GDI Integrated Facility Services Inc

TSX:GDI

Earnings Call Transcript 2020-Q2

[Operator]

Good morning, ladies and gentlemen, and welcome to the GDI Integrated Facility Services Second Quarter 2020 Results Conference Call. [Operator Instructions] Also note that the call is being recorded on Friday, August 7, 2020. And I would like to turn the conference over to Mr. Stéphane Lavigne. Please go ahead.

[Stéphane Lavigne, Senior VP & CFO]

Thank you, operator. Good morning, and welcome to GDI's conference call to discuss our results for the second quarter of 2020. My name is Stéphane Lavigne, I'm Senior Vice President and Chief Financial Officer of GDI. 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 provisions that is fully described at the beginning in the MD&A filed yesterday on SEDAR. I will begin the call with an overview of GDI's financial results for the quarter, and then we'll invite Claude to provide his comments on the business. In the second quarter, GDI recorded revenue of $326.7 million, an increase of $14 million or 4.4% over the second quarter of last year, with revenue growth negatively impacted due to the closure of certain client facilities as a result of the COVID-19 pandemic shutdown. We recorded an adjusted EBITDA of $22.5 million in the quarter, an increase of $4 million over the second quarter of last year. Adjusted EBITDA was positively impacted by additional products and services delivered to existing and new clients, whose facilities remain open during the pandemic. On a year-to-date basis, revenue increased by $63.5 million or 10.3%, reaching $681.6 million compared to $618.1 million last year. The organic decline was 3% due to the effect of the COVID-19, which was offset by revenue growth coming primarily from acquisitions. Adjusted EBITDA in the first half amounted to $42.6 million, an increase of $6.1 million or 16.6% over the corresponding period of 2019. Now moving to our business segment. Janitorial Canada recorded revenue of $119 million in Q2, a decrease of $13.7 million or negative 10.3% compared to the second quarter of 2019. The segment reported adjusted EBITDA of $15.2 million compared to $8 million in the second quarter of last year, representing a margin of 12.7% compared to 6% last year. Our Janitorial USA business segment recorded revenue of $80.4 million, which was in line with revenue of $80.1 million in the second quarter of 2019. Adjusted EBITDA was $6.9 million or 8.6% of revenue compared to $6.8 million or 8.5% of revenue in the second quarter of 2019. The COVID pandemic had a slightly negative impact on revenue and slightly positive impact on adjusted EBITDA in the quarter. Our Complementary Service had a very strong quarter, reporting revenue of $25.2 million in Q2, an increase of $5.7 million or 29.2% compared to the second quarter of last year. Adjusted EBITDA was $4.3 million compared to $1.6 million in the second quarter of 2019, an increase of 173%. Finally, our Technical Service segment was more impacted by COVID, recording revenue of $107.4 million, an increase of $20.1 million or 23% over the second quarter of last year, with revenue growth all coming from acquisitions. Revenue decline on an organic basis was 22.6% as the construction sector, both in Québec and Ontario, was shut down, and many commercial clients were either nonoperational or operating at significantly reduced activity levels. Adjusted EBITDA was $84,000, a decrease of $4.7 million compared to last year. Now I would like to turn the call to Claude, who will provide further comments on GDI's performance during the quarter.

[Claude Bigras, President, CEO & Non]

