Earnings call transcript: GDI Integrated Q2 2025 Misses Forecast, Stock Falls

GDI Integrated Facility Services reported its Q2 2025 earnings, revealing a significant miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of -$0.04 against a forecasted $0.285, resulting in a negative surprise of 114.04%. Revenue also fell short, coming in at $610 million compared to the expected $669.2 million, an 8.85% miss. Following these results, GDI’s stock dropped by 13.35%, closing at $29.27, near its 52-week low. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations, with two analysts recently revising their earnings expectations downward for the upcoming period.

Want deeper insights? InvestingPro offers 8 additional investment tips for GDI, including crucial metrics and valuation analysis.

Key Takeaways

• GDI Integrated’s Q2 2025 EPS and revenue fell significantly short of expectations.
• The company’s stock decreased by 13.35% following the earnings release.
• Adjusted EBITDA remained stable, but revenue declined year-over-year.
• GDI is focusing on higher-margin, technical service sectors for growth.
• Economic uncertainty and high vacancy rates are impacting the business.

Company Performance

GDI Integrated reported a 5% decrease in Q2 2025 revenue compared to the same quarter in 2024. Year-to-date revenue also showed a decline of 4%. Despite these challenges, the company maintained its adjusted EBITDA at $34 million, with a slight increase in the EBITDA margin to 6%. The Canadian business service segment showed a modest 1% revenue increase, while the U.S. segment experienced an 8% decline. Notably, InvestingPro data reveals the company maintains a perfect Piotroski Score of 9, indicating strong financial health, while its current ratio of 1.26 shows adequate liquidity to meet short-term obligations.

Financial Highlights

• Revenue: $610 million, down 5% year-over-year.
• Earnings per share: -$0.04, missing the forecast by $0.325.
• Adjusted EBITDA: $34 million, unchanged from Q2 2024.
• Adjusted EBITDA Margin: 6%, up by 1% from the previous year.

Earnings vs. Forecast

GDI Integrated’s Q2 2025 earnings were significantly below expectations, with an EPS of -$0.04 compared to the forecast of $0.285, marking a 114.04% negative surprise. Revenue also missed the mark, coming in at $610 million against a forecast of $669.2 million, an 8.85% shortfall. This substantial miss contrasts with the company’s previous performance, where it had shown more stability.

Market Reaction

Following the earnings announcement, GDI’s stock fell by 13.35%, closing at $29.27. This drop places the stock near its 52-week low of $29.27, reflecting investor disappointment with the earnings miss. The decline contrasts with broader market trends, where many companies have shown resilience despite economic uncertainties.

Outlook & Guidance

Looking ahead, GDI Integrated anticipates continued softness in its business services segment, with a return to normalized organic growth expected by late 2025. The company remains optimistic about its technical services segment, citing a near-record project backlog with improved margins. InvestingPro’s comprehensive analysis indicates an overall Financial Health score of "GOOD," with particularly strong ratings in profit and price momentum metrics.

For detailed valuation analysis and expert insights, access the full GDI Research Report, available exclusively on InvestingPro, along with reports for 1,400+ other top stocks.

Executive Commentary

Claude Girouard, CEO, emphasized a focus on profitability, stating, "We need to make sure that the business we do is profitable." He also highlighted the importance of maintaining margins over aggressive growth, reflecting a strategic shift towards higher-margin service sectors.

Risks and Challenges

• Economic Uncertainty: Ongoing economic challenges could further impact revenue.
• High Vacancy Rates: Elevated vacancy rates in commercial real estate may affect demand.
• Cost Management: Clients are aggressively managing costs, potentially reducing service demand.
• Market Softness: Anticipated softness in the business services segment could persist.
• Competitive Pressure: The need to maintain margins may limit growth opportunities.

Q&A

During the earnings call, analysts inquired about contract churn in the commercial real estate sector and GDI’s strategy of prioritizing margins over volume growth. The management confirmed an ongoing M&A pipeline and a disciplined approach to acquisitions, aiming for more reasonable multiples.

Full transcript - GDI Integrated (GDI) Q2 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to the GDI Integrated Facility Services Inc. Second Quarter twenty twenty five Results 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 0 for the operator.

This call is being recorded on Thursday, 08/07/2025. I would now like to turn the conference over to Shaul Etienne Giroir, Senior Vice President and Chief Financial Officer. Please go ahead.

