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
Greetings, and welcome to the GDI Integrated Facility Services Third Quarter ended September 30, 2019 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Friday, November 8, 2019. I would now like to turn the conference over to Stéphane Lavigne. Please go ahead.
Thank you, operator. Good morning, everyone. Welcome to GDI's conference call to discuss our results for the third quarter of fiscal 2019. 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 provision that is fully described at the beginning of the MD&A filed on SEDAR yesterday night. I will begin the call with an overview of GDI's financial results for the quarter and then will invite Claude to provide his comments on the business. In the third quarter, GDI recorded revenue of $228.8 million -- sorry, $222.8 million, an increase of $41 million or 14.6% over Q3 of last year. We also recorded strong performance in adjusted EBITDA, generating $20.2 million in the quarter, an increase of $3.8 million over Q3 of last year, which included a favorable impact of $2.3 million due to the implementation of IFRS 16. Prior to IFRS 16, GDI recorded adjusted EBITDA of $17.9 million, an increase of 9.1% over Q3 of 2018, representing a margin of 5.6% versus 5.8% in the prior year. In the third quarter of 2019, there was an extra working day compared to the third quarter of 2018, which negatively impacted our global margin by 60 basis points. For the 9 months period ended September 30, 2019, we recorded revenue of $940.9 million, an increase of $140.7 million or 17.6% compared to the corresponding period of 2019. We also recorded strong performance in adjusted EBITDA generating $56.7 million or $50.7 million when excluding the effects of IFRS 16, an increase of 36.2% compared to the first 9 months of 2018. For the remainder of the call, in order to present an apples-to-apples comparison of our results, all adjusted EBITDA figures discussed will be prior to the effect of IFRS 16. Our Canadian Janitorial business recorded a revenue of $133 million in Q3, up by $1.3 million or 1% compared to the third quarter of 2018. The segment reported an adjusted EBITDA of $8.6 million compared to $9.8 million in the third quarter of 2018, representing a margin of 6.5% compared to 7.5% last year. The decrease is primarily driven by one more working day in the quarter compared to last year. Our Janitorial U.S. business had a very strong quarter, recording revenue of $82.2 million, an increase of $17.5 million or 27.1% with an organic growth rate of 10.4%. Adjusted EBITDA was $5.5 million or 6% -- 6.7% of revenue compared to $5.1 million or 7.8% of revenue in Q3 of 2018. The growth in the Janitorial U.S. segment is mainly explained by the acquisition completed in the business segment in January 2019 and the margin reduction is like in Canada, driven by one more working day. Our Technical Service business had a strong third quarter, recording revenue of $97.2 million, an increase of $24 million or 32.9% over Q3 of 2018. Adjusted EBITDA was $4.9 million compared to $3.6 million last year for an increase of $1.3 million or 35.4% compared to third quarter of 2018. Our Complementary Services segment recorded revenue of $17.6 million in the third quarter, down $1.3 million or 6% -- or 6.8% compared to Q3 of last year. Adjusted EBITDA was $856,000 compared to $1.1 million in the third quarter of 2018. The decrease was driven by lower margin and a soft market in this segment. I will now turn this call to Claude, who will provide further comments on GDI's performance during the quarter.
Thank you, Stéphane. Good morning, and thank you for taking the time to participate to our earnings call. I'm pleased to report that GDI recorded another strong quarter. Let me comment on the different business segments. Our Canadian Janitorial revenue is slightly up compared to last year. We are investing in building our sales force, and we are deploying our new sales approach in the market. And this is starting to show positive results. Our EBITDA margin was slightly down this quarter due to the extra working day, as Stéphane was saying, which represent about 80 basis points of margin impact in the quarter for that business. Year-to-date, we have the same number of working days as last year. In regard to our Modern business, we are still investing to develop and launch the territory franchise model. This business is under some margin pressures due to revenue mix changes and higher operating costs, but we are confident we will grow this business in 2020. Overall, our Canadian Janitorial segment results were in line with our expectations in the quarter. Our Janitorial U.S. business had a strong quarter. We closed an acquisition in the Northeast, our second acquisition in the United States this year, which will reinforce our position in the region. Our adjusted EBITDA grew by $400,000 in the quarter despite one more working day, as mentioned previously. We continue to be pleased with the performance of our U.S. business during 2019.Our Technical Services segment had a very strong quarter, delivering solid revenue and adjusted EBITDA growth. Since the end of the second quarter, we completed 2 regional acquisitions to support the business and to reinforce our regional products.We have a very healthy backlog going into Q4. In fact, the backlog is the highest it has been to date, and we are working hard converting all these projects into revenue in the fourth quarter. We still have to work closely with the team to integrate our businesses in order to get our 6% historical margin target along with our growth. We are very pleased with all the work that has been accomplished with our technical business since the acquisition of Ainsworth at the end of 2015. Our Complementary Services business, which is now our product manufacturing and distribution business, reported lower revenue of $1.3 million, which was entirely due to the sale of our thematic business in the second quarter. Revenue, in fact, increased with normalizing for the sale of thematic. Adjusted EBITDA was down by about $200,000, impacted by the sale of thematic and some margin pressures that impacted the quarter. We have a very good prospect in this business, and we expect profitability to be back to its historical levels in the coming quarters. In summary, I feel that GDI delivered another strong quarter with solid growth in EBITDA despite our Janitorial business having to account for the extra working day. We achieved over 20% of growth in adjusted EBITDA at $20 million, the first time we have reached that level in a single quarter.I am very proud of our team across the whole organization. Our organic growth is healthy. Our profitability continue to improve, and we are executing on our plan to grow GDI through strategic acquisitions, strong organic growth. So the pipeline is strong, and our total debt-to-adjusted-EBITDA ratio is still below 2.5x. Finally, we are well positioned to continue to execute our business plan and capitalize on strategic growth opportunities as they arise. That concludes my remarks. And I will now ask the operator to open the line to analysts for questions.