Thank you, Stéphane. Good morning, and thank you for taking the time to participate in our earning call. At the beginning of the second quarter, we were faced with a high degree of uncertainty as the COVID pandemic began impacting business and society across North America and the whole world. We took proactive steps early and implemented a number of actions to manage costs, mitigate business disruption, protect our employees and ensure we would be able to provide our clients with the essential services they needed to keep their facilities safe. COVID impacted different regions and end markets to varying degrees, which we are seeing in our second quarter results. Some part of our business were impacted by building closures or government-mandated construction shutdowns, while other parts of our business were working in excess capacity to help our client, teams are building open, while providing a safe environment for occupancy. I feel that our management team did a great job to ensure that GDI emerge from the pandemic in a strong financial and competitive position. We feel that the second quarter represented the peak of the crisis. And based on the knowledge gain in advance made going forward, government and industries are better prepared as we emerge from the pandemic. And while Q2 was the worst of the crisis, in our opinion, we feel that we are entering a new period of lack of visibility. We are now seeing COVID cases hitting second run numbers in the U.S. in certain states and an increase in certain of part of Canada. We are facing some uncertainty over the timing and pace of facility being reoccupied and what that means for non-term occupancy rate. We're also unsure what the midterm economic impact of COVID will be and how it will affect the real estate sector. Personally, I think that no one can really predict the future in the real estate industry, but somehow we know that the industry will prevail. We remain very cautious for the remainder of this year. We expect certain parts of our business to recover as facility has started to reopen, but expect the moderation in other parts of our business as the need for additional and specialized services began to slowly decline. That being said, we work very hard during the pandemic to differentiate GDI in the marketplace and feel that we are well positioned as a key adviser to our clients as the essential services rules are being lift and occupancy rates continue to rise. Our Canadian Janitorial business performed well in the second quarter. It faced revenue pressure in certain end markets like education, shopping center and hospitality where facilities were effectively shut down in many regions, while, at the same time, other market like health care, industrial required a significant amount of enhanced services and specialty services to ensure their buildings remain open and safe. Additionally, our Modern franchise business performed well in the quarter as a number of its clients are essential retailers and required a significant amount of additional services. And Modern franchisees were able to secure a large number of additional personnel in the middle of the health crisis, I might add, to support those client needs. I'm very proud of our Canadian Janitorial business as a whole. The entire team stepped up to meet the COVID crisis as one, working at levels overcapacity, to help our clients keep their facilities safe and virus-free. Our Janitorial USA business also performed well in the second quarter, delivering both revenues and EBITDA that was in line with the same period last year. And the business had a different revenue mix than our Canadian Janitorial business, with a high proportion of clients in the industrial and educational sector as a percentage of total revenue. However, it was -- the business was able to keep revenues and EBITDA in line with last year despite the challenge imposed by the COVID pandemic. Our Complementary Service business, which now consists of our product manufacturing and distribution business, had an exceptional second quarter. This business began working at excess capacity as COVID began to spread, and the supply chain for cleaning and disinfecting product tightened. GDI clients and third-party clients relied on our Superior Solutions business to source products like glove, mask, manufactured chemicals, like disinfectant and hand lotions. Superior delivered almost 35% organic growth in the second quarter, and more importantly, they were able to provide our clients with critical products in their time of need. Our Technical Service segment was GDI business that was the most impacted by COVID. Government initiated construction and industry shutdowns in both Québec and Ontario, 2 of the large geographies for this business. It had a material impact on performance. While many of our traditional commercial clients were closed and delayed projects into future quarters, and building with 0 occupancy led to lower-than-normal level of service costs. The backlog at Ainsworth, though, currently stand at near-record highs. We have been experiencing a strong rebound in services and service connectivities, and we expect this business to return to a sustainable activity level as the different regional economies progressively reopens. Ainsworth business remains strong. The integration of the ESC acquisition is progressing as planned, and we fully expect our Technical Service business to be a strong performer for GDI well into the future. I feel that GDI performed extremely well in the second quarter. After having begun the quarter in the crisis mode management, we emerged from the worst [ pandemic ] not only in a sound financial position but in a stronger competitive position. While we lack some visibility ahead of us in Q3 and Q4 of this year, our balance sheet remained healthy. Our subsidiaries are the -- that were the most impacted by COVID are getting to -- back to normal activities. So I would like to finish by thanking each and every one of our dedicated employees who works tirelessly in the front line of the pandemic. Our clients are depending on us to keep them safe, and all of you have risen to the occasion. I'm extremely proud to see how our entire team has been stepping up to the challenge. That concludes my remarks, and I will now ask the operator to open the lines for analysts for questions.

