GDI Integrated Facility Services Inc. Releases its Financial Results for the Second Quarter Ended June 30, 2024

CNW Group

Wed, Aug 7, 2024, 4:59 PM 17 min read

Revenue reached $639 million, an increase of $30 million, or 5%, over the second quarter of 2023, comprised of 6% growth from acquisitions and partially offset by 1% organic decline coming from the Technical Services segment.
Adjusted EBITDA^* amounted to $34 million, in line with the second quarter of 2023.
Net income was $2 million or $0.07 per share compared to $1 million or $0.04 per share in Q2 2023.

For the second quarters of 2024 and 2023, the business segments performed as follows:

(in millions of Canadian dollars)	Business Services Canada		Business Services USA		Technical Services		Corporate and Other		Consolidated
(in millions of Canadian dollars)	2024	2023	2024	2023	2024	2023	2024	2023	2024	2023
Revenue	145	144	221	180	259	264	14	21	639	609
Organic Growth (Decline)	1 %	(1 %)	1 %	0 %	(5 %)	31 %	14 %	11 %	(1 %)	12 %
Adjusted EBITDA^*	12	13	14	13	14	12	(6)	(4)	34	34
Adjusted EBITDA Margin^*	8 %	9 %	6 %	7 %	5 %	5 %	N/A	N/A	5 %	6 %

For the six-month period ended June 30, 2024:

Revenue reached $1.3 billion, an increase of $83 million, or 7%, over the corresponding period of 2022, comprised of 1% organic growth and 6% growth from acquisitions.
Adjusted EBITDA^* amounted to $61 million, a decrease of $6 million, or 9%, over the corresponding period of 2023.
Net income was $2 million or $0.09 per share compared to $5 million or $0.19 per share over the corresponding period of 2023. The decrease in net income in the first six months of 2024 compared to 2023 is mainly due to lower operating income of $14 million, which is primarily attributable to an increase in amortization and depreciation expense of $9 million resulting from a significant reduction in the amortized value of a large customer contract in the quarter, which was partially offset by lower net finance expense of $10 million and lower income tax expense of $1 million.

For the first two quarters of 2024 and 2023, the business segments performed as follows:

(in millions of Canadian dollars)	Business Services Canada		Business Services USA		Technical Services		Corporate and Other		Consolidated
(in millions of Canadian dollars)	2024	2023	2024	2023	2024	2023	2024	2023	2024	2023
Revenue	290	286	446	356	511	516	36	42	1,283	1,200
Organic Growth (Decline)	1 %	(1 %)	6 %	(1 %)	(3 %)	36 %	10 %	14 %	1 %	13 %
Adjusted EBITDA^*	23	27	27	25	22	23	(11)	(8)	61	67
Adjusted EBITDA Margin^*	8 %	9 %	6 %	7 %	4 %	4 %	N/A	N/A	5 %	6 %

GDI's Business Services Canada segment recorded $145 million in revenue in the second quarter while generating $12 million in Adjusted EBITDA*, representing an Adjusted EBITDA margin* of 8%. GDI's Business Services USA segment performed well in Q2 2024, recording revenue of $221 million and Adjusted EBITDA* of $14 million, representing an Adjusted EBITDA margin* of 6%.

The Technical Services segment recorded revenue of $259 million and Adjusted EBITDA* of $14 million, representing an Adjusted EBITDA margin* of 5%. Historically, the first half of the year in the Technical Services segment is seasonally slower and the business ramps up as the year progresses.

Finally, GDI's Corporate and Other recorded revenue of $14 million compared to revenue of $21 million in Q2 2023, the decrease being attributable to the sale of its Superior cleaning and sanitation products distribution business on April 1, 2024, which was partially offset by organic growth generated by GDI's chemical manufacturing business.

