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

Thank you, Mr. Leclerc. Do we have a seconder?

Yes, sir. [Foreign Language].

Thank you, Mr. [ Ouellet ]. To recap, it has been moved and seconded that the following amendment to the company's stock option plan be ratified and approved: an increase in the number of subordinated voting shares of the company reserved for issuance under the stock option plan by 1,528,877, representing 6.52% of the issued and outstanding shares, and any one director or officer of the company is hereby authorized and directed acting for, in the same and on behalf of the company, to execute or cause to be executed under the corporate seal of the company or otherwise and to deliver or cause to be delivered all such documents, agreements and instruments and to do so or caused to be done all such other acts and things as such director or officer of the corporation determines to be necessary or desirable in order to carry out the intent of this resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of any such document, agreement or instrument or the doing of any such act or thing. I would ask registered shareholders or duly appointed proxy holders who are present in person at this meeting and who want to vote on the proposed amendment to the company's stock option plan to record their vote on the resolution on a ballot, sign the ballot. Please print name on the ballot. Once you have completed your ballot, please raise your hand so the scrutineer may collect it. I would ask registered shareholders or duly appointed proxy holders attending the meeting via audio webcast and who want to vote on the proposed amendment to the company's stock option plan to click on the voting icon and select the appropriate voting direction displayed on the screen and then click submit. I now declare the online voting closed. I have received the scrutineer's report, which reads as follows...

Actually, Mr. Chair, I just received the report from scrutineer. I will dispense you from reading it, so you can just proceed with the rest of the your [indiscernible].

I adopt the report of the scrutineer and declare Dave Samuel, Claude Bigras, Suzanne Blanchet, Mike Boychuk, Robert McGuire, Anne Ristic, Richard Roy duly elected directors of the company to hold office until the successors are duly elected or appointed. I hereby confirm that registered shareholders or duly appointed proxy holders present in person at the meeting voted in favor of the appointment of KPMG LLP as 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 their remuneration. I hereby confirm the registered shareholders or duly appointed proxy holders present in person at the meeting voted in favor of the amendment to the company's stock option plan. The formal items of business 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 formal portion of the meeting concluded. I would like to invite Claude Bigras and Stéphane Lavigne to provide an overview of the company's operations and financial performance for 2023 fiscal year. A question and answer period will follow.

Thank you, Mr. Chairman. I will start with the financial review of 2023, then talking about the first quarter of 2024 that we just released last night. In 2023, GDI revenues were $2.4 billion, up from [ $2.174 ] billion, so $265 million, up last year, 12%, mostly coming from our Technical Services that grew at 18% of organic growth last year. EBITDA last year finished at $143 million compared to $156 million in the prior year, mainly coming from the reduction of the business service Canada EBITDA. 2022 was still -- we were still benefiting from the COVID impact which in '23 kind of faded away. There's a little typo in margin, it's '22 compared to '21. In the first quarter of 2024, we recorded $644 million of revenue compared to $591 million last year for a 9% growth, 3% organic and 6% of M&A growth coming from our Atalian acquisition that we concluded in November 1 of last year. Our adjusted EBITDA was affected in Q1 mainly in our technical segment that we've mentioned that we had 3 projects with some overrun costs that Claude might discuss later. So our EBITDA stood at $28 million for Q1 compared to $33 million last year and margin at 4%. On our balance sheet, we've been managing the debt carefully, so our debt stands at about 3x debt-to-EBITDA ratio. So we have enough room to execute our growth strategy. And as we mentioned since Q2 last year, like we've implemented our working cap plan reduction, which benefited in Q4 last year and slightly in Q1, and we're committed to still decrease our working capital by $30 million more for the balance of the year. So on that, I will pass the presentation to Claude Bigras.

