GDI Integrated Facility Services Inc
TSX:GDI
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
31
39.85
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
GDI Integrated Facility Services Inc
You don't have any saved screeners yet
Ladies and gentlemen, thank you for standing by, and welcome to the GDI Integrated Facility Services Second Quarter ended June 30, 2018 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Thursday, August 9, 2018. I would now like to turn the conference over to Mr. Stéphane Lavigne. Please go ahead.
Thank you, operator. Good morning, everyone. Welcome to GDI's conference call to discuss our results for the second quarter of fiscal 2018. My name is Stéphane Lavigne. I'm GDI's Senior Vice President and Chief Financial Officer. I'm here with Claude Bigras, President and CEO of GDI; and David Hinchey, Senior Vice President, Strategic 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 SEDAR on August 8, 2018. I would like to turn the call to Claude, who will provide further remarks for the -- our second quarter.
Thank you very much, Stéphane. Good morning, and thank you all for taking your time to participate in our earning call. So I'm pleased to report that GDI delivered strong results in the second quarter. On a consolidated basis, we reported revenue of $267 million and an adjusted EBITDA of $13.5 million, representing a margin of 5.1% of our revenue. Adjusted EBITDA grew by 14.1% over the same period last year, and margin increased both quarter-over-quarter and sequentially. All our business segments delivered increase in revenue, and our general -- Janitorial USA, Technical Services and Complementary Service segment realized solid growth in adjusted EBITDA. Our Canadian Janitorial segment performed relatively well in the quarter, recording $132 million in revenue, driven by an organic growth of 6.4% over the same period last year. Adjusted EBITDA of $8.3 million was in line with last year, while the margin of 6.3% was slightly down, as the business was adjusting to the higher wage environment in certain parts of Canada. While I feel we can do better, I am pleased with the performance of our Canadian Janitorial business this quarter, given the market challenges in Canada. Our Technical Service segment delivered solid results in Q2. As you may recall, Ainsworth first quarter result were not to our expectation, as the late start to [ strain costs ] from HVAC system maintenance and startup work [ to be ] delayed. In addition to executing on some of this work in Q2, Ainsworth won a number of significant new contracts in the quarter. The business recorded revenue of $69.5 million, with an adjusted EBITDA of $3.2 million or a margin of 4.6%, and began Q3 with a strong backlog of work. We are still working on the business growth and optimization to get the Technical segment to our 6% EBITDA target. Our Janitorial USA business also had a solid quarter, recording $53.2 million in revenue and adjusted EBITDA of $3.7 million. Adjusted EBITDA margin increased to 7% in Q2 compared to 6.5% in the prior year. The U.S. management team is working actively on growing the business and improving margins. Our Complementary Services segment, composed of our Superior Solutions, manufacturing and distribution business and our [ systematic ] disaster restoration business, performed well in Q2, recording revenue and adjusted EBITDA of $18.1 million and $1.1 million, respectively, representing 50% growth in revenue and 90% growth in adjusted EBITDA. The businesses also grew EBITDA margin by 130 basis points from 5% in Q2 2017 to 6.3% this year. In regards to GDI strategic growth initiatives, we successfully concluded 3 small strategic acquisitions during the second quarter in our Janitorial USA, Technical Service and manufacturing and distribution businesses. In total, during 2018, we concluded 4 acquisitions that, together, on a run rate basis, contributed approximately $40 million in annual revenue. Each of these acquisitions were strategic in both talent and customers and structure for GDI, with each one expanding our geography footprint, while also adding into the strength and depth in our management and operational team, like I said. In conclusion, GDI delivered what I feel a strong result in Q2. Our business continue to generate healthy level of cash flow. Our balance sheet is strong. The momentum in our business remained positive, and our M&A strategy is [ concluded ]. And we are well positioned to continue to execute on our business plan and deliver long-term value to our shareholders. That concludes my remarks. And I will now ask the operator to open up the lines for analysts for questions.