"I am pleased with GDI's overall performance in Q2 2024, we were able to overcome specific challenges that affected our business in recent quarters and delivered solid results," stated Claude Bigras, President & CEO of GDI. "Our Business Services Canada segment performed well with a sequential increase in Adjusted EBITDA* and Adjusted EBITDA* margin over the first quarter of 2024. Occupancy levels in the Class A office market in Canada are remaining stable and we continue to expect Adjusted EBITDA* margin in the segment to remain higher than pre-COVID levels for the near-to-mid term. Adjusted EBITDA* and Adjusted EBITDA Margin* were slightly lower than Q2 2023 due to COVID-related gains realized in the prior year's quarter. Our Business Services USA segment performed well during the quarter to mitigate the revenue and Adjusted EBITDA* impact of the previously announced supplier realignment of one of the segment's largest clients which became effective just prior to the start of Q2. In fact, the business delivered both positive organic revenue growth and an increase in Adjusted EBITDA* compared to Q2 2023 despite the revenue loss experienced during the quarter, which serves to demonstrate the resiliency of the business and the strength of our team. The integration of the Atalian acquisition has been progressing as planned and our margin improvement initiatives are progressively being realized. The previously announced Paramount Building Solutions acquisition, that closed on May 1, 2024, has been substantially integrated and has been performing in-line with expectations. Our Technical Services segment had a very good quarter with Adjusted EBITDA* growth of 75% over Q1 2024 and 17% over Q2 2023. The three projects in our U.S. business that negatively impacted the segment's results in the past two quarters were successfully closed out in Q1, and enhanced procedures were put in place to augment project management in the region. The business delivered Adjusted EBITDA* margin of 5% which was in-line with historic levels in the segment's seasonally weak second quarter. We are continuing to improve pricing and margins and still selling as much new contracts as in the past producing a near record backlog. Finally, Ainsworth completed the acquisition of RYCOM Corporation on June 1, 2024. RYCOM develops, deploys, and manages smart building solutions that enable the end-to-end transformation of real estate assets into smart buildings and is recognized as the leader in smart building solutions in Canada. This acquisition considerably strengthens Ainsworth's Energy & Technology business unit and positions GDI as a leading player in the Canadian marketplace in building technologies, data analytics and advisory services for energy and greenhouse gas reduction," continued Mr. Bigras.

"With the recent challenges behind us, the outlook for all of GDI's business segments is positive for the remainder of 2024. Our initiatives to reduce working capital requirements during 2024 are continuing and we remain committed to deliver a total reduction in operating working capital in the second half of the year. Our balance sheet remains healthy and we have sufficient room on our existing credit facilities to continue to execute on our strategic growth plans. I look forward to GDI's performance through the remainder of 2024," concluded Mr. Bigras.

ABOUT GDI

GDI is a leading integrated commercial facility services provider which offers a range of services in Canada and the United States to owners and managers of a variety of facility types including office buildings, educational facilities, distribution centers, industrial facilities, healthcare establishments, stadiums and event venues, hotels, shopping centres, airports and other transportation facilities. GDI's commercial facility services capabilities include commercial janitorial and building maintenance, energy advisory and system optimization, the installation, maintenance and repair of HVAC-R, mechanical, electrical and building automation systems, as well as other complementary services such as janitorial products manufacturing and distribution. GDI's subordinate voting shares are listed on the Toronto Stock Exchange (TSX: GDI). Additional information on GDI can be found on its website at www.gdi.com.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements in this MD&A may constitute forward-looking information within the meaning of securities laws. Forward looking information may relate to GDI's future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "may"; "will"; "should"; "expect"; "plan"; "anticipate"; "believe"; "intend"; "estimate"; "predict"; "potential"; "continue"; "foresee"; "ensure" or other similar expressions concerning matters that are not historical facts. In particular, statements regarding GDI's future operating results and economic performance, and its objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions including expected growth, results of operations, performance and business prospects and opportunities, which GDI believes are reasonable as of the current date. While management considers these assumptions to be reasonable based on information currently available to the Company, they may prove to be incorrect. It is impossible for GDI to predict with certainty the impact that the current economic uncertainties may have on future results. Forward-looking information is also subject to certain factors, including risks and uncertainties (described in the "Risk Factors" section) that could cause actual results to differ materially from what GDI currently expects. Namely, these factors include risks pertaining to unsuccessful implementation of the business strategy, changes to business structure, inherent operating risks from acquisition activity, failure to integrate an acquired company, decline in commercial real estate occupancy levels, increase in costs which cannot be passed on to customers, labour shortages, disruption in information technology systems and execution issues with Strategic IT projects, increases in interest rates, exchange rate fluctuations, deterioration in economic conditions, increase in competition, influence of the principal shareholders, loss of key or long-term customers, public procurement laws and regulations, legal proceedings, reputational damage, labour disputes, disputes with franchisees, environmental, social and governance ("ESG") considerations, goodwill and long-lived assets impairment charges, tax matters, key employees, participation in multi-employer pension plans, legislation or other governmental action, cybersecurity, data confidentiality and data protection, and public perception of our environmental footprint, many of which are beyond the Company's control. Therefore, future events and results may vary significantly from what management currently foresees. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While management may elect to, the Company is under no obligation and does not undertake to update or alter this information at any particular time, except as may be required by law.