[Operator]

[Operator Instructions] And your first question will be from Paul Bilenki at TD Securities.

[Paul Bilenki, Associate]

Congratulations on a strong quarter in a challenging environment.

[Claude Bigras, President, CEO & Non]

Thank you.

[Paul Bilenki, Associate]

So I guess just to start off, on the Janitorial business, can you comment at all on how trends kind of changed as the quarter progressed, maybe April versus May versus June?

[Claude Bigras, President, CEO & Non]

Yes. Well, from, I would say, mid-March, we have experienced a tremendous amount of facility closures across each market in Canada. The U.S. was a little different, but in Canada, mainly, we had to face that. So we had to really, I would say, align the closure with our staffing and work accordingly. So this is why we took very preemptive measures on that front. But as it goes, came April and May, and starting mid-May towards the end of June, we have seen industrial clients reopening their activities, building to start reopening. And so we've seen, what, the growth in activity, and we expect this activity. And what we see now is the activity still remains at a regular pace. And we feel like the September, we'll see a big bump in the level of activity in the real estate.

[Paul Bilenki, Associate]

Okay. So I guess is the right way to think about this, that as businesses reopen, some of that recurring and contractual revenue will begin to tick back up, but some of that on-call business will maybe go away from the peak level seen in Q2. But sort of overall, the revenue will be sort of trending positively. Is that the right way to think about it?

[Claude Bigras, President, CEO & Non]

Well, listen, let me just tell you this is, first of all is what you see -- what we hear for -- from several -- a lot of people are trying to guess what the future will look like. Unfortunately, I'm not that smart. But what we see is this is, yes, there is -- for sure, the cleaning industry has -- will change as the needs are changing. You see, before, well, I would say that we're cleaning for appearance. Space will have to look clean. Now we're shifting into health cleaning, meaning that no matter what, surfaces needs to be sanitized. Space needs to be free of contaminant. So it's another approach for cleaning. So yes, we might have a little bit of less occupation, but it's going to be offset by the extra service levels. Now if there is a second wave, like a lot of people anticipating, for sure, we will have to provide a lot of specialty services in the next quarters. But if it's not the case, like you said, I think that with the new normal will be positive overall. A little bit maybe less space, more services as social distancing will be mandatory in offices is we still have the same coverage and space, but with less people, but, again, offset by people being at home. So for now, what I'm saying is that we think the impact long term will be positive. To what degree, it remains to be seen. But I do not believe that the real estate industry will shut down.

[Paul Bilenki, Associate]

Okay. That's very good color. And maybe one more for me. On the Technical Services business, we've -- there's been a lot of talk in the news about increased focus on air quality and circulation. What sort of opportunities does that present for your Technical Services business?

[Claude Bigras, President, CEO & Non]

Well, the Technical Services is what we are providing a lot of solutions for our clients in the pandemic. Example, just to name a few, if you know what our filtering capacity filters, UV systems to disinfect airflows. So there are several solutions available in the market that we are promoting with our Technical Service. Also is as the real estate industry is reopening, there's a lot of needs to recommission. You know what, I'm positive about the future because technology's evolving, building needs to evolve. Now there is a new -- again, there's a new way of seeing the world. And mechanically -- or, I would say, the whole technical systems and buildings needs to be adjusted consequently.

[Operator]

Next question will be from Maggie MacDougall at Stifel.

[Maggie Anne MacDougall, Head of Research]

So very impressive what you guys were able to do this quarter because I know that it was a really strange time for everybody. Question on the Technical Services business. It sounds like there was quite a bit of deployment of activity there as buildings were basically closed. You're seeing that return. Would we expect that, even with low occupancy, that sort of recurring maintenance and bug fix work will, I guess, come back to normal levels?