[Operator Instructions] Our first question comes from the line of Frederic Tremblay from Desjardins Capital Markets.
The first question is on Janitorial Canada. Can you go into a bit more detail in terms of the initiatives that you're implementing at Modern? And it seems like your outlook is more positive for 2020 for that business. So just some more detail on that, please?
Okay. Well, as we are saying for some time now is the Janitorial business, we are transforming our Janitorial business as we are restructuring our sales teams and we are redeploying our whole new sales force going into '19 and '20. And let me put it in my own word is, we are moving from farmers to hunters. And so that's one of the big, big strategic moves that we're doing in our Canadian Janitorial business. Secondly is we are working -- we are deploying and developing our new franchise model with Modern in other submarkets in Canada. When I'm saying we're deploying, we're developing the business, and we are launching -- slowly launching the start-up of this business. So it's very, very encouraging. And we look forward, I would say, to bring a lot of, I would say, profitability and a lot of growth through this initiative.
Okay. Switching to the U.S. Solid quarter again. 10.4% organic growth. I was wondering if you could maybe straight up in terms of -- I know there was one large contract that was won in July of last year. So just trying to get a sense of what the potential growth profile for that business is going forward now that we've reached the 1-year mark of that big contract.
Well, this is -- yes. For sure, the large contract is a positive on our organic growth. But I will tell you that as our footprint in the U.S. markets continue to grow, we are better positioned to win more and more new business and new, larger contracts. So we see it as a very strong opportunity going forward in 2020.
Okay. And then I wanted to ask on the acquisitions. You announced some new transactions this quarter. One of them was in Technical Services in Winnipeg. I know you acquired another business in Technical Services in Winnipeg last year. Can you comment on how those 2 businesses sort of complement each other or the reasoning behind the second acquisition there?
Yes. Well, our business model is very simple. Like I said, we target some specific markets or service lines in which we invest on an acquisition. We develop the depth of the management, and we work with the team, and we support the business. And after that, we do subsequent acquisition to develop density. It's right into our business model. In Winnipeg, we have acquired a strong business with great operators, and now we're reinforcing this business by an extra add-on that also develops the spread of services in this market, which we believe will be growing in the next years. So that's exactly what we're doing in our business modeling.
Our next question comes from Paul Bilenki with TD Securities.
So staying on the Modern franchise business. I know you had started up a pilot in Hamilton not too long ago. How has -- how have the early results there been relative to your expectations?
Yes. Well, listen, the first store -- how can I say this? The first store so far is not exactly representative of our full growth business model because it's also a training center. So it's quite a large operation. But we're very encouraged with the early result as we are learning a lot from the franchise operator's requirements. And we are getting some market share there, so we're starting to see good results. But for sure, our business model will not be at the same size as the Edmonton store in every region. It's quite a significant installation there.
Okay. Great. And then on the sort of change in sales strategy from -- moving from farmers to hunters, have you had any challenges in your sales team getting them to be, I guess, more proactive in their way of thinking and sort of getting more aggressive on the sales strategy?
Well, listen, sales strategies start with the leadership. After that, it goes into the design, the design of the sales force across each market. And going further down after that is to really, I would say, set in motion the whole objectives, budgeting, reporting and follow-up structure. So we really work from the ABC back to the -- we went back to the root, leadership, structure, reporting, budgeting, accountability and for sure, you know what, acquiring new talents in our sales teams across new markets. So I would say that is the major also change into the sales teams across markets.
And has that sort of change been done across both Canada and the U.S.?
No. No. No. It's mainly in Canada. The major change is in Canada. And I would say that the work is well underway. Now the team has been, more or less, I would say, about 3/4 of it has been put into place. We are implementing our systems. So I would figure that 2020 will -- we are -- like I said, we are already seeing some good results recently, so we're very confident. But in 2020, we should see probably the full spectrum of the results.
Our next question comes from Zachary Evershed with National Bank Financial.
