GDI Integrated Facility Services Q2 2024 Earnings Report

GDI Integrated Facility Services EPS Results

• Actual EPS: C$0.07
• Consensus EPS: C$0.18
• Beat/Miss: Missed by -C$0.11
• One Year Ago EPS: N/A

GDI Integrated Facility Services Revenue Results

• Actual Revenue: $639.00 million
• Expected Revenue: $648.70 million
• Beat/Miss: Missed by -$9.70 million
• YoY Revenue Growth: N/A

GDI Integrated Facility Services Announcement Details

• Quarter: Q2 2024
• Date: 8/7/2024
• Time: N/A
• Conference Call Date: Thursday, August 8, 2024
• Conference Call Time: 9:00AM ET

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. 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.

GDI Integrated Facility Services Q2 2024 Earnings Call Transcript

Key Takeaways

• Q2 revenue grew 5% to $639 M driven by a 6% lift from acquisitions, while adjusted EBITDA held at $34 M, up $6 M sequentially.
• Business Service USA reported $221 M in revenue (up $41 M YoY) from the Italian and Paramount acquisitions plus 1% organic growth, delivering $14 M in EBITDA, a $1 M increase year-over-year.
• Technical Services generated $259 M in revenue and $14 M in adjusted EBITDA (5% margin), supported by record backlog levels and ongoing margin-enhancement initiatives.
• GDI formed a special purpose vehicle and secured up to $100 M from the Canadian Infrastructure Bank to finance energy retrofit projects, bolstering its energy advisory and smart building offerings.
• The company anticipates receiving $25–30 M from the planned sale of its remaining manufacturing facilities, proceeds that will be used to further reduce debt.

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to the GDI Integrated Facility Services, Inc., second quarter 2024 result conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 8, 2024. I would now like to turn the conference over to Stéphane Lavigne. Please go ahead.

[Stéphane Lavigne, SVP and CFO at GDI Integrated Facility Services Inc.]

Thank you, operator. Bon matin à tous. Good morning, all, and welcome to GDI's conference call to discuss our results for the second quarter of fiscal 2024. 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, Executive Vice President of Corporate 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 in the MD&A file on SEDAR+ at the end of last night. I will begin the call with an overview of GDI's financial results for the second quarter of fiscal 2024, and then we'll invite Claude to provide his comments on the business.

[Stéphane Lavigne, SVP and CFO at GDI Integrated Facility Services Inc.]

In the second quarter, GDI recorded revenue of CAD 639 million, an increase of CAD 30 million, or 5% over Q2 of last year, comprised of 6% growth from acquisitions and partially offset by 1% organic decline coming from the Technical Services segment. We recorded an Adjusted EBITDA of CAD 34 million in the quarter, in line with Q2 of last year and up CAD 6 million compared to our Q1 of 2024. On a year-to-date basis, revenue increased by CAD 83 million or 7% to reach CAD 1.3 billion, compared to CAD 1.2 billion last year. Year-over-year revenue growth from acquisition was 6% and organic growth was 1%.

[Stéphane Lavigne, SVP and CFO at GDI Integrated Facility Services Inc.]

Adjusted EBITDA in the first half amounted to CAD 61 million, a decrease of 6% or 9% over the corresponding period of 2023, mainly due to the cost overruns incurred on the three projects in the U.S. Technical Service business that negatively impacted the results in Q1 and Q4 last year, and that we successfully closed last quarter. Moving to our business segments, Business Services Canada recorded revenue of CAD 145 million in the second quarter, while generating CAD 12 million in adjusted EBITDA, representing an adjusted EBITDA margin of 8%, up by CAD 1 million compared to Q1 of 2024.

[Stéphane Lavigne, SVP and CFO at GDI Integrated Facility Services Inc.]

Our Business Services USA segment recorded revenue of CAD 221 million in Q2, representing an increase of CAD 41 million when compared to Q2 last year, mainly due to the Italian and Paramount acquisitions, and 1% organic growth, which was generated despite the loss of a major customer that started affecting the segment toward the end of Q1 2024. The segment reported Adjusted EBITDA of CAD 14 million, in line with Q2 of 2024, and CAD 1 million higher than Q2 of last year. Our Technical Services segment recorded revenue of CAD 259 million, compared to CAD 264 million in Q2 last year, mainly due to the organic decline attributable to the strong project revenue generated last year.