[Claude Bigras, President, CEO & Non]

Well, listen, you know what, you said it is -- allow me to say this like this. When the facility is opened, they need us. When they said the facility is closed, there's nothing we can do. So construction had to live with a total shutdown. So for almost 1.5 months where people were furloughed because we could not work. But as we start working back now, we are well into the third quarter. I don't want to do guidance. What I can tell you is that we see the market getting back on its feet, and we see our people are working, our clients require our services, and facilities were reopening. We have a big, big surge in service call requests. So we're fairly positive on our Technical Business as the world is coming back to a certain normality.

[Maggie Anne MacDougall, Head of Research]

Have you seen any evidence that your customers are stocking excess inventory in the Complementary Services space in advance of the flu season this fall?

[Claude Bigras, President, CEO & Non]

Listen, I tell you something is a lot of products is getting used, and we have a lot of reorders. So I don't see -- you know what, we are more into double shift production to supply the demand than overstocking, and I'm sure clients are doing the same. You know what, there's a lot of needs, and this will be for a while. You know what, you know that as much as I do is we need to really, really work against the virus.

[Maggie Anne MacDougall, Head of Research]

Yes, for sure. Is there any opportunity for you to expand capacity with your manufacturing?

[Claude Bigras, President, CEO & Non]

To expand, you said? Well, listen, I can tell you something. We moved probably 2 shifts, and we increased 2 lines. Now again, capacity, you know what, there's a limit to what we can do. But yes, we are expanding revenues every month. We're growing revenue. We work with some business partners to supply the demand. We have a big, big focus on our existing client business overall at GDI, and so we are adjusting our production accordingly. And this business is growing. Like I said, this business, for us, if I remember, when we started that 5 years ago, we had to deal with some -- a lot of uncertainty from the market. But today, it happens to be extremely positive for us, both on supplying GDI with the tools that we need to service our clients, but also providing clients with protective equipment and product that they desperately need to run their business. So I'm very, very happy of this business segment.

[Maggie Anne MacDougall, Head of Research]

Okay. One final question for me. I was curious if you could explain a bit of the difference in your U.S. versus Canadian customer base because it's apparent that your U.S. experience is a bit different than what happened in Canada, and I'm assuming that has something to do with your end markets.

[Claude Bigras, President, CEO & Non]

Well, I would tell you that -- okay. So how can I say this? First of all, to answer your question, you see, the U.S. business and the markets we are, we are less into skyscraper towers, we are less in shopping centers. And in hospitality, we were more into regular industrial clients, education clients. And those clients, actually, you know what, either they remain open partially, so we offset labor with extra work. So you know what, if I wish to say it is, this is giving us a little bit of a flavor of what the kind of a new normal will be, where, even though we may have experienced a little bit less revenue, margins and service level will remain high. So yes, it's the business mix and the markets when they are different. There was no total shutdowns like we had in Eastern Canada, for example.

[Operator]

Next question will be from Scott Fromson at CIBC.

[Scott Douglas Fromson]

Just wondering, how has COVID-19 affected selling and administration expenses? And do you have any sense of how the ongoing cost structure will be affected?

[Claude Bigras, President, CEO & Non]

Well, listen, I would tell you, this is -- Q2 was a difficult quarter to really work on our NIM because lower revenue, thus, creating higher margins. You know what, we are very prudent also in managing our liabilities. This also affect our overhead. I would say this, Scott, is we are -- and the general call is we need to be extremely prudent and savvy, and we will manage our overhead going forward. I mean I better prepare for not so good and be very good than the other way. So yes, we're going to be extremely focused on our general overhead in the quarters to come because it's prudent to do so.

[Scott Douglas Fromson]

Right. That makes sense. Have any clients spoken of closing space permanently as employee staffing levels decrease and work from home increases?