Looking at Janitorial USA, how do you view the evolution of your margins there over the coming quarters as your scale south of the border grows?
Okay. Margin -- we see margin to be fairly stable over 2020 because we have a very strong contract -- solid contract base. And so there's nothing -- as we grow -- you know what, gentlemen, I would have to say, as we grow to $500 million, $700 million, $800 million, probably I would see a more -- I would say, a more rationalized margin as you grow in markets, you grow in contract size. But we're not there yet. We're still working on finding the right business and the right profitable business to add on to our business there. So I don't see a major shift in the margin, and I see revenue, top line and bottom line growth. I don't want to do forward-looking statements, but I think you can hear what I'm saying.
Understood. One more for me. Are you seeing any changes to the multiples on acquisitions or more competitors around the deal table?
No. No. No. Well, listen, you know what, it's always the same thing, is as you shift in size and as you shift towards technology, multiples are a little bit higher than traditional businesses. But no, actually, Dave Hinchey and the team are working extensively to find the right business at the right valuation. So we're not going on for multiple battles. This is not our strategy.
Our next question comes from Maggie MacDougall with Cormark Securities.
I actually wanted to follow on the M&A question that Zach was just asking about. If you can maybe give us a little bit of a picture of your pipeline in terms of region, segment size or even just characterization of it now versus maybe a year or 2 ago.
Maggie, do you like -- would you like to have names and business?
That would be excellent. Please.
Well, listen, I can tell you that we still have a strong pipeline. The team is busy. Both -- so, yes, I would characterize it as we have done 6 acquisitions this year so far. The idea is that we are a little bit agnostic on size, meaning that we -- our M&A team is well seasoned, so we can really work effectively in acquiring smaller business in some segments. So we process those. And yes, we have a healthy pipeline, and we have -- we also look at more sizable business regularly. But this being said, I don't know to what extent I can give you some guidance there, but I think that I can say that we are working like we have worked historically in our businesses. We have a strong pipeline, and we're doing our job on that front. I'm sorry if I cannot be clearer than that, but...
No, that was great. I also wanted to ask a follow-up question on the Technical Services division. You mentioned that you are entering Q4 with an extremely strong backlog, and I'm curious what you think the driver of the backlog is in terms of the growth. Is it a marketing and sales strategy, just a result of success with bolt-on deals giving you new opportunities or perhaps something else entirely?
Maggie, you know what, it's like a recipe. It's a little bit of everything. Too much of one thing can scrap the sauce, but my point is we have really developed -- if you look at Ainsworth since '15, we have done several things. First thing is we have worked to restructure the management team in the business. We have acquired great talent throughout acquisitions. We have redesigned our sales teams almost in its entirety, and we're still building on it. Thirdly is I think that we were able to achieve somehow a new market recognition as Ainsworth being a very, very strong -- strongly managed, very fine operation business. And I think we're collecting on this market perception. And for sure, the market is active also in Canada. So all of the above, I think, makes it that we have the strongest backlog ever.
Okay. And then following back again on the Janitorial USA business. I'm curious, the 10.4% growth is really strong. And how much of that is sort of seasoning of that large contract you won in July last year? And how much of it is attributable to just general market share gains throughout the U.S. business?
I'm not sure that I understood. You're asking me how the business performed without the major contract.
Yes. So you had one quarter in there, July, which would have been the anniversary of that contract win. So I guess another way of framing the question could be, in August and September, was your experience that you're just, generally speaking, gaining market share? And so in other words, was the double-digit organic growth homogenous throughout the quarter? Or was it sort of weighted to July?
Yes, okay. I understand. Well, listen, you know what, I can tell you the rest of the business is very active, and it's delivering as we expect. So this is one good news. Also, you know what, I don't want to get too technical. But for sure, when we start [ DPS ], the contract -- sorry, when we started the large contract last year -- you get me there, Maggie. But as we started the large contract in the U.S., July and August were start-up months. So it has -- it was not fully deployed. So now we're -- the third quarter is probably the round -- the first real 12 months round of this contract. So yes, it's a little bit of both. The large contract is still contributing in the third quarter, and the rest of the business is very healthy.
Do you expect it's possible to generate double-digit organic revenue growth in the U.S. in the coming quarters given that dynamic?
Well, listen, you know that we don't give guidance there, but I'd love to see that. Now it's our capacity to attract very large contract in time. But for modeling purposes, without giving guidance, I would refer to our historical organic growth as a better approach to it.
There are no further questions at this time. Please continue with your presentation or closing remarks.
Well, you know what, thank you very much, Mr. Operator. Again, I'm very happy of what the team is accomplishing across each of our markets and our businesses. We still work very hard in accomplishing our business plans and really integrating GDI as one culture, one organization. And I'm very, very happy, and I have a very good -- I'm very positive on the future of the business as we have a very dedicated team working at it every day. Thank you very much for coming to this call. Thank you.
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.