GDI Integrated Facility Services Inc.

Good morning ladies and gentlemen and welcome to the GDI Integrated Facility Services Inc second quarter 2025 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 has been recorded on Thursday August 7, 2025. I would now like to turn the conference over to Xiao Etienne Giroir, Senior Vice President and Chief Financial Officer. Please go ahead.

Thank you, operator. Good morning, all, and welcome to GDI conference call to discuss our results for the second quarter of fiscal 2025. My name is Etienne Giroir. I am Senior Vice President and Chief Financial Officer of GDI. I am the , President and CEO of GDI, and David and Chief, 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 second quarter of fiscal 2025, and will then invite Claude to provide his comments on the business. In the second quarter, GDI recorded revenue of 610 million, a decrease of 29 million or 5% over 2024. This is mostly due to the organic decline of 4%. GDI recorded adjusted EBITDA 34 billion in the quarter, in line with Q2 2024, which represents an adjusted EBITDA margin of 6%, increasing 1% over Q2 of last year. On a year-to-date basis, Revenue reached $1.23 billion, a decrease of $57 million, or 4% over the same period of 2024. Year-over-year decline was permanently due to an organic decline of 5%. Adjusted EBITDA in the first half of the year amounted to $67 million, an increase of $6 million, or 10% over the corresponding period of 2024. Our Business Service Canada segment. recorded revenue of 147 million in the second quarter, up 1% over Q2 2024, while generating 10 million in adjusted EBITDA, down 1 million compared to Q2 last year. Adjusted EBITDA margin was 7% compared to 8% in Q2 2024. Our business service USA segment recorded revenue of 204 million in Q2, a decrease of 8% over Q2 2024. The segment experienced an expected organic decline of 11% in Q2, which reflects the paring down of low margin accounts from our Italian acquisition, which was carried out through the course of fiscal 2024, as well as the loss in Q1 2025 of the remaining 20% of the large client loss during Q1 of fiscal 24. In addition, revenues are limited by one customer. situated based on the volume of recurring project work, which was lower in the second quarter of 2025 compared to last year. This segment reported adjusted EBITDA of 14 million, representing an adjusted EBITDA margin of 7% and increase of 1% over Q2 last year. The technical service segment recorded revenue of 252 million compared to 264 in Q2 last year. The segment generated adjusted EBITDA of 14 million, which is $2 million higher than Q2 2024, representing an adjusted EBITDA margin of 6% compared to 5% in Q2 2024, the increase being mainly attributable to higher margin in product revenue. Finally, our corporate and other segments reported revenue of 7 million compared to last year, and negative adjusted EBITDA of 4 million compared to 2 million in Q2 2024. I would like to turn the call to Claude who will provide further comments on GDI performance during the quarter.

Thank you, Charles-Etienne. Merci, and thanks to everyone participating in our GDI Q2 25 earning call. I'm relatively pleased with GDI's overall performance in Q2 this year. Our Business Service Canada segment delivered results that were in line with historic performance. However, we began to experience some softness in the business during the quarter. We had a higher than normal degree of churn in our client base, which we believe is due to higher than historic vacancy rate coupled with economic uncertainty from the threat of tariffs. This has caused some of our clients to either bring contract to market or otherwise pressure margins. And in response to this, we have taken strategic action to reduce our cost structure across the business. We also have invested in new sales resources in both Canada and the USA. enhance both client retention and stimulate organic growth we expect continued softness in the business over the next few quarters as the initiatives we have implemented takes hold and will continue to focus on winning business with a margin profile that is sustainable for the long term and the good health of the business our business service us segment had a good quarter as we have previously managed message Organic growth was hampered by the paring down of low margin contracts and some from the Italian acquisition, and that must carry out to 2024. Additionally, as expected, in Q1 2025, we have terminated the remaining 20% of the business from the large client that existed in Q1 2024. Despite this decline in revenue, the business delivered the same level of adjusted EBITDA on a quarter-over-quarter basis, with an increase in EBITDA margin from 6% to 7%, which is the important part of the equation. Our business service USA segment has secured a number of new contract wins that we are expecting to start up in Q3, and we'll continue to expect a return to historic organic growth level towards the end of 2025. In mid-2024, we have implemented and adjusted our sales strategy with a greater focus on higher growth and higher margin and markets and invested in resources in both sales and operations to target these markets. The strategy to grow our business service segment in these stickier markets where cleaning is more technical give us the ability to develop long-term partnership with our clients, And to date, these initiatives have been successful, and we have been realizing new contract wins. GDI technical segment had a very strong quarter, generating $14 million in adjusted EBITDA and a margin of 6%. In what is typically the segment's second weakest quarter. Notably, we delivered this result in a quarter where revenue were under pressure, a slow start to summer, caused lowered and anticipated HVAC service revenue, and due to the economic uncertainty, certain clients delayed the start-up of project work. The outlook for this business remains quite positive, and we are seeing very high temperature across Canada and the U.S. Northwest, which is helping our HVAC service business. Additionally, our project backlog is close to record high, and backlog margin is 100% to 200% Base points higher than historic. Nsworth is currently firing on all cylinders. During Q2, our operation and finance team continued to focus on GDI balance sheet. Working capital was stable in Q2 compared to Q1 2025, and we generated a slight decrease in long-term debt. The structural initiatives that we put in place at the end of 23 and early 24 are bearing fruit, and our team's remaining is remaining focused on cash efficiency. Our balance sheet is strong. Our leverage ratio sits comfortable under three times the data, and we're well positioned to execute on our growth strategy. So that concludes our formal portion of the earning call. Operator, please open the line to analyst questions.