[Claude Bigras, President, CEO & Non]

What we see so far -- again, what I was saying is the -- I'm not that intelligent to really forecast exactly how it will all evolve. But what I can tell you, Scott, is what we see is there is less occupancy, but the full surfaces are used. Some have impacted clients, like, I don't know, event management companies and everything, yes. As they're closed, they don't need the space. But in the office world or industrial world, what we see is they are occupying the space, maybe a 5% to 10% decrease in space over time. But social distanciation requires space. So what we see is people are really rethinking the densification in the office space. They're really rethinking that because they see that for the next couple of years, it doesn't seem to be the solution. So for us, at the end of the day, what we see is maybe less occupancy, more service, office space being used. So at the end of the day, we think it's going to be, you know what, not a dramatically positive impact, like double, but we don't see a negative impact on the office space at the time now. This excludes, for sure, a second resurgence of the pandemic. And if we shut down everything, again, you know what, we're going to have to live with it. But at this time, I cannot tell you. First of all, I don't have the competence to tell you that it would be a 12% decrease or something. This is not what we see. We see people managing their space, managing teleworking, having hybrid solutions, people coming to 3 days a week in the office. This is what we see so far, and we are managing accordingly. And don't forget, Scott, the level of cleaning required going forward is far different from the traditional cleaning requirements. So this also comes into the balance when we see the market.

[Scott Douglas Fromson]

Sure enough. I appreciate your candor. Just one question on credit losses. What are the regions and industries that are most accountable for the expected credit losses? And has that changed since Q2 -- the end of Q2? And have you seen any customers enter into creditor protection?

[Claude Bigras, President, CEO & Non]

Well, listen, for sure, there are some clients that had to protect their business, like, what I would name it as public, like Reitmans, example. But you know what, so far, our collection level has been great. The people are paying their bills. Like I said, we have a prudent approach in our management. So I think that we're sufficiently reserved for any negative credit impact that we may have. But we are -- I can tell you something. We have a special tag team involved 100% of their time to track our receivables and our credit -- the credit of our clients. And so far, we have been managing it. I'm very happy of what the team has done under Stéphane's leadership. But again, who knows? But I can tell you this is we are securely provisioned to address bumps in that direction.

[Scott Douglas Fromson]

Great. Good job in tough times.

[Claude Bigras, President, CEO & Non]

Thank you, sir.

[Operator]

Next question will be from Jeff Fenwick at Cormark Securities.

[Jeffrey Michael Fenwick, MD & Head of Institutional Equity Research]

I just wanted to circle back on the Complementary Services unit for a moment. Other than capacity constraints, are you seeing any challenges with sourcing inputs or product that might limit your growth for this period?

[Claude Bigras, President, CEO & Non]

Well, you know what, supply was the key driver of the last 4 months. What we see is what the market has -- the market has evolved. If you were asking me this question in May, I was telling you, even me, I was making 4 calls to get products to give you an example. I was trying to get as much products all over the world because there was a big, big challenge there. Fortunately, for us, you know what, we had a very strong supply chain, so we were able to secure quantities of goods to supply. Secondly is, I can tell you that, today, the market has some kind of evolved. You know what, so I see a little bit less pressure in the market environment for the supplies of good. I think now we are reaching an equilibrium over the next probably 30 to 60 days. We are aiming towards that. So I remain cautiously optimistic that supply will be there to provide the goods to manufacture.

[Jeffrey Michael Fenwick, MD & Head of Institutional Equity Research]

Okay. That's helpful. And I wanted to talk about the wage subsidy. I know that you did net ahead of your EBITDA. Can you just explain how that flows through the organization? Is it being primarily given the workers have been furloughed? Is it impacting any of the other -- the way we should look at the margins in the business?

[Claude Bigras, President, CEO & Non]

Well, that's it exactly. So in order to provide the best possible vision of the business, we treat it accordingly. Now this being said -- I'm sorry, this being said is depending -- you know what, we have many businesses, and some of the business, actually, were able to benefit from these programs. So you know what, we had certain quantity of internal people that we call back to work. We had a lot of office people that also where we call to work. So we manage this to the best of our ability. But again, so we had a mix of businesses that were impacted, like Technical Services, where there was a big impact. So it really help us to manage our workforce in the pandemic.