[Stéphane Lavigne, SVP and CFO at GDI Integrated Facility Services Inc.]

The segment generated an Adjusted EBITDA of CAD 14 million at 5% of Adjusted EBITDA margin, which is CAD 2 million higher than Q2 of last year. Finally, our corporate and other segment reported revenue of CAD 14 million, compared to CAD 21 million last year, mainly due to the sale of our super distribution and retail business at the beginning of the quarter, partially offset by the growth generated in our U.S. manufacturing operations. I would like now to turn the call to Claude, who will provide further comments on GDI's performance during the quarter.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Well, merci, Stéphane. Bonjour, good morning, and thank you to everyone for taking the time to participate in our Q2 earnings call. I'm pleased with GDI's performance during the second quarter. We successfully worked through the installation issues that impacted our prior year quarters and delivered solid results across all of our business segments. Our Business Services Canada segment had a good quarter, with sequential growth in both EBITDA and EBITDA margin over the first quarter of the year. Notably, EBITDA margin is holding in line with our previous guidance of 100-200 basis points above the pre-COVID level, and we expect to sustain this over the near midterm. Occupancy in the Class A office market has been relatively stable, and we believe this will continue for the foreseeable future. Our Business Services USA segment had a very good quarter.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Our team was able to mitigate most of the loss of business from one of our largest client that we had previously announced. In addition to replacing lost revenue, we also increased EBITDA over Q2 of last year through a combination of cost reduction, new business win, and acquisition activity. Our work on improving margin in the Italian business that we acquired at the end of 2023 is progressing well. While margins continue to be slightly impacted by Italian in Q2, we expect margin improvement efforts to be completed in the second half of the year. Additionally, the Paramount Building Solution acquisition was closed on May 1, that has substantially onboarded, and has been substantially onboarded, and the business is performing in line with expectations.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Both our Business Services segments in Canada and the US remain relatively well insulated from the credit-related challenge we have been seeing in other parts of the real estate industry. We typically work with large to midsize building, with large, well-established clients.... While higher costs of capital can cause some clients to try push on payment terms, they do not materially affect the credit profile of most of our client base. That being said, we are cautious by nature, and we regularly monitor credit quality and receivable days as a matter of course. Finally, both Q3 and Q4 of this year will have one extra working day than the comparable quarters in the prior year.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

As a result, this will have an effect on quarter-over-quarter comparisons, as one working day represent approximately CAD 3.5 million in labor cost and benefits in our Business Services segment on a combined basis. Extra and fewer working days are irregular periodic events that has positive or negative effect when looking at quarter-over-quarter results. Our Technical Service segment had also a very good quarter. As expected, the three project in our US business that impacted Q4 of 2023 and Q1 of 2024, results were closed out in Q1. Result in the business rebound in Q2 with an Adjusted EBITDA margin back at 5%, which was in line with the prior year's quarter. I will remind you that Ainsworth is a seasonality as a business, with Q1 and Q2 traditionally been weaker due to the ramp-up of HVAC season.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

The margin improvement strategy that we began implementing in 2023 has been progressing well, and we are continuing to operate with a backlog near record level, and we are still seeing good demand for new bookings. On June 1, Ainsworth closed the acquisition of Rycom Corporation. Based in Toronto, Rycom is considered as a leader in smart building technology in Canada. Essentially, they focus on connecting all of the business building system into a single platform so that the data can be analyzed and used to optimize building operations. This will lead to energy optimization, greenhouse gas reduction, and a vast array of new and innovative service to enhance the experience in building occupant. Rycom further solidifies Ainsworth and GDI leadership in technology for the real estate industry sector.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Also, shortly after quarter, we announced a partnership with the Canada Infrastructure Bank, CIB, where the CIB has committed up to CAD 100 million over a 5-year period to provide our clients with a low-cost funding for energy and carbon reduction projects. Ainsworth and its Energia subsidiary will provide complete end-to-end turnkey analysis, design, build retrofit service for projects, where each building is expected to reduce greenhouse gas emissions by a minimum of 30% annually. GDI has formed a special purpose vehicle to enable our clients to finance the capital cost of the retrofit, which will include the CIB's investment, with the remainder funded through an equity investment by GDI and third parties. The CIB funding of the SPV is non-recourse to GDI, subject to certain standard guarantees, and will have no bearing on our debt level or leverage ratio.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