Thank you very much, Stephane. Mr. Chairman, thank you. So as Stephane was saying, our revenue were $2.4 billion last year. We are -- our original goal is to be by run rate 2025 of $3 billion. So we are well underway. It's not done yet. We're not there, but still aiming at that. We're the largest leading facility service company in Canada and probably 1 of the top 4 in North America. So I think this is also a good achievement for GDI. We have grown our EBITDA and revenue continuously in the 20% range. That's another good achievement. We did 50-plus acquisitions in our tenure. So I think that we're starting to know a little bit what we're doing. We're not perfect. We still have a little bit of a -- little bit of rocks there and there, but globally, I think we are efficient in allocating capital and acquisition. We developed a very experienced management team over time through people joining. The beauty of growing is you are able to attract great talent. So that's one thing. And through our acquisitions, one of the main assets that we acquire, and it doesn't look always in the book, is the talent that we acquire alongside the business, because people make business. It's not the other way. So I'm very, very happy and proud of the team here. As you know, the fortunate part is COVID was very attractive for our type of business. Now we're getting back to a new normal. So that's one thing we are adjusting with. But the good news is also we are also resistant to recession. We're not totally shield, but we are recession resistant. So that helps. So the beta is not as volatile as some other business could be. We have a strong balance sheet, working on it, improving our working cap, like Stephane is saying, and because we had a great organic growth with Ainsworth. So now we are adjusting the way that we are making our business here through a better cash management approach. So a strong business balance sheet growth is still part of our endeavor and we're focusing on getting the right businesses at the right price in the right business segment that we need to grow. So it's still a commitment. I'd like to talk to you 2 minutes about the values. We work very hard to -- we have reformulated our value into a very sharp, easy to understand vision and values in the business. And to be very honest, we talked a lot about financials and results, but I think sometimes we miss a little bit on what makes businesses. It's talent, but it's also the values that those talents are carrying. And I'm the first one that to blame is, we do not promote our values enough in the marketplace among stakeholders. And this is a key element what differentiates us, what differentiates us from our competitors. We deliver the service, we deliver, we have technicians -- we have the same training, same background, but values are essential. And those values are [indiscernible], okay? Respect. We are a people business. We have to work accordingly. We work into respecting our people. To be a good company means that we have to strive for excellence all the time. So we strive for it. It is in our DNA to always do better. I'm not saying that we have to be the top, top, top company and everything. We have to adjust to the customer requirements. But overall, we strive for excellence in everything we do, even in the way we manage the company. We can deliver a good service, but we can be also a good governance company. We can be a good citizen with our people. Excellence is it's very large in the company. Innovation. You know what? Today, the world is going at 3,000 miles an hour. So innovation is part of our -- the world has changed dramatically over the last 5 years. So what we need to adapt, we need -- it's fast. If you look at the curve of innovation, I'm sure you also had this curve, it's like flat for a gazillion years, and for the last 50 years it's a spike. So innovation has to be part of -- our curiosity is important in the business. Accountability, honesty, to be a good governance company, it doesn't come natural. I mean, I'm not saying that people are [ corrupt ] when they're not public ]. I'm not saying that. But what I'm saying is governance is something that has to be worked on and formalized and followed through, and we need to train people on that because people need to work with accountable companies. And I'm very proud to say that I think that we are very good in that particular area. We're transparent. We have a great governance, thanks to the teams that make sure that we are online all the time. And the last item, we need to promote -- we work with collaboration. What we mean by collaboration is individually as a single person, there's so much we can do. But when we work all into -- in a collaborative manner, sharing information, sharing good practice, sharing customer strategies, it makes us a better company and a more efficient company. So don't be surprised that you're going to see a lot of those 5 values going. And now we have a nice little acronym. It's called [ ICARE ]. It was really you know what, it came from a very intelligent person, not me, from one of our board members. Thank you very much. So [ ICARE ] is our motto. So anyway, ESG. There's a lot of discussion around ESG. Me, what I like is it gives us a formal path to follow into becoming a better corporate citizen. Because we can say that we are good, we