDI Integrated Facility Services Inc. First Quarter 2025 Results Conference Call. At this time, all lines are in a 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 has been recorded on Friday, May 9, 2025. I would now like to turn the conference over to Charles Etienne Girouard, Executive Vice President of Finance, please go ahead.

Thank you, operator. Good morning, all. Welcome to GDI's conference call to discuss our results for the first quarter of fiscal 2025. My name is Charles-Etienne Giroir. I am Executive Vice President of Finance at GDI. I am with Phil Bigrat, President and CEO of GDI, and David Inchey, Executive Vice President of Corporate Development. Before we begin, I would like to make you aware that this call contains forward-looking information, and we ask listeners to refer to the full description of the forward-looking safe harbor provision that is fully described at the beginning of the MD&A filed on CEDAW last night. I will begin the call with an overview of GDI financial results for the first quarter of TISCAL 2025. and will then invite GLOW to provide its comments on the business. In the first quarter, GDI recorded revenue of $616 million, a decrease of $28 million or 4% over Q1 2024. This is mostly due to an organic decline of 7%, partially upset by an increase from the foreign currency translation of 3%. GDI recorded adjusted EBITDA of $34 million in the quarter, representing an adjusted EBITDA margin of 6%, an increase of 6 million and 2% respectively over Q1 of last year. In the first quarter, GDI reported a net operating working capital reduction of $9 million. GDI has also reduced its long-term debt net of cash by $14 million over before 2024. Before moving to our business segment results, I would like to discuss some housekeeping changes that we made in the first quarter. First, we allocate certain IT costs from our corporate and other segments into our operating segments based on usage. The exercise move cost of about $1 million per quarter into our Business Service Canada segment and about $2 million per quarter in our technical service segment. We feel this more accurately depicts profitability in operating segments. Secondly, we have moved reporting for our IFS business unit from corporate and other to technical services as we feel that this is a more appropriate home for this business. The reclass represents about $25 million in revenue and $1 million in adjusted EBITDA annually. Now, the only operating segment business that resides in corporate and other is our chemical manufacturing business. Q1 fiscal 2024 results have been restated to reflect these changes as will future financial reports. Our Business Service Canada segment recorded revenue of $147 million in the first quarter, while generating $11 million in adjusted EBITDA, up $1 million compared to Q1 2024. The adjusted EBITDA margin of 7% was in line with Q1 of last year following the adjustment of the IT cost allocation. Our Business Service USA segment recorded revenue of $217 million in Q1, a decrease of 4% over Q1 2024. The segment experienced an expected organic decline in Q1 2025 due to the loss of the segment's largest client at the end of Q1 2024, and a reduction of low-margin contracts obtained in the Italian acquisition. The organic decline was partially compensated by an increase from foreign currency translation of 6% and by growth from acquisition of 5%. This segment reported adjusted EBITDA of 15 million, representing an adjusted EBITDA of 7%, an increase of 1 million and 1%, respectively, over Q1 of last year. The technical service segment recorded revenue of $246 million compared to $260 in Q1 last year, many due to organic decline of 5%, attributable to lower service call levels and to the timing of project revenues. The segment generated adjusted EBITDA of $12 million, which is $6 million higher than Q1 last year. That last year was negatively affected by cost overrun on three projects in its U.S. operation. The adjusted EBITDA margin of 5% this quarter increased by 3% over Q1 2024. Finally, our corporate and other segments reported revenues of $6 million compared to $14 million last year, mainly due to the sale of our superior distribution and retail business at the beginning of Q2 2024. I would like to turn the call to Claude, who will provide further comments on GDR performance during the quarter.

Thank you, Charles-Etienne. Good morning and thank you for participating in our conference call to discuss GDI's results for the first quarter of 2025. I was very pleased with the results of GDI's this quarter. Each business segment delivered an increase in adjusted EBITDA over the prior year. On a consolidated basis, GDI delivered a 21% increase in adjusted EBITDA and a 6% adjusted EBITDA margin during Q1. which is typically our slowest quarters due to some seasonal factors. Our Business Service Canada segment recorded its fifth quarter in a row with a 7% adjusted EBITDA margin after adjusting its historic results for the IT cost reallocation. This business has been very stable. In 2025, we have been seeing a higher amount of clients going to market, which has increased our returns to less likely. However, We have also been successful in winning new clients. That being said, we are expecting to deliver our historic GDP level organic growth in this segment, depending on the timing of replacing losses with new ones. Our business service US segment had a solid quarter, returning to its historic adjusted EBITDA margin range, as the work to improve profitability of the Italian contracts has now been completed. As previously announced, organic growth in Q1 was impacted by the loss of GDI's largest client in Q1 2024 at the end of 2023. We have replaced most of the lost business and expect organic growth to progressively return to our historic level by Q4 of this year. Apart to the large client loss and the Italian restructuring, our core business is very healthy and has been growing quite well. Our technical services segment at a non-standing quarter with $246 million in revenue and a 5% EBITDA margin. Q1 is traditionally Zensworth's seasonally weakest quarter. To put this in perspective, adjusted EBITDA in Q1 has ranged between 2% to 4% adjusted for DRT recharge since we acquired Zensworth at the end of 2015. Much of the strong performance has resulted in our initiative to increase margin in Ainsworth's project that began in Q3 2023. The outlook for Ainsworth for the remainder of 2025 remains positive. I'm also pleased to report that GDI has continued to successfully execute on its balance sheet improvement initiative during Q1. We reduced net operating working capital by $9 million, which brings the total reduction to 53 million since we launched our initiative in Q3 of 2023. Additionally, the working capital reduction along solid cash flow from operation enabled us to reduce GDI long-term debt by 14 million over Q4 of 2024. This debt reduction coupled with the strong growth in adjusted EBITDA during Q1 has brought GDI's leverage ratio in the mid-2s, which is well below our comfort zone of 3% to 3.5% that time. In summary, all of GDI business segments performed well during the quarter, and our outlook for each is positive for the remainder of 2025. We have been actively evaluating a number of M&A opportunities, and the pipeline is healthy. Our balance sheet is strong. Our leverage ratio is low, and we are in a good position to continue to execute on our growth strategy. I would also like to share that effective today, Charles Etienne is now officially our new SBP and Chief Financial Officer. I would like to congratulate him, and I'm very, very, very excited to see him working and going forward. Thank you, Claude. I would like to thank you for participating in our conference call for Q1 2025 and would now ask the operator to open the lines for questions.