This initiative with the CIB helps to demonstrate Ainsworth and GDI's leadership in the energy advisory sector in Canada and will help our business development activity in the space. Finally, following the sales of our Superior Solutions distribution business on April first, we have successfully moved the majority of our Canadian manufacturing operation to our plant in Kansas. Our manufacturing business is performing quite well in 2024 and has won a number of important contracts. We plan to sell the two remaining facilities through where Superior operated over the next few quarters, and expect a combined gross proceeds in the $25 million-$30 million range. I am happy with GDI performance in Q2 this year. Our business services team in Canada has been working hard and delivered well in the dynamically challenging office environment and preserve margin and keep our clients satisfied.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Our business service team in the U.S. has successfully managed through the loss of a major client by driving revenue growth, implementing cost reduction initiative to mitigate any negative impact and improve EBITDA margin. Our technical service business has been focusing on improving overall profitability while maintaining revenue level, despite exceptionally strong growth last year. With recent challenges behind us, I'm very optimistic for the remainder of 2024. Our balance sheets remain healthy, with leverage sitting within our comfort zone. We remain focused on reducing our operating working capital in the second half of 2024, which will be used to further reduce debt, and we continue to execute on our growth through acquisition strategy, having completed three acquisitions in the first half of the year. I look forward to GDI's performance for the remainder of the year.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

I'd like to thank all of you again for participating in this call, and at this time, I will ask the operator to open the line for research analysts for questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by the two.... If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Gabriel Moreau with Scotiabank. Your line is now open.

[Gabriel Moreau, Analyst at Scotiabank]

Hi. I'm calling for Jean-Nicolas. My question, my question is on technical services. How do you see the segment margins evolving in the second half? Do you expect margins to follow the typical seasonal pattern?

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Well, actually, well, you know, as you know, we, we had to resolve an issue in late 2023 and 2024. Now the business is back to its, I would say, historical, recent year margins. But the focus is to continue to improve margins, and we have established initiatives where we enhance our, you know, margins and, at our, contract negotiating level. So, you know, I'm positive that we should see, you know, further EBITDA margin enhancements over the next quarters.

[Gabriel Moreau, Analyst at Scotiabank]

Thank you. And on the working cap for this year, are you still expecting to reduce working cap by CAD 30 million through the balance of the year?

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Yes, sir, we're still focused on achieving it, working hard on it, but we are confident, and we aim to deliver on our target.

[Gabriel Moreau, Analyst at Scotiabank]

That's my two. Thank you very much.

[Operator]

Your next question comes from Derek Lessard with TD Cowen. Your line is now open.

[Derek Lessard, Analyst at TD Cowen]

Yeah, good morning, everybody. Hope you're doing well.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Good, well.

[Derek Lessard, Analyst at TD Cowen]

Good morning. Maybe, Stéphane, I just want to extend congratulations, I believe, on the retirement. But as a follow-up, I just wanted to ask if you could maybe talk about where you guys are in the search for a new CFO.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Okay. Well, Derek, listen, good news. We have our candidate in the house! So we have circulated some news on that front. So the idea is Charles-Étienne Girouard, our VP of Reporting, will succeed Stéphane in September. And Stéphane will remain with the organization for, you know, on a full-time basis until the end of the year, and on extended advisory basis for 2024 to help and support Charles-Étienne into his new functions. And, so you know, the good news is, you know, our talents were inside, and we're looking forward to see Charles-Étienne in action. And, so, and Stéphane, like I said, is not going too far.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

He's staying, he's staying around us for the next little while.

[Derek Lessard, Analyst at TD Cowen]

Yeah, so Claude, always good to see strong bench strength. So the plan is for Charles eventually to be appointed CFO?

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Yeah, I can tell you this, I've been working with him for the last 30 days. He's very involved in, you know, visiting all the, you know, our locations, meeting people. I think he's getting his arms around it. That's a good news.