can say that, oh yes, we take care of this, minority are important, and the environment. It's all words. It's a good start to talk about it, but ESG gave us a formal path. So we are engaging in ESG because it gives us a scorecard [ about it ] and something for people to refer to. You see -- so that's a very good plan. We have issued our third report, hopefully, you read it or I would encourage you to read it. Now we're going a step forward this year actually, into really making mathematical and analytics baselines on ESG on where we are, where we stand. So it will give us an even more formal scorecard in order to advance and go forward. So for us, it's a very good map on becoming one of the best of the best in matter of our values: people, respect, accountability, it all goes there. GDI today, 2.4 billion revenues. I always knew it, to be very honest. It's amazing how this gang of people can achieve. You know what, I'm very proud of the team. We are in the $2 billion-plus business and growing and managing the business and getting better every day. And you know what, we -- there's rocks there and there and we work on it, we go around and we take the rock up. And we put asphalt again. That's the way to work and pave the road to success. So anyway, so we're the largest in our business, business service, in the U.S. Now we have 50,000 people in this particular division. It's great. Remember that 10 years ago, we were thinking to go in the U.S. So we have some of our U.S. business partner here, great achievement over the last 10 years. Technical, 9 years ago, again, we were thinking about technical. So now you know what, it's almost half of the business. So I think that it's a great achievement. It makes us a global -- and I'm going to talk about it later. You'll see why those 2 components together are very strong into the next -- I'd say the next trend in the business. So anyway, so now with the map, you see this is our footprint in the businesses. As you see now in the Northeast, we're very, very present in the Northeast. And we have some business relationship in the Southwest. We have an office in Seattle, one in Portland. We just made an acquisition, now we are in Minnesota. So my point is, the idea is not to put only dots on the map. It is, as we grow -- and for people familiar with organic growth, to organic growth, 6% net of a $2.5 billion or $3 billion, we cannot sell the grocery stores one by one. So my point is this footprint enables us to attack and work with large multinational customer, very, very large customers that like the way that we work our values, they love that we have a strong governance because we're a public company. They love our footprint. They love that we self-perform. So I think we have a lot to offer to those customers. So this is why the footprint is important. So I know I don't want to keep you until 12:30, so I'm going to go fast. So anyway, so the opportunity, again, is in the U.S. These are the offices that we have in the U.S., real staffed offices. You see market we serve and staffed offices are not always the same. So as you see, our offices are there. We are adding 1 up since last week -- this thing is not up to date, what is that? So I mean another dot, another office to serve in the Northeast. So my point is the opportunity is there with Ainsworth. As you see, you have the offices there. You can put -- you know what, a copycat around these has to be to have our staffed office. So except that we have maybe a couple of more in GDI. But to make a long story short, we're getting very strong in the Northeast, going south. So our motto is "1 provider, 1 solution" to service you and all your facility service needs. So I will flip to the other page. Okay. So why is it important is if you understand today, the today's business is moving into what we call integrated facilities management. This is the new trend we see for the last 30 years. A lot of major governmental, institutional, industrial clients that have footprints around the world are moving towards this trend. So it -- global FM consists mainly of 2 parts, 1 which we call real estate services, as you see on your left-hand side, it's office services, project management, real estate brokerage, all those services provided by brokers if you allow me to say. You see this is one part of the business. The other one is operational maintenance. And this is where we come along. The other half of the business, we are specialists in doing this part. So we do, you know what, we do management, we do soft services and hard services. And on the next page, you'll see what are soft and hard services. You see in the soft services, it includes everything related to servicing the building and its occupant: help desk concierge service, event management, moving -- some mailroom services, on-demand janitorial services, window, pest control, waste, security services. They're all part of what we call soft services. In this area, we do most of them either internally as a self-staffed provider or to with some other business partners. On the other side, it's all the hard services. All the hard services, again, we are a self-performer in almost all of this and it includes building operations, building maintenance, energy and environmental services. You're all aware that climate change are creating a whole new era into technical