Jonathan Girouard, Senior Vice President and Chief Financial Officer, GDI Integrated Facility Services: Thank you, operator. Good morning all, and welcome to GDI conference call to discuss our results for the 2025. My name is Jonathan Girouard. I am senior vice president and chief financial officer of GDI. I am with Chubb Girouard, president and CEO of GDI, and David Hinchi, 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 of the MD and A filed on SEDAR last night. I will begin the call with an overview of GDI financial results for the 2025 and will then invite Phil to provide his comments on the business. In the second quarter, recorded revenue of 610,000,000, a decrease of 29,000,000 or 5% over 2024. This is mostly due to the organic decline of 4%. GDI recorded adjusted EBITDA of 34,000,000,000 in the quarter, in line with q two twenty twenty four, which represents an adjusted EBITDA margin of 6%, increasing 1% over q two of last year.

On a year to date basis, revenue reached 1,230,000,000.00, a decrease of 57,000,000 or 4% over the same period of 2024. Year over year decline was primarily due to an organic decline of 5%. Adjusted EBITDA in the first half of the year amounted to 67,000,000, an increase of 6,000,000 or 10% over the corresponding period of 2024. Our Business Service Canada segment recorded revenue of 147,000,000 in the second quarter, up 1% over q two twenty twenty four, while generating 10,000,000 in adjusted EBITDA, down 1,000,000 compared to q two last year. Adjusted EBITDA margin was 7% compared to 8% in Q2 twenty twenty four.

Our business service USA segment recorded revenue of $2.00 $4,000,000 in Q2, a decrease of 8% over Q2 twenty twenty four. The segment experienced an expected organic decline of 11% in Q2, which reflects the bearing down of low margin accounts from our Italian acquisition, which was carried out through the course of fiscal twenty twenty four as well as the loss in q one twenty twenty five of the remaining 20% of their large client loss during q one of fiscal twenty four. In addition, revenue generated by one customer situated based on the volume of recurring project work, which was lower in the 2025 compared to last year. This segment reported adjusted EBITDA of 14,000,000, representing an adjusted EBITDA margin of 7%, an increase of 1% over q two last year. The technical service segment recorded revenue of 252,000,000 compared to $2.64 in Q2 last year.

The segment generated adjusted EBITDA of 14,000,000, which is $2,000,000 higher than Q2 twenty twenty four, representing an adjusted EBITDA margin of 6% compared to 5% in Q2 twenty twenty four, the increase being mainly attributable to higher margin and product revenue. Finally, our corporate and other segment reported revenue of $7,000,000 compared to last year and negative adjusted EBITDA of $4,000,000 compared to $3,000,000 in Q2 twenty twenty four. I would like to turn the call to Claude, who will provide further comments on GDI performance during

Claude Girouard, President and CEO, GDI Integrated Facility Services: the quarter. Thank you, Charlottetienne. Merci. And thanks to everyone participating in our GDI Q2 twenty five earnings call. I’m relatively pleased with GDI’s overall performance in Q2 this year.

Our business service Canada segment delivered results that were in line with historic performance. However, we began to experience some softness in the business during the quarter. We had a higher than normal degree of churn in our client base, which we believe is due to higher than historic vacancy rate coupled with economic uncertainty from the threat of tariffs. This has caused some of our clients to either bring contract to market or otherwise pressure margins. And in response to this, we have taken strategic action to reduce our cost structure across the business.

We also have invested in new sales resources in both Canada and The US to enhance both client retention and stimulate organic growth. We expect continued softness in the business over the next few quarters as the initiatives we have implemented takes hold, and we’ll continue to focus on winning business with a margin profile that is sustainable for the long term and the good health of the business. Our business service US segment had a good quarter. As we have previously managed message, organic growth was hampered by the bearing down of low margin contracts and some from the Italian acquisition and that that was carried out to 02/2024. Additionally, as expected, in Q1 twenty twenty five, we have terminated the remaining 20% of the business from the large client that existed in Q1 twenty twenty four.