[Derek Lessard, Analyst at TD Cowen]

Very good. Good to hear, too. On the Atalian acquisition, maybe could you just... I know you touched on it in your prepared remarks, but maybe share some of the some of the updates on the integration and the turnaround there, and when are you expecting for the margins to normalize with the rest of the BSU segment?

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Okay. Well, listen, we acquired it in November last year, but before January, we were not in full control of the organization. I can say that it's evolving well. You know, on the positive notes, our security segment, we negotiate several increases with customers, so our security segment over the next, 2 remaining quarters should deliver, you know, a more sustainable margin. On the regular business, cleanings, you know, the janitorial services, you know, we're still, working with each of our clients to either improve margins or actually to divest from some clients if we are not able to improve margins. So our aim, we are aiming again at the end of the year to work within, you know, what I would call the normal margin. We're still focused on that. I don't see any significant impairment in doing so.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

So, now the business has been integrated, you know, all the name, the brand, the people, the supervision, the organization, organizational structure has been all incorporated in GDI, our, you know, the accounting and finance. So I think we put everything together to be successful this year.

[Derek Lessard, Analyst at TD Cowen]

Awesome. Maybe one follow-up for me on technical services. I think you had guided earlier, maybe it was last quarter, to about 6% EBITDA margins by the end of the year. Is that still the target, and are you on track to hit that?

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Yeah, well, listen, yeah, exactly. So now I think that to be very precise, I think it was 5.4, you know, on this quarter. You know, I maybe my colleagues will look at me with big eyes, but I do believe that our target would be to bring it to 7% at some point. Now, but, you know, one step at a time, we are increasing, we're working on a working cap, increasing margins, and all this should bring us to the 7% mark at some point.

[Operator]

Merci, Claude. Your next question comes from Zachary Evershed with National Bank Financial. Your line is now open.

[Zachary Evershed, Analyst at National Bank Financial]

Good morning, everyone.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Good morning, Zachary.

[Zachary Evershed, Analyst at National Bank Financial]

With the record backlog in technical services, it'll obviously take some time for contract negotiation initiatives to cycle through to sales. Could you maybe help us pinpoint when you expect that to flow through?

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Well, actually, Zachary, now, where we stand at this point, our backlog, you know, is showing an improvement of about 150 basis points, you know, and we expect it to show 250 basis points, you know, probably by the end of Q3. So, so you understand that our margin at the backlog will, you know, will deliver a higher EBITDA margin at the end. So we are seeing it already because we start this initiatives, you know, what, couple of quarters ago. But like you said, it takes time because all the previous work, it needs to be executed. So but now our backlog is, like I said, 150 basis points over last year, more, you know, I called contractual margin. So, you know, I'm very positive that it will continue on this route.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

I would say that if we are able to... Again, I don't wanna do guidance, but if we can increase by another 150 basis points by the end of the year, I think it will really support our objectives.

[Zachary Evershed, Analyst at National Bank Financial]

That's great color. Thanks. And then for business services, the U.S., sorry, the adjusted EBITDA margins have been a little lower than pre-pandemic levels this year. Obviously, some turmoil with the major customer loss that you guys are backfilling quite well on organic growth. What's your outlook on the likelihood of bouncing back to the 7%-8% range in that segment?

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Okay, well, you know, that's an interesting question. You know, as you know, Zachary, US has been full of, full of, not challenges, but full of events. We acquired Italian with, as, you know, that we started with a lower margin. We have our-- this large customer lost. Now, we aggressively, you know what, pick up a large customers with aggressive margins to compensate. And there is the, I would say the, you know, the office normal-- you know, in the normalization. So we had a lot to cope with in the US. So as we're growing, and now we are rationalizing, and also the good news is we have, we have, you know, a very significant one that is starting in Q3.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

I think we should go back to our traditional 7%, you know, 7%, probably, I would say, by the end of Q3, maybe, maybe Q4, but this is what we're aiming at. Hello?

[Operator]

Your next question comes from Jeff Fenwick with Cormark Securities. Your line is now open.

[Jeff Fenwick, Analyst at Cormark Securities]

Hi, good morning, everyone.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Good morning, sir.