[Operator Instructions] Our first question comes from the line of Martin Landry with GMP Securities.
My first question is, Claude, I wanted -- I'd like to -- you to give us a little bit more details on your Complementary Services segment. You've had very strong growth, up 50%, and your organic growth is up 33%. So wondering if you can give us a little bit more detail on what's the -- what's driving the organic growth there.
Well, actually, it's our aggressive approach to the retail sector market. We had some good customer wins, and we're also maturing some major contracts. So it's -- there's no great news to deliver on that front. It's just that we try to manage to the best of our ability and acquiring good customers. It's the day-to-day business.
Great. Well, I mean, 33% is a good news for organic growth. What's the timing of the start of the contract? Was it -- did it start this quarter or in previous quarters?
It started -- well, actually, like I said, it's several contracts. Maybe there's one a little bit bigger than the others, but I would say it started 2 quarters ago more or less. But it went up and it matured. But again, it's not a material [ per se ] contract like we had the last 2 years, but there are good wins there.
Okay. And is there any seasonality to that revenue profile?
No, not much. There was probably some one-time work that is combined, but nothing significant to talk about. Most of the contracts are all-inclusive, let's say. And there are some seasonal as well [ as it's ] the spring. So for sure, there is some impact there.
So there is some seasonality? So does that mean that you're -- that what you're saying is...
Retailers and everything, they would tend to spend a little bit more in the spring, if you follow what I'm saying. I don't have the exact figures. But like I said, it's not a material differential. But yes, usually, in this quarter, we have a little bit more one-time work [ in Modern. ]
Okay. And on the Janitorial Canada segment, your margin declined 60 bps. Your EBITDA margin adjusted. You talked in your opening remarks about a potential impact on minimum wage, but I'm curious to see -- to understand why we didn't see a margin decline in Q1, and we're seeing one in Q2, when the minimum wage increase occurred in Ontario on Jan 1.? Can you help me out understand a little bit?
No. Well, listen. You know what? Let me put it this way. Canada doesn't make our life easy for the last couple of years. Example, in Q2, we had to record the new sick leave that was ruled in Ontario, for example. It just adds up an extra 4 days of paid days for caring for elders, and if you're a victim of anything. Anyway, to make a long story short, Martin, yes, we are dealing with several increases across Canada and in the West. We are dealing also with new increases in Canada. And so it's a mishmash of everything. And again, spring is also -- as I was telling you that retailers spend a little bit more in the spring for services, and our Canadian Janitorial is more or less an all-inclusive. So spring also calls for spring work. So it may have a little bit of impact there, but nothing significant. But again, Canada is a challenging market for the past 3 years, with all those things, the West and the wages impact and everything. So we're working very hard at it.
So Claude, for the remainder of the year, in Janitorial Canada, should we expect margin to be stable year-over-year or declining a little bit?
I think -- you know what? I don't want to make a forward-looking statement, but I don't expect any significant changes as we manage the business very closely on a day-to-day basis.
Okay. And last one for me, and maybe for Stéphane. Just wondering if you can explain a little bit on the amortization and depreciation. It looks like it's declined $2 million sequentially from Q1. And given your growth and your acquisitions, I would have expected depreciation to maybe move up slightly on a sequential basis. So is there anything unusual on that line?
Yes, there was an adjustment. There was a mistake, a small mistake in the Q1. So the year-to-date, [ nothing ] is good. So it was overstated in Q1, which we corrected in Q2. So that decline is not necessarily like the going forward. So if you take your -- let's say, your first 6 months, you divide it by 2, like will give you a better like quarterly amount on depreciation.
Our next question comes from the line of Frederic Tremblay with Desjardins Capital Markets.
First question on the -- in the MD&A, you state that the legislation change explained most of the 6.4% organic growth in Janitorial Canada. I assume you're referring to the minimum wage increase there?