[Jeffrey Michael Fenwick, MD & Head of Institutional Equity Research]

That's helpful. And then we can touch on M&A. I know it's obviously talked to you any [indiscernible]

[Claude Bigras, President, CEO & Non]

I'm sorry, you're cutting. Can you just rephrase? Because you were cutting, sir.

[Jeffrey Michael Fenwick, MD & Head of Institutional Equity Research]

Sure. I thought we should touch on M&A. I know it's challenging in this market to do due diligence when we're restricted from travel. What are your thoughts here on the outlook?

[Claude Bigras, President, CEO & Non]

I'm sorry. You know what, you're cutting.

[Stéphane Lavigne, Senior VP & CFO]

M&A.

[Claude Bigras, President, CEO & Non]

The M&A, but I missed part of the sentence. I'm sorry. So again, on the M&A side is we all -- through the pandemic, we actually remained, you know what, active on the M&A side. Now this being said, you know what, the -- I would say, the industry did not show signs of distress. So I think that the market would be a little bit back to normal on that front. I think there would be opportunities going forward depending on the business structures going in the next maybe 4, 5, 6 quarters. So I think that we -- our M&A activity will remain strong, but we're still pursuing businesses that fits our business model. But this -- but again, we don't see any big distress at this time.

[Operator]

Next question will be from Zachary Evershed at National Bank Financial.

[Zachary Evershed, Analyst]

Congrats on the quarter.

[Stéphane Lavigne, Senior VP & CFO]

Thanks, Zach.

[Claude Bigras, President, CEO & Non]

Zach, thank you.

[Zachary Evershed, Analyst]

So we explored the mix differences that had Janitorial USA not see the same impact that Janitorial Canada had. But given the resurgence cases in the U.S., do you think we could see a similar impact on margins in Q3 for Janitorial USA?

[Claude Bigras, President, CEO & Non]

You know what, I think that the U.S.A., in the markets we're operating, I don't think that there would be a major setback. You know what, because we work mainly in the northern states, not in the southern states. So I don't see a huge impact there. But again, if we take the past is they are -- they have a different approach to shutdowns. And I don't think that with our -- I think that we were close to a relatively normal speed in the U.S. in the next quarters.

[Zachary Evershed, Analyst]

That's helpful. And looking at Technical Services now, in terms of lost sales versus deferred sales now in the backlog, what do you think the rough split was?

[Claude Bigras, President, CEO & Non]

Well, you know what, to be very honest, Zach, I don't do this in-depth analysis as business were shut down. So our backlog, we were not able to execute on backlog. And other projects were coming on top of it, so we have almost have an all-time high backlog to work now. And in the West, we mainly opened, so we were executing almost as normality in the West. So we don't -- we did not qualify postponed work on that front. But if we make just a math, originally, a project, we will probably do 25 a month. So if the business is closed 2 months, we can make the math that we did not do this work.

[Zachary Evershed, Analyst]

Makes sense. Great color. One for you, on selling and administrative expenses went up by about $8 million quarter-over-quarter. Some of that will be ESC, as it only closed on the 15th of January. But what does the increase tell us about your credit loss expectations?

[Claude Bigras, President, CEO & Non]

Again, we're very fortunate to work with the largest real estate businesses in Canada and in the U.S. We work with a lot of institutional and government facilities across Canada. So you know what, the credit risk that we have seen was not dramatically high. And again, like I said, is we fully, fully have assessed our credit risk, and we worked accordingly around it. And for where we had some uncertainty, we were very active in tracking those clients that could represent very large credit risk. I'll tell you this, as for me, it's not a main risk item at this time.