[Jeff Fenwick, Analyst at Cormark Securities]

Yeah. Claude, I wanted to ask about organic growth in business services, and maybe we'll split it between the U.S. and Canada. And as you said, you've done a lot of work to replace a lost customer in the U.S. But as that sort of goes into the rearview mirror, like what are the prospects here for organic growth? You know, if we were to normalize now going forward, given that momentum you built there, I imagine that's a pretty good pace of business expansion you've had there. So I would imagine going forward, organic growth should be a bit stronger when you report it.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Well, listen, you know, I'm always looking, you know, my target number for organic growth is always 6%, but mind you, that we cope with probably a 3% loss year-over-year. So now we have a little bit of inflation revenue, you know, increase, but markets are very challenging, so, you know what? We negotiate. You know, the idea is to always keep the margin alive. This is. You know, keep the margin is the first priority. So into, you know, an inflationary periods where customers are challenged, because we have some customer which are challenges, we don't focus only on increasing revenue. We focus on managing our business partners to keep our margin to a sustainable level. So that's the first priority. This being said, we're investing in the sales force, and we are seeing good results.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

My wish is that we have, you know, a net organic growth between 4%-6% every year. So this is usually what we are aiming for.

[Jeff Fenwick, Analyst at Cormark Securities]

Okay, that's good color. Thank you. And then I wanted to ask about the CIB program that you've announced here, and just trying to understand that a little bit when you put yourself or putting some money into that program. Obviously, this is an opportunity to drive some business your way, some business development, but you know, does the return profile from those projects look incrementally better, or is the thinking that it would just maybe drive some business beyond the initial work that you're doing with these customers? Or can you just give us a little bit of color about you know, the benefits of that program?

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Yes. Okay, so let's break it into a couple of parts. The first part is clients. As you know, you know what, everybody is aware of climate changes, everybody is aware of the government's objectives in this matter. So as, as, you know, what the main leader in the building technologies, it's a must that we offer our clients technology and advisory and expertise into delivering on their objectives. So, you know, on the client side, it's not even a second thought, is this is tomorrow, one of tomorrow's drivers, and we have to be up to par to service our clientele. I hope you agree with that. Secondly, is this, you know, this initiative will generate a substantial amount of work over the next 10 years, you know, and beyond.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

And for sure, we want to capture this work to make sure that our businesses, you know, are staying healthy and that we keep strong backlogs. So that's the second part of it. The third part of it is, you see, now we will probably generate, I would say, profitability through two parts. One, on the Ainsworth execution of contract and projects, and secondly, on return on the investment we do, you know, as equity investment into the SPV, like I said. So now, you know, we, like I said, is we will work on the SPV, us as an investor, and with external partners. So our participation would be probably in the 20%-25% range over the whole investment required.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

This being said, this 20%, you know, will probably also take the form of a, you know, a fee management and turn into equity. So it will not probably be a whole cash injection. Probably, it would be to convert some of our fees into equity in the projects. Hopefully, I was able to give you a good, a good portrayal of it, but don't hesitate to ask me more questions if you, if you want.

[Jeff Fenwick, Analyst at Cormark Securities]

Yeah, I guess one follow-up there is just when I think about a program like this, my assumption is, you're offering terms to the end customer for financing that are probably better than they would typically get. It's a bit of a encouragement to pursue these projects, obviously.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Ah.

[Jeff Fenwick, Analyst at Cormark Securities]

I'm just curious-

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Absolutely.

[Jeff Fenwick, Analyst at Cormark Securities]

If it's a lower, lower return potential out of that type of loan.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

I'm sorry, lower return?

[Jeff Fenwick, Analyst at Cormark Securities]

Well, I mean, if you're effectively lending the customer money, is it being to them the discount to prime or whatever that rate is, to encourage them to utilize the program, and therefore, the return on a loan is relatively less in that situation. So, you know, are you making a good return out of that equity that's going into this initiative?