Yes. Yes, exactly.
Okay. And excluding the minimum wage, what would have been organic growth in Canada?
I don't have this exact figure, but I would probably -- let's say, without being not too far that the organic growth would have been probably a couple of percent.
Okay. And just on the Technical Services, there was a higher volume of business activity in the quarter. Can you just maybe provide a bit more color? Was it new long-term contracts? Or was it some sort of one-time work? What's the composition of that?
Yes. Well, it's a mix. Ainsworth is composed of break fix and projects. And so it's probably the 2 segments in which we operate. And I would say that break fix was a little bit slower in Q1. It was very active in Q2. And I'm happy to report, like I said in my earlier statement, is we have a very strong project backlog, and we execute well on project. So both segments are really very active.
Our next question comes from the line of Leon Aghazarian with GDI (sic) [ National Bank Financial ].
I don't work at GDI, but yes, that's fine.
You did not know? You're starting Monday, Leon.
That's good to know. It's better than doing the earnings season. Yes. Just to follow up on Martin's question earlier on the Canadian margins. I realized you're not going to give any forward-looking statements. And kind of a follow-up to the question would be, if we're looking at the second half the year, should we expect a similar type of margin contraction that we saw from Q2? Or are you saying that you're seeing a similar year-over-year margin in Canada that's kind of just the direction...
Yes, [ it could be ] a similar year-over-year, our [ new ] approach to it was necessary to Q2 [ and say ], yes, we don't expect a major, major shift in margin globally for the year from last year.
Okay. Yes, because Q3 '17 was -- I mean, now that's been declassified or reclassified, I mean, the Janitorial Canada was about 7.8% in Q3. So I'm just trying to see if that's actually a pretty good benchmark to look forward to.
Well, listen, again, don't get me into forward-looking statements.
Yes. No, okay. Fair enough. If I could just switch over just on the acquisition front, I mean, yes, I realized there was 3 smaller types of acquisitions, and it's the fourth one this year. What are you seeing in terms of -- I realize M&A pipeline is also looking good for you, guys, but what are some of the things that you are looking for when you're looking at these types of companies? Are you seeing more opportunities come up? Are you seeing maybe the multiples come down? Is that why you're getting more aggressive on that? Or what's kind of the reason to be pulling the trigger more often now?
Well, listen, let me try to give an intelligent answer here, is -- first of all, is we're very active in searching and finding those opportunities. So yes, it's the result of some hard work from the M&A team. Secondly is, Leon, we have an approach here where, yes, we always pursue larger acquisitions as they become -- as they're available, but we remain very focused on valuation, and we are very focused on the right partnership approach with the target companies we're looking at. So as we were not able to complete anything major over the last 12 months, we were very focused on working with transaction that we find very accretive and very positive for the company. What do we see is, I don't see anything very different from last year. We're looking at a lot of opportunities, but we try to find the right one for the business.
And is it fair to say that most of these opportunities would be on the Janitorial side, whether it's Canada or the U.S.?
It's a mishmash of everything. It's Canada. It's U.S. It's Technical. It's Janitorial. Even we completed one in the product manufacturing division. We have 4 business vehicles, and we tend to work with those 4 fronts in our M&A strategy.
[Operator Instructions] Our next question comes from the line of Neil Linsdell from Industrial Alliance Securities.
Claude, could you just talk about the cross-selling opportunities? Obviously, as you've expanded your service offerings with the Technical Service, that's going very well. Can you talk about your client base? Are they using the full breadth of services that you have now? How much overlap do we have? Is there much more opportunity for cross-selling the synergies?
There is a lot of opportunity for cross-selling. But mind you that our cross-selling activity within Ainsworth is more project-driven. So it's a small to midsize project. We have some wins on recurring revenue projects, but it's not our primary focus. So the cross-selling activity is very positive for Ainsworth. And yes, now we're looking forward capturing also some clients on the Janitorial Canada side as we grow. But I would say that, for now, it has been very positive on the Ainsworth side, as they meet our client, the GDI business, and they are growing with the GDI business portfolio. So that's very positive.