[Zachary Evershed, Analyst]

That's great. Just one last one. Without providing guidance, you're seeing some reopening activity in the world getting back to normal in July and August thus far. Should we also understand that we're seeing a concordant decline in the demand for specialized services as compared to Q2?

[Claude Bigras, President, CEO & Non]

But again, Zach, what we're saying is, you know what, yes, there is a little less demand for disinfection as you're not in the peak of the crisis, but we see a lot of additional service requests on a day-to-day basis within client space. For sure, when the space is not occupied, we do not deliver services. But now the reoccupation is stepping in, in many of what we call the B&I segment, business and industry segment. The places where we have, for sure, we have a very slow recovery is more or less the hospitality sector, the event sector, where our particular clients are facing challenges. The retail being opened, they require a lot of service and support to secure their clients. So you see, depending on the market, depending on the business segment, it's a mismatch of many requirements. So -- but overall, what we're saying is we do not see a dramatic decrease in space usage, and we see a positive service requirement to our clients. So overall, we are positive going forward. But this being said, if the world shuts down again, we're going to have to work with it and we work around it. And so far, we -- you know what, I think we were able to really help our clients in the worst of it. So we anticipate that it will be the same if the world shuts down again.

[Operator]

Next question will be from Frederic Tremblay at Desjardins.

[Frederic Tremblay, Analyst]

Maybe as a follow-up to some of the prior questions. We're almost halfway into Q3 now. Just wondering if you're still experiencing significant demand for your special janitorial work, or was that mostly done in Q2 in March and April [indiscernible]

[Claude Bigras, President, CEO & Non]

No, no. As we are maybe almost half in the quarter, yes, we've seen a little diminishing with -- we've seen a decrease in demand of services. Also, you have to understand that it's still vacation. It's vacation time for many of our client markets and client facilities. So yes, Q3, we still have some serious demands on services, but we see a diminution, for sure. But again, each client that we are retaking their space, they require special services, not on a one shot, but on a regular basis in order to provide safety to their occupants. So one, it's a -- I would love to tell you a full figure, but we're living it as it goes as well.

[Frederic Tremblay, Analyst]

Sure. That's helpful. And were there cases where GDI was asked by new customers to provide special services during COVID? And can you talk about the opportunity to gain market share by turning these entities into regular customers for your recurring janitorial services in the future?

[Claude Bigras, President, CEO & Non]

Well, I'm trying to fully assess the question is we gave -- first of all, in supplementary services and products, we really prioritize our existing book of business. Don't forget that GDI overall has tens of thousands of clients, so we needed to be there for them. This being said, yes, it created a lot of opportunities to contact and start relationships with new clients. In the product business, for example, we have a lot of new clients, which are, instead of being spot purchases now, are renewal purchases. So for us, it's all good signs. And again, there are things that we don't evolve, but I can tell you this is, even in Q2, the results for new business acquisitions are very, very positive. You know what, but we are starting the project as it goes. So you see an organic decline. But if I look forward, our new business success are very, very promising. And as -- hopefully, I'm not giving too much guidance here.

[Frederic Tremblay, Analyst]

That's great. And congrats on the great performance in a tough environment.

[Claude Bigras, President, CEO & Non]

Thank you.

[Operator]

[Operator Instructions] And your next question will be from Neil Linsdell at Industrial Alliance.

[Neil Linsdell]

Just trying to suss out or understand a little bit better the Janitorial Canada margin. So you backed out the wage subsidy. So that didn't have any impact on your cost base in -- when we look at that margin, if I understand correctly, and a lot of the margin improvement was really on the specialized services. So as we look forward, and this kind of stabilize if the specialized services come down, will you still see an elevated margin, but maybe not to the extent because of the efficiencies of more cleaning within locations?