services. Now we become -- now our duty as a technical service company is to provide our customers with energy management, decarbonation solutions. Customers are expecting that. So we're developing our expertise to do acquisitions and talent acquisition. So -- and by developing these energy solutions, it will provide us also work for all the internal working parts of that work. So this, we have a very big focus on energy, and other specialty, small -- we also, for example, in Canada, we're the fourth largest building automation specialists in Canada. There's 3 others which are more international, that I don't remember the name, unfortunately. But we're the fourth largest in Canada, and we're growing. And this is the building intelligence, so we need this expertise to become a very strong player in energy and decarbonation. It's the brain. So we're very good in assembling the brain and programming the brain. So that's a very good -- two very, very important component of the mission of Ainsworth going forward. So anyway, in 2023, we did 2 acquisitions. We are adjusting our business model with COVID behind us. I can resume this is before COVID, probably 95% of our monthly invoices were automatic, and 5% we had to adjust something. Now it's the other way. So nothing is standard anymore. So it requires a lot of flexibility, a lot of agility to service our customers today, because the world is not what it was. You all read the papers. You know about occupancy. You know what? It's now -- Monday is different than Tuesday, it's different than Thursday. And Friday, I see a lot of teleworking on Friday going up more -- I'm [indiscernible]. Yes, it's funny now, [ the hours ] are busy teleworking. Anyway, so we had a strong growth in our technical services. A lot of things to learn as well on that. We grow tremendously. Now we are adjusting the business properly because when we grow, it's normal that there are a few things that can happen. We're fixing it and working around it. I'm very positive, and I'm very excited with what we have accomplished. So we also have implemented our HRIS platform last year. Now we're starting to have -- so these are nice accomplishments internally. It doesn't show up a lot for you from the outside, but from the inside, it's very important. We're starting -- we sweat a lot implementing HRIS. If you ask people, it was a lot of work. We're happy it's done. There's still a little bit to go, but now we're starting to bear the fruit on it. So the 2 acquisitions we did React, you know what, a very nice maintenance company in New York. The beauty of React is our organization in New York has specialized in high-rise systems, REACT does all the low-rise systems. So now we are able to accomplish and work on both sides, which is very good in our strategy. In November, we have acquired, as you know, we have acquired Atalian, which is -- this was the U.S. division of a European player. And you know what? It's $100 million revenue. We are -- we have totally integrated the business as we speak in the last 3, 4, 5 months, and it's delivering as expected. So I'm very happy around that. So again, $100 million, they have operation in Columbus, Boston, St. Louis. So Columbus and St. Louis are 2 new markets. Boston, it strengthened our Boston business. It's highly complementary to the business. And like I said, we have -- it's a turnaround, and we have integrated their operation with ours, so, so far, so good. So now if we're moving. As you see here, this is showing -- this is giving you a good idea of COVID. In 2019, we were in 6%, 6.5%, 7%. And you know what -- and this is where we are -- and COVID brought us to new heights, but I lived [indiscernible], I lived [indiscernible], whatever. How do you call that? SARS. So you know what, as soon as governments let go the restrictions, people revert back very quickly to their habits. But this particular extent, because it has dramatically changed the way we do business, we expect for the going forward of the foreseeable future to work within 100 to 200 bps over our original margin. I think there is a little bit better over -- on the continuing basis, which is a good news overall. Ainsworth, as you saw, we delivered 18% growth last year. And I'm not trying to say it because it's normal. We're all human and it's never too late to do things is the growth was there, and we seized it. But I think we missed an opportunity in managing our cash. Ask for more money upfront, increase our margins, there was a lot of demand. And since we are very, very focused on clients, maybe there's an opportunity that we should have addressed better on that front. Needed, we needed to invest money in lower working cap with this growth, for sure. And it leads us to identify ways to better manage our cash, which we are implementing and working in 2024. So example, last quarter, Q4, we had the decrease in our working cap of about $30 million. So -- and we're still continuing in 2024, we want to achieve another $30 million. So it's a work in progress. You know what, I will go faster because I know time is flying. We are working to improving our overall profitability. This is our mission. 