So is it more your Janitorial customers are now looking to add Technical Services or Technical Services adding Janitorial?
Exactly. It's more Janitorial clients using our Technical Services. Yes. It's -- what we have seen so far is primarily the most successful.
Okay. And then just thinking about your pipeline on bidding, are you seeing any changes now with customers? And I'm specifically thinking about the U.S. with all kind of changes that they're dealing with as far as them completely revising their expenses and how they're paying for things. Is the bidding environment getting different between, say, Canada and U.S.?
Well, listen, yes, the Canadian -- well, actually, you know what? I think it's -- I was not the only one, and that is the business economic has changed for the last 5 years. I think with many of industrial sectors, yes, it's a more aggressive bidding environment. It's a more challenging one, and we are adjusting to it. And we're trying to be very efficient in the market. And as we're growing bigger and bigger, we work with larger projects, bigger customers. So it makes it -- it adds up another layer in the equation. But yes, the bidding environment, I can say, is a bit more challenging than it used to be, for sure. But now it's spread out. It's not Canada. It's not U.S. or Canada. It's globally. So we are aiming to be more efficient every day. It's a focus on the day-to-day management.
Our next question comes from the line of Stephanie Price with CIBC.
Your U.S. Janitorial business saw solid momentum in the quarter. I was wondering if you could kind of talk about that business, what you're seeing and how we should think about growth from here.
Well, the -- okay. So the U.S. business, you know what? I think it's a good horse runner, if you allow me to say. It means that the team works very hard. We're acquiring business. We manage the business. Where we don't see opportunities, we let go business. So we have a very good business mix. We are growing the business. They are doing significant wins, and I'm sure this will reflect over the next quarters. We're very happy with it. And it's, for sure, a big work in progress and a big focus for us.
Okay. And then in terms of M&A in the U.S., do you have any color on what you're thinking about in terms of geographies or different product lines?
I would say that we are a lot more focused on transitional janitorial services for sure. And you know what? We're very active in the U.S. We have done -- 1 of our 4 acquisition was in the U.S. So we remain very focused. But again, it's to buy the right business, the right talent and the right customers and the right financials. So it's always a work in progress. So the -- I would say that is the objective, is not to make 10 transaction, it's to do 2, but good ones.
Fair enough. And then margins in the Technical Services division continue to improve this quarter. Can you talk about how you're thinking about that margin and how we should think about the time line to that 6% target that you've got?
Listen, time line is always hard to tell, but we're focusing every day on it. This is our objective. If you recall 4, 5, 6 quarters ago, we had very -- 1% to 2%, 2.5% margins. Now we are about 5.1%. As you see, we are steady as it goes. And I would say maybe we'll need -- again, I don't want to do forward-looking statements. But in the next couple of quarters going forward, I'm hoping to see a 6% coming sooner the better, let's put it this way. And then saying between that -- between what I can say, and -- but the idea is I think the takeaway is we are still very focused on bringing this business to the 6%. Because when we bring this one to the 6% and above, it will make the overall at 6%. And this is where I want us to be back. Even if we have a lot of challenges in the Canadian environment, I think by being focused, we can reach it. This is what we are aiming at.
Gentlemen, there are no further questions at this time. Please continue with your presentation or closing remarks.
Well, in closing, if I'm -- okay, there are no more questions. So just in closing is the team is working very hard to deliver. I'm very pleased with everybody's commitment towards making this business a strong, solid and a better business. We have a lot of initiatives to deliver better and more efficient services to our clients. We try to be in front of the parade. So very happy of Q2, looking forward to do well in Q3. And let's continue to work to bring value to our shareholders and to everybody in the business. Thank you very much.
Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your line. Have a great day, everyone.