GDI Integrated Facility Services Inc. (GDI.TO) Earnings Call Transcript & Summary

Thank you, Mr. Hinchey. To recap, it has been moved and seconded that KPMG LLP be appointed auditors of the company to hold office until the next Annual Meeting of Shareholders or until its successor is duly appointed and that the directors be authorized to fix the auditor's remuneration. Would those registered shareholders or duly appointed proxyholders present in person who are in favor of the motion please signify by raising their hand? [Voting]

Would all registered shareholders or duly appointed proxyholders present in person and who wish to abstain, raise their hand? [Voting]

I declare the motion carried. I would like to invite Claude Bigras, President and Chief Executive Officer, to provide an overview of the company's operations and financial performance for 2019 fiscal year and for the first quarter of fiscal 2020.

Thank you, Mr. Chairman. [Foreign Language] So hello, and this is Claude Bigras. And now I would like to take a few minutes to give you an overview of GDI's accomplishment in 2019 and what we have been doing to solidify the foundation of our business for the future. First, however, I would like to provide you with an update on the pandemic. GDI is a leader in cleaning and disinfecting services, and from the start of the pandemic, we have been proactive. We have been in constant communication with our clients and employees, providing them with factual information on COVID-19 as it has been evolving and as well as advice on protective measures to stay safe and preventative measures to reduce transmission. In all cities and regions, GDI's Janitorial business is recognized as an essential service, and in many regions, our Technical Services business is as well. We are being viewed as a critical supplier by our clients, and our janitorial, technical trades and manufacturing distribution employees are all working on the front line of the crisis. We are playing a critical role in helping to keep our clients safe, with our building virus-free and their infrastructure operating. We expect that COVID will have a material impact on the real estate industries and GDI's revenue in Q2 this year. However, I think we have a better visibility on how COVID will evolve. We are now seeing province and states reopening gradually their businesses and economies. And while we think it will take time for things to get back to full normal, at least now, we are seeing path to that, what's happening in each regions. We are fully prepared as buildings are reopened and as occupancy rates rises. We expect that service required by our clients will be significantly expanded. Disinfection upon start up, higher frequency cleaning, more specialties cleaning services increase and focus on HVAC and air filtration systems. Our sales, marketing and operation teams have been proactive since the pandemic began and have developed a full suite of services to help our clients ensure that their buildings and their environments are safe for occupants to return to. I invite you to visit our new website, www.cleaningforhealth.com to learn more about the services we have designed to support our clients in a world where the focus has shift from cleaning for appearance to cleaning for health. In terms of COVID impact on GDI at a fundamental level, GDI is a very strong business. We are a leader in our field, have a flexible cost structure, are diversified across many regions and many market sectors, and we are an essential service provider to our clients. In a recession, we typically perform well because we have the ability to work with our clients and adjust our operation to modify our cost base, protect our margin and preserve our financial health. We entered into the pandemic on a solid financial footing. Even after taking into consideration the ESC acquisition that we closed in January, our balance sheet is healthy, our leverage ratios are well within our control zone and we have significant excess capacity on our credit facility. We do not have a material concentration with a single client, and the significant majority of our clients are large property owners with low credit risk. From a balance sheet perspective and with the ability to adjust our cost base to mitigate any business volume decline, we are in a very strong position to navigate through the storm. And now I would like to speak to you about GDI's accomplishments in 2019 and our outlook for the future. I am pleased to say that GDI has had an exceptional year in 2019. All our business units delivered strong financial results, including revenue and EBITDA growth of over 30% in both of our Janitorial USA and Technical Service businesses. On a consolidated basis, GDI finished the year with $1.3 billion in revenue and $77.5 million of EBITDA, and delivered an organic growth rate of 7.1%. The strong performance came at a time when we were facing economic headwinds in Western Canada from the oil sector's challenges, a late start to spring that impacted our mechanical service business, higher supply costs during the proactive renegotiation of the NAFTA agreement and tight labor market in many regions across North America. The fact that GDI was able to deliver strong financial results in this environment is a testament to our strong relationship with clients, our resilient business model, an intense focus on efficiency and profitability and ultimately, to the incredibly hard work put in each and every day by our employees and managers that makes up the GDI team. In 2019, we had considerable success in executing on our growth through acquisition strategy. We completed 7 acquisitions during the year. 2 in the Northeastern United States, which serve to expand our Janitorial USA segment into new geographies; 4 in Canada within our GDI and our Ainsworth business; and 1 in our Janitorial Canada segment, which strengthened our platform in Northern Ontario. All these acquisitions were strategic and served to either expand our business geography or reinforce our market leadership in regions where we were already present. Our acquisition of ESC Automation in January this year was a major accomplishment that positions GDI for the future. Based in Vancouver, ESC is one of the largest and most highly regarded building system integrator in North America with an impressive project portfolio, including installation and maintenance of building automation systems, security systems, HVAC system as well as newer technologies, including real-time locating systems, building analytics and energy management systems. So ESC is also one of the most advanced provider of smart building technologies in North America. ESC considerably strengthened Ainsworth building automation system business across Canada and positioned it as a master system integrator with the capability to install and service multiple type of building systems, the next-generation building technologies. And those times, you may appreciate how essential it would be for us to manage and monitor movements in buildings and traffic and real estate. Together, ESC and Ainsworth are now the premier building system and multi-trade facility provider in Canada and are one of the leading providers of smart building technologies in North America, a true one-stop shop for both today and tomorrow's building. In addition to what we have accomplished with ESC, we are substantially advanced in our expansion strategy, targeting more or less secondary -- any secondary market across Canada with the next-generation of our modern franchise business model. We believe this initiative has the potential to significantly grow our Canadian Janitorial business well in the future. We still have a lot of work ahead of us to implement and grow this new regional franchise model. However, we are excited at the opportunity that it represents for GDI, our clients, employees and shareholders. Although we feel there is a significant growth opportunity for GDI, we are simultaneously working on other opportunities to grow and scale strategically across all of our business units. The facility service industry is evolving, so as it does -- so in calling for a higher complex, connected and integrated business model. This is why we had aligned GDI businesses around the following 5 pillars: cost reduction and improved competitiveness, product-portfolio optimization, sales effectiveness, service delivery model and finally, growth through acquisition. GDI's 5 pillars are designed to ensure the long-term sustainability of our business and they are supported by a culture focused on the respect and support of our primary resource, our people. We continue to focus on our 3-year strategic business plan, our road map for transforming and developing the company, which is focused on the following objectives: providing an industry-leading sustainable commercial cleaning service offering in all major markets in Canada through innovation, service excellence and smart cost management; exploiting our cross-selling strategy to promote our technical service business across our client base; establishing a regional franchise network of cleaning and product distribution center in small and mid-market size across Canada; expanding Ainsworth, our multi-trade service platform across the Canadian market; and finally, but not the least, focusing on our acquisition strategy in the U.S. market to expand our presence and become the leading player in the United States. This strategic plan has been designed to ensure that GDI maintained its position as an industry-leading facility service provider with a focus on sustainable growth and profitability, serving to enhance its value proposition to shareholders, customers and employees. I would like to take this opportunity to thank our clients for their business and insight, and our shareholders for their continued support. I would also like to give a special thanks to all our employees across GDI group of companies. Not only are our clients relying on you to keep their facilities safe, but our society for -- looking to you as an essential component of ensuring public health. You have been at the forefront lines of the crisis, and I am incredibly proud of the courage that you show and the work that you do. Finally, I would like to address all the people to -- all the people in the health care community, doctors, nurses, researchers, orderlies, support staff. You are the front line and the first-line of defense in the crisis, and you have been working courageously and selflessly throughout this pandemic. On behalf of the entire team at GDI, we greatly appreciate your efforts, and we value the exceptional work that you do. Thanks to all for participating to GDI first ever Annual Meeting [Foreign Language]. I hope that you stay healthy and keep safe in the COVID environment we are living in, and I look forward to the times where our life begin to get normal again. Thank you.