Analyst Conference Call:	August 8, 2024 at 9:00 A.M. (ET) Kindly note that Investors and Media representatives may attend as listeners only.
	Please use the following dial-in numbers to have access to the conference call by dialing 10 minutes before the beginning of the conference: North America Toll-Free: 1-888-664-6392 Local: 416-764-8659 (Toronto) or 514-225-6995 (Montreal) Confirmation Code: 995327 # RapidConnect URL: https://emportal.ink/40clg9j
	A rebroadcast of the conference call will be available until August 15, 2024 by dialing: North America Toll-Free: 1-888-390-0541 Local: 416-764-8677 (Toronto) Confirmation Code: 995327 #

June 30, 2024 unaudited condensed consolidated interim financial statements and accompanied Management & Discussion Analysis are filed on www.sedarplus.ca.

GDI INTEGRATED FACILITY SERVICES INC.
Condensed Consolidated Interim Statements of Financial Position
(Unaudited) (In millions of Canadian dollars)

	As at June 30, 2024	As at December 31, 2023
Assets

Current assets
Cash	29	17
Trade and other receivables and contract assets	600	571
Current tax assets	9	11
Inventories	37	42
Other financial assets	14	13
Prepaid expenses and other	16	11
Derivatives	–	1
Total current assets	705	666

Non-current assets
Property, plant and equipment	125	127
Intangible assets	121	131
Goodwill	373	356
Other assets	15	12
Total non-current assets	634	626

Total assets	1,339	1,292

Liabilities and Shareholders' Equity

Current liabilities
Bank indebtedness	6	14
Trade and other payables	303	298
Provisions	33	32
Contract liabilities	29	34
Current tax liabilities	6	2
Current portion of long-term debt	27	36
Total current liabilities	404	416

Non-current liabilities
Long-term debt	444	384
Other payables	6	5
Deferred tax liabilities	27	32
Total non-current liabilities	477	421

Shareholders' equity
Share capital	381	380
Retained earnings	70	68
Contributed surplus	3	2
Accumulated other comprehensive income	4	5
Total shareholders' equity	458	455

Total liabilities and shareholders' equity	1,339	1,292

GDI INTEGRATED FACILITY SERVICES INC.
Condensed Consolidated Interim Statements of Comprehensive Income
(Unaudited) (In millions of Canadian dollars, except for earnings per share)

	Three-month periods ended June 30,		Six-month periods ended June 30,
	2024	2023		2024	2023

Revenues	639	609		1,283	1,200

Cost of services	526	497		1,063	979
Selling and administrative expenses	81	81		163	159
Transaction, reorganization and other costs	2	1		3	2
Strategic information technology projects configuration and customization costs	1	1		1	2
Amortization of intangible assets	5	6		17	11
Depreciation of property, plant and equipment	14	13		28	25
Operating income	10	10		8	22