2024 is a year of really putting back things on a solid base, aligning what the future growth. It doesn't mean that we're not opportunistic, that we won't do -- no, no. We always on the lookout for opportunities. But this year, we [ have to ] invest into making sure the business is in top, top condition to continue to grow. This is our big thing. HRIS, if you allow me, I'm going to pass -- you know what, 80% of our employees are now enrolled in HRIS. Rather -- we'd have rather done it at 35,000 than at 350,000. So I think it's done, at least we're going to grow with it. So in our strategy, I think I covered it a little bit. You see our usual strategy is accretive acquisition and efficient integration and great commercial service quality. This is more or less who we are. And again, our values, transparencies, better customer overall experience and employees' experience. So it goes into our respect, our innovations. So this is what we do mainly. We are -- like usual, we identify markets. We are very focused and very rigorous in our acquisition approach. I would say something very, very simple is: you don't make money when you sell, you make money when you buy businesses. Meaning that you have to buy businesses and partner with businesses at the right price. If you're going crazy and spent -- it's very hard to create value afterwards. So anyway, so we support those acquired businesses. We work with them. We have them to develop. This is what we do in life. It's our day job. So tactical for 2023 to '26 and take [ patience ] integrating GDI and Ainsworth together at one point, system integrations by 2025. We want to continue to integrate our systems to have 1 global platform working into that. And growth. Conservative acquisitions approach, [ reality ] of capital and interest rate cost makes us very prudent in what we do. We continue to develop in the U.S. We are aligning the mechanical group, and we're developing our energy efficiency and carbon-neutral building strategy, so it's going to be one thing going forward, and continue to implement our integrated facility service solutions, we feel, is the future. So energy integrated solution, efficient, continuing sales growth, I think we have a lot of work ahead of ourselves. But if we do it well, it would be very rewarding. So -- and again, for efficiency, reduce the SG&A, our GTA business, you know what, we're still working on it. We changed leadership there to really address -- there's potential, a lot of potential I feel that we're not seizing in GTA, and I want us to have a more driven growth team in GTA. So we are reshaping it, we acquired talent and new leadership. We assigned new leadership to support that mission. So I think it's very important. Talent development, again, we want to have the best people. We need to train those people. If we don't train people, we're just talking. Software development, talking about innovations. And health and safety, we -- the member of the Board saw that the effort in health and safety are paying off. We have decreased in events. We have decreased in our cost, which is good also for the profitability. And we have our [ PRP ]. People which are hurt are not very happy people. So I think it's very important. Value creation is what we are focusing on again. We have sold our Superior business in 2024 last month. So it provides us with what we are partnering with a great company going forward. And also, it does free up some very, very, I would say, valued real estate that will help us work on our cash management over the next couple of quarters. And yes, I'm going to start -- we work on 2024, and after that I'm going to take the [ parent stick ] with my team, and we're going to work and promote the business in the marketplace to share how we have done great in developing our strategy. I will spend more time there. So more or less, this is what we are focusing to do. And there's a lot of -- some of our team in the room, guys, your job. So let's work together on it. Thank you very much for listening.

Thank you, Claude. Thank you. We have now reached the question-and-answer period. At this point, we'd be happy to answer any questions from existing shareholders and duly appointed proxy holders. We will answer questions until the end of the meeting. [Operator Instructions]. We will start with questions from registered shareholders and duly appointed proxy holders present in person and then address questions received through the audio webcast. We would like to remind shareholders that the questions may be asked in either French or English. Any questions pertinent to the meeting that cannot be answered during the question-and-answer period due to time constraints will be answered and posted on the company's website as soon as it is practical. So any questions?

[Foreign Language].

[Foreign Language]. [Foreign Language] For my English partners, we're buying in Russia, we're buying in Asia. So the Board would be very busy over the next couple of weeks. Thank you.

Other questions? Is there anything online?

No, we have no question online confirmed.

Thank you. Thank you all for attending again. And on behalf of the Board of Directors, I would like to thank you for attending. [indiscernible] on the -- our annual and special meeting. I'd also like to thank the shareholders for all their commitment and continued support. Most of all, I would like to thank our employees. We are lucky to have each and every one of you. We look forward to seeing you again next year. Thanks very much.

Thank you.