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Okay. No, okay, you know what? Maybe I just wanna make sure. You know what? Allow me, my, my thinking is, you know, as an investor, we have an expectation of return. So we know this is one part. The second part is lower the loan costs, higher the expectation of return at the end is... You know, you know what I'm saying? It's like, it's like vice versa. If you have a higher interest rate, the return for the investor would be lower. If you have a lower interest rate on the lending part, the capital part, the capital part should receive a higher return. Do-- am I saying it properly for you?

[Jeff Fenwick, Analyst at Cormark Securities]

Yeah, I think I get what you're speaking to there, yes.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

So my point is, you know what? Listen, the point is, you know, we're providing the clients... And don't forget us, our revenue is based on capturing the savings generated through the initiatives. So actually, what the SPV will receive is the, this, you know, the amount of savings generated through the program over a certain period of time. So yes, the programs, the modelization is built around providing the equity investor with the fair, right amount of return based on the risk level, et cetera. And Ainsworth is the model is based on Ainsworth making his honorable and sustainable margin by executing the project.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

So CIB is a tool that we use because, you know, it enables our clients to not be obliged to put extra debt on their properties, which are sometimes, you know, well-financed. So I think it's a great, great initiative from the government to support this, you know, the decarbonization strategies. Don't you think so?

[Jeff Fenwick, Analyst at Cormark Securities]

Yeah, that's very helpful color. I appreciate that. Thank you. I'll... That's all I had. I'll-

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

You know, it's hard to explain the program of this magnitude in three minutes. So bear with me.

[Jeff Fenwick, Analyst at Cormark Securities]

Absolutely. Thank you.

[Operator]

Ladies and gentlemen, as a reminder, should you have a question, please press Star followed by the one. Your next question comes from Liam Bergevin with Desjardins Capital Markets. Your line is now open.

[Liam Bergevin, Analyst at Desjardins]

Hi, good morning. This is Liam for Fred. Could you share your observations on the M&A environment, more especially on your pipeline in the U.S., where GDI seems to have a significant expansion potential?

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

But, well, listen, as you know, as M&A is part of our day bread and butter, David and his teams are always working actively into it. We feel like the environment is normalizing itself a little bit now. We lived the period where everybody was selling their business and their grandmother in the COVID era, so now we're past that. Now, the business is getting to a new normal. So yes, we're very active. Again, we don't, we don't do not only, you know, for forward-looking, but, you know, I can tell you the team is always very busy exploring opportunities and seeking. But again, that the objective is not to buy businesses, it's to buy business at the right price. That's the ticket.

[Liam Bergevin, Analyst at Desjardins]

Great, that makes sense. And, maybe on the, my second question would be on the acquisition of Rycom, would you be able to quantify your expectations for Rycom's annual revenue generation?

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Well, Rycom, on the revenue side, is not a big needle mover on the revenue side. Rycom is an engineering expert business in providing a layer of expertise and systems that will enable us to go further in our technology approach with our clients. So you know what? You should put, tag this with my prior answers. So the objective behind Rycom is really to support our objective in the technology sector to start with. This being said, you know, you know, Rycom is, you know, I don't know exactly... I don't remember what we disclosed, but, you know what? It's not a significantly high revenue generating business.

[Liam Bergevin, Analyst at Desjardins]

Understood. Well, that's all for me. Thank you for taking my questions.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Thank you.

[Operator]

There are no further questions at this time. I will now turn the call over to Mr. Bigras for closing remarks.

[Claude Bigras, CEO at GDI Integrated Facility Services Inc.]

Well, again, thank you very much for taking the time. I would just like to share with you that, you know, we are, I'm very happy to have a very, very focused team working on our objectives, working on making this business a better business. I'm always. You see, a business is like anything else, a living organism. Sometimes we have little things to address. We're working on, we have worked on it, we're still working on it, and, I'm looking forward to see where we are, where we'll be at the end of the year. But I'm very positive on all the efforts that are deployed. So thank you again for the time.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and as always, please disconnect your lines.

Participants

Executives

• Claude Bigras, CEO
• Stéphane Lavigne, SVP and CFO

Analysts

• Derek Lessard, Analyst at TD Cowen
• Gabriel Moreau, Analyst at Scotiabank
• Jeff Fenwick, Analyst at Cormark Securities
• Liam Bergevin, Analyst at Desjardins
• Zachary Evershed, Analyst at National Bank Financial