Net finance expense	5	8		4	14
Income before income taxes	5	2		4	8

Income tax expense	3	1		2	3
Net income	2	1		2	5

Other comprehensive income (loss)
Gains (losses) that are or may be reclassified to earnings:
Foreign currency translation differences for foreign operations	3	(7)		9	(7)
Hedge of net investments in foreign operations, net of tax	(3)	7		(9)	7
Cash flow hedges, effective portion of changes in fair value, net of tax	–	–		(1)	(1)
	–	–		(1)	(1)

Total comprehensive income	2	1		1	4


Earnings per share:
Basic	0.07	0.04		0.09	0.19
Diluted	0.07	0.04		0.09	0.19

GDI INTEGRATED FACILITY SERVICES INC.
Condensed Consolidated Interim Statements of Changes in Equity
Six-month periods ended June 30, 2024 and 2023
(Unaudited) (In millions of Canadian dollars, except for number of shares)

	Share capital		Retained earnings	Contributed surplus	Accumulated other comprehensive income	Total
	Number (in thousands of shares)	Amount	Retained earnings	Contributed surplus	Accumulated other comprehensive income	Total

Balance, January 1, 2023	23,414	379	49	4	7	439
Net income	–	–	5	–	–	5
Other comprehensive loss	–	–	–	–	(1)	(1)
Total comprehensive income for the period	–	–	5	–	(1)	4
Transactions with owners of the Company:
Stock options exercised	66	1	–	–	–	1
Share-based compensation	–	–	–	1	–	1
Shares repurchased for cancellation	(98)	(1)	–	(3)	–	(4)
Balance, June 30, 2023	23,382	379	54	2	6	441

Balance, January 1, 2024	23,414	380	68	2	5	455
Net income	–	–	2	–	–	2
Other comprehensive loss	–	–	–	–	(1)	(1)
Total comprehensive income for the period	–	–	2	–	(1)	1
Transactions with owners of the Company:
Stock options exercised	66	1	–	–	–	1
Share-based compensation	–	–	–	1	–	1
Balance, June 30, 2024	23,480	381	70	3	4	458

GDI INTEGRATED FACILITY SERVICES INC.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited) (In millions of Canadian dollars)

Six-month periods ended June 30,
	2024	2023

Cash flows from (used in) operating activities
Net income	2	5
Adjustments for:
Depreciation and amortization	45	36
Equity portion of share-based compensation	1	1
Net finance expense	4	14
Income tax expense	2	3
Income taxes paid	(2)	(11)
Net changes in non-cash operating assets and liabilities	(24)	(49)
Net cash from (used in) operating activities	28	(1)

Cash flows from (used in) financing activities
Proceeds from issuance of long-term debt	201	177
Repayment of long-term debt	(157)	(118)
Payment of lease liabilities	(19)	(16)
Interest paid	(15)	(10)
Other	1	(4)
Net cash from financing activities	11	29

Cash flows (used in) from investing activities
Business acquisitions and disposal, net of cash acquired	(7)	(2)
Additions to property, plant and equipment	(8)	(11)
Additions to intangible assets	(1)	(3)
Proceeds on disposal of property, plant and equipment	2	1
Net cash used in investing activities	(14)	(15)

Foreign exchange (loss) gain on cash held in foreign currencies	(5)	2

Net change in cash	20	15

Cash (Bank indebtedness), beginning of period:
Cash	17	7
Bank indebtedness	(14)	(10)
	3	(3)

Cash, end of period:
Cash	29	15
Bank indebtedness	(6)	(3)
	23	12

GDI INTEGRATED FACILITY SERVICES INC.
Segmented information
(Unaudited) (In millions of Canadian dollars)

	Three-month period ended June 30, 2024
	Business Services Canada	Business Services USA	Technical Services	Corporate and Other	Total