Thank you, all. As mentioned at the beginning of the meeting, we have now reached the open period for questions. At this point, we would be happy to answer any questions of registered shareholders, duly appointed proxyholders and guests may have. We will answer questions until the end of the meeting being 10 a.m. I ask that all persons who would like to take the floor clearly identify themselves by indicating their name, the entity they represent, if any, and confirm whether they are a registered shareholder, a duly appointed proxy holder or a guest. As mentioned at the beginning of the meeting, questions from registered shareholders and duly appointed proxyholders will be answered first, and questions from guests will be answered if time allows. We will start with questions from registered shareholders and duly appointed proxyholders. We would like to remind shareholders that questions may be asked in either English or French.

Thank you [Operator Instructions] [Foreign Language]

Thank you, operator. This is Dave Samuel, are there any questions in the queue?

I do not see any questions at this time. [Operator Instructions] [Foreign Language] There are still no questions at this time.

Okay. If there are no further questions, understandable given the circumstances, we will terminate the meeting. The formal items of the business, as set out in the notice of the meeting, have now been dealt with. As there is no further business to come before the meeting, I declare the meeting concluded. On behalf of management, our Board of Directors and everyone at GDI, I would like to take this opportunity to thank everyone for being here today. I would also like to thank all of our shareholders for their commitment and continued support. Most of all, this year, I would like to thank our employees. The past few weeks have been challenging for everyone. It is in navigating troubling times that you really see the fabric and solidity of a company. And I can say that we are solid. Our employees are resilient. They're dedicated. They show up for work with the same will as before. It's incredible. And for that, I want to thank them. We are lucky to have each and everyone here. We look forward to seeing you again next year. Stay safe, everyone. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. [Foreign Language]