Despite this decline in revenue, the business delivered the same level of adjusted EBITDA on a quarter over quarter basis with an increase in EBITDA margin from 6% to 7%, which is the important part of the equation. Our business service UFS segment has secured a number of new contract wins that we are expecting to start up in q three, and we’ll continue to expect a return to historic organic growth level towards the 2025. In mid twenty twenty four, we have implemented and adjusted our sales strategy with a greater focus on higher growth and higher margin end markets and invested in resources in both sales and operations to target these markets. The strategy to grow our business service segment is stick in the stickier market where cleaning is more technical, give us the ability to develop long term partnership with our clients. And to date, these initiatives have been successful, and we have been realizing new contract wins.

GDI technical segment had a very strong quarter, generating $14,000,000 in adjusted EBITDA and a margin of 6%. In what is typically the segment’s second weakest quarter. Notably, we delivered this result in a quarter where revenue were under pressure. A slow start to summer caused lower than anticipated HVAC service revenue and due to the economic uncertainty, certain clients delayed the startup of project work. The outlook for this business remained quite positive, and we are seeing very high temperature across Canada and The US, Northwest, which is helping our HVAC service business.

Additionally, our project backlog is close to record high, and backlog margin is 100 to 200 basis points higher than the start. As work is currently firing on all cylinders. During q two, our operation and finance team continued to focus on GDI balance sheet. Working capital was stable in q two compared to q one twenty twenty five, and we generated a slight decrease of long term debt. The structural initiatives that we put in place at the ’23 and early twenty four are bearing fruit, and our team is remaining is remaining focused on cash efficiency.

Our balance sheet is strong. Our leverage ratio sits comfortable under three times EBITDA, and we’re well positioned to execute on our growth strategy. So that concludes our formal portion of the earnings call. Operator, please open the line to analyst questions.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you wish to decline from the polling process, please press star followed by

Claude Girouard, President and CEO, GDI Integrated Facility Services: the two. If you are using a

Conference Operator: speakerphone, please lift a handset before pressing any key. Your first question comes from Cheryl Zhang with TD Cowen. Your line is now open.

Cheryl Zhang, Analyst, TD Cowen: Good morning, everyone. This is Cheryl calling from morning. Morning.

Claude Girouard, President and CEO, GDI Integrated Facility Services: Thanks for

Cheryl Zhang, Analyst, TD Cowen: taking my question. So my first question is with regards to Business Service Canada. In the press release, you commented on the softness of that business with higher level of contract churn and margin pressure. Just curious if you can provide more color around what you’re seeing in demand and what you’re hearing from your customers.

Claude Girouard, President and CEO, GDI Integrated Facility Services: Thank you, Cheryl. But what we’re looking at the market is there isn’t and what we’re seeing with our customer base is there is definitively a cost, I would say, an aggressive cost management approach to to business. So we are navigating through that. Our focus remain on customer retention. And, you know, and again, I’ve been saying it for years is our focus is always on keeping the margin and having sustainable margin.

So, yes, it’s a little bit costly on the term, but we we are investing instead of cutting margins to a point where it’s not sustainable to do business. We are focusing on sales growth and investing in that. But, yes, you know, there’s a general sense in the business of, you know, savings, and we don’t wanna get entangled into, you know, a a downward spiral of profitability.

Cheryl Zhang, Analyst, TD Cowen: Got it. That’s very helpful. And maybe one more before I review. So on Business Services USA, you noted that you have secured several new contract wins to offset the loss of that remaining business of a major client. Just curious what is the nature of these new contracts?

Like, what type of industry or what type of work?

Claude Girouard, President and CEO, GDI Integrated Facility Services: Okay. Well, I would say first, I would like to say that, as you know, about a year and a half ago, two years ago, we start with the building a strong sales team. I’m I I should not maybe say that, but I’m very happy that we started that some time ago because we would be in a difficult it it would be a little more difficult or more challenging for us. The team is really delivering, especially in The US, and now we’re implementing the sales strategy in Canada. So this has been delivering good result.

We operate mainly in our traditional sectors, industrial. But like I was saying, the good news is we have invested on operating and business development talent and some very, I would say, margin and and you know, more technical sector of cleaning. You know, it’s it’s it’s a it’s a big big undertaking, but we have seen very good win this year so far. So we continue to focus on that. So the idea is you have to sell to cope for what we have lost, keep the margin, and at that end, get more business in higher end markets where the margins are more sustainable.

It’s a very simple strategy, but it would be proven to be efficient in times where we’re doing it.

Cheryl Zhang, Analyst, TD Cowen: Got it. That’s very helpful. Thanks so much. I’ll reach you