[Claude Bigras, President, CEO & Non]

Absolutely, Neil. Thank you. You just nailed it properly. You know what, all things being equal -- again, you know what, the world collapse again, it will be a different story. But as we see is occupants reintegrating space, general demand, they transform specialties, services into regular services. Now again, we're coping with less people, occupancy, more services. So over and over is revenues and more -- revenues, I would say there would be maybe a slightly pickup, and margin also will be positively pick up because of the mix of business that we have to work with. But again, you know what, we won't live -- I would love to live this scenario for the next 15 years, but it won't be the case, I think.

[Neil Linsdell]

Be careful what you wish for, Claude.

[Claude Bigras, President, CEO & Non]

But listen, you know what, no -- but seriously, you know what, it's like -- let me put it this way, Neil, is we don't -- I really do not wish anything negative for our clients. But I have to make sure that if there's troubles, we're there to help. That's my main, main, main concern.

[Neil Linsdell]

Of course. And just on the other government program, on the CERB, I hear other businesses talk about how difficult it is to get labor because people are deciding to stay on the CERB instead. Have you seen -- have any kind of problems as far as hiring with that?

[Claude Bigras, President, CEO & Non]

You see, this is something that I have to tell you is I am shocked. You know what, our workforce, although there was all sorts of programs, they really, really step up. We had significant health care clients across the portfolio that needed them. We were able to staff, we were able to service, we were able to start new projects. People really respond. So you know what, in our case, I am actually -- I'm so -- I'm very thrilled to see how people respond. This being said, I don't know about the other trades, but I can tell you here that I was concerned. And you know what, they have proven me wrong totally.

[Neil Linsdell]

Okay. Good to hear. And just lastly, you did mention about educational facilities that you're servicing, specifically in the U.S. Obviously, a hot-button issue right now is how we're going to deal with the kids going back to school. Can you give any color as far as what you're seeing the demand in both Canada and the U.S. for educational institutions?

[Claude Bigras, President, CEO & Non]

Again, you know what, if I was that competent, I would be somewhere else, maybe I would be in The Oval Office. No, I'm joking. But -- no, no, but seriously, an indication what we have lived in Q2 is students are not there. So facilities are taking advantage of that to execute work that is, I would say, backlogged. And as students will reoccupy, for sure, they will have to redesign their requirements, and we are working with them on that. For the summer, less occupancy, but we were able to staff the buildings and provide services as it goes. So this is why you did not see a big peak because the staff -- there were regular staff doing extra work. Now for higher education, as you know, we have many higher education clients with the, I would say, class by distance or tele-education, let's put it this way. But they still will have a bulk of students and a bulk of occupation in their facilities. So yes, the service -- the extra service requirement would probably more or less absorbed by the diminution of occupancy in the building. So I think those institutions will have a certain normality, and I don't expect a big peak in demand of service because it will be offset by less space requirement usage for those institutions, at least for the next 4 -- 3, 4 quarters.

[Neil Linsdell]

But similar to a lot of your other clients?

[Claude Bigras, President, CEO & Non]

Sorry?

[Neil Linsdell]

So similar to a lot of your other clients?

[Claude Bigras, President, CEO & Non]

Yes, yes. But you see, unlike an office that they say we can shut down. Example, in many facilities, sports pavilion will remain shut down. You know what I'm saying? But in some of the faculties, they're like labs or science, they remain open, but they purchase triple the service requirements. But legal, they do teleworking, so we just do minimum work. So you see, it's a moving target.

[Operator]

And at this time, gentlemen, we have no other questions [ about this, too ]. So I would like to turn the call back over to you.

[Claude Bigras, President, CEO & Non]

Well, again, thank you very much for being there taking the call. Again, I'm -- in those uncertain times and challenging time, I'm extremely proud of what the team has accomplished from everywhere in the countries, so I'm amazed to see how people respond. We are still working into some lack of visibility, so we are managing with prudence. But I would say, relatively positively, not -- I'm sorry, my lack of English, but I'm positive on the future because of what we're seeing so far in Q3 and what we have as visibility so far. Thank you very much for taking the call.

[Operator]

Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have yourself a great weekend.