Recurring/contractual services	127	200	32	4	363
On-call services	10	21	68	1	100
Project	–	–	159	–	159
Manufacturing and distribution	–	–	–	12	12
Other revenues	5	–	–	–	5

Total external revenues	142	221	259	17	639
Inter-segment revenues	3	–	–	(3)	–
Revenues	145	221	259	14	639

Income (loss) before income taxes	9	8	3	(15)	5
Net finance expense	–	1	2	2	5
Operating income (loss)	9	9	5	(13)	10
Depreciation and amortization	3	5	9	2	19
Transaction, reorganization, and other costs	–	–	–	2	2
Share-based compensation	–	–	–	2	2
Strategic information technology projects configuration and customization costs	–	–	–	1	1
Adjusted EBITDA	12	14	14	(6)	34

Total assets	271	409	560	99	1,339
Total liabilities	68	119	256	438	881
Additions to property, plant and equipment	1	5	8	2	16
Additions to intangible assets	–	1	3	–	4
Goodwill recorded on business acquisition	–	7	2	–	9

GDI INTEGRATED FACILITY SERVICES INC.
Segmented information
(Unaudited) (In millions of Canadian dollars)

	Three-month period ended June 30, 2023
	Business Services Canada	Business Services USA	Technical Services	Corporate and Other	Total

Recurring/contractual services	124	170	21	4	319
On-call services	11	10	73	2	96
Project	–	–	170	–	170
Manufacturing and distribution	–	–	–	18	18
Other revenues	6	–	–	–	6

Total external revenues	141	180	264	24	609
Inter-segment revenues	3	–	–	(3)	–
Revenues	144	180	264	21	609

Income (loss) before income taxes	10	8	2	(18)	2
Net finance expense	–	1	1	6	8
Operating income (loss)	10	9	3	(12)	10
Depreciation and amortization	3	4	9	3	19
Transaction, reorganization, and other costs	–	–	–	1	1
Share-based compensation	–	–	–	3	3
Strategic information technology projects configuration and customization costs	–	–	–	1	1
Adjusted EBITDA	13	13	12	(4)	34

Total assets	267	359	544	122	1,292
Total liabilities	69	109	253	406	837
Additions to property, plant and equipment	3	3	6	2	14
Additions to intangible assets	–	–	1	2	3
Goodwill recorded on business acquisition	–	–	2	–	2

GDI INTEGRATED FACILITY SERVICES INC.
Segmented information (continued)
(Unaudited) (In millions of Canadian dollars)

	Six-month period ended June 30, 2024
	Business Services Canada	Business Services USA	Technical Services	Corporate and Other	Total

Recurring/contractual services	253	403	62	10	728
On-call services	18	43	140	3	204
Project	–	–	309	–	309
Manufacturing and distribution	–	–	–	29	29
Other revenues	13	–	–	–	13

Total external revenues	284	446	511	42	1,283
Inter-segment revenues	6	–	–	(6)	–
Revenues	290	446	511	36	1,283

Income (loss) before income taxes	17	11	2	(26)	4
Net finance expense	–	1	1	2	4
Operating income (loss)	17	12	3	(24)	8
Depreciation and amortization	6	14	19	6	45
Transaction, reorganization, and other costs	–	1	–	2	3
Share-based compensation	–	–	–	4	4
Strategic information technology projects configuration and customization costs	–	–	–	1	1
Adjusted EBITDA	23	27	22	(11)	61

Total assets	271	409	560	99	1,339
Total liabilities	68	119	256	438	881
Additions to property, plant and equipment	3	6	16	3	28
Additions to intangible assets	–	1	3	1	5
Goodwill recorded on business acquisition	–	10	2	–	12

GDI INTEGRATED FACILITY SERVICES INC.
Segmented information (continued)
(Unaudited) (In millions of Canadian dollars)

	Six-month period ended June 30, 2023
	Business Services Canada	Business Services USA	Technical Services	Corporate and Other	Total

Recurring/contractual services	244	337	42	11	634
On-call services	23	19	147	3	192
Project	–	–	327	–	327
Manufacturing and distribution	–	–	–	33	33
Other revenues	13	–	–	1	14

Total external revenues	280	356	516	48	1,200
Inter-segment revenues	6	–	–	(6)	–
Revenues	286	356	516	42	1,200

Income (loss) before income taxes	22	16	3	(33)	8
Net finance expense	–	1	3	10	14
Operating income (loss)	22	17	6	(23)	22
Depreciation and amortization	5	8	16	7	36
Transaction, reorganization, and other costs	–	–	1	1	2
Share-based compensation	–	–	–	5	5
Strategic information technology projects configuration and customization costs	–	–	–	2	2
Adjusted EBITDA	27	25	23	(8)	67

Total assets	267	359	544	122	1,292
Total liabilities	69	109	253	406	837
Additions to property, plant and equipment	4	5	13	5	27
Additions to intangible assets	–	–	1	3	4
Goodwill recorded on business acquisition	–	–	2	–	2

GDI INTEGRATED FACILITY SERVICES INC.
Business acquisitions

Acquisition date	Company acquired	Location	Segment reporting	Purchase price allocation status
2024 Acquisitions
April 1, 2024	Hussmann Canada Inc. ("Hussmann")	Darthmouth, Nova Scotia	Technical Services	Preliminary

May 1, 2024	Jade Opco, LLC, doing business as Paramount Building Solutions ("Paramount")	Phoenix, Arizona	Business Services USA	Preliminary
June 1, 2024	RYCOM Corporation ("RYCOM")	Toronto, Ontario	Technical Services	Preliminary
2023 Acquisitions
June 1, 2023	React Technical, Inc. ("React")	New York, New York	Technical Services	Completed
November 1, 2023	La Financière Atalian ("Atalian")	Multi-sites in USA	Business Services USA	Preliminary

Business disposal

On April 1, 2024, the Company completed the sale of its Superior cleaning and sanitation supplies distribution business and transferred some of its related liabilities.

GDI INTEGRATED FACILITY SERVICES INC.
Supplementary Quarterly Financial Information
Three-month periods
(Unaudited) (In millions of Canadian dollars, except per share data)

Three months ended
(in millions of Canadian dollars, except per share data) ⁽¹⁾	June 2024	March 2024	December 2023	September 2023
Revenue	639	644	622	615
Operating (loss) income	10	(2)	9	16
Depreciation and amortization	19	26	22	19
Transaction, reorganization and other costs	2	1	2	‒
Share-based compensation	2	2	2	2
Strategic information technology projects configuration and customization costs	1	1	2	2
Adjusted EBITDA	34	28	37	39
Net income for the period	2	‒	6	8
Earnings per share
Basic	0.07	0.02	0.26	0.35
Diluted	0.07	0.02	0.25	0.35

Three months ended
(in millions of Canadian dollars, except per share data) ⁽¹⁾	June 2023	March 2023	December 2022	September 2022
Revenue	609	591	588	563
Operating income	10	12	15	19
Depreciation and amortization	19	17	22	18
Transaction, reorganization and other costs	1	1	1	1
Share-based compensation	3	2	3	2
Strategic information technology projects configuration and customization costs	1	1	1	2
Adjusted EBITDA	34	33	42	42
Net income for the period	1	4	10	11
Earnings per share
Basic	0.04	0.15	0.41	0.45
Diluted	0.04	0.15	0.40	0.44

______________________________

^* The terms "Adjusted EBITDA" and "Adjusted EBITDA Margin" do not have standardized definitions prescribed by International Financial Reporting Standards and therefore, may not be comparable to similar measures presented by other companies. "Adjusted EBITDA" is defined as operating income before depreciation and amortization, transaction, reorganization and other costs, share-based compensation and strategic information technology projects configuration and customization costs. The Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by revenues. For more details and for a reconciliation of that measure to the most directly comparable IFRS measure, consult the "Segmented Information" tables at the end of this press release.

SOURCE GDI Integrated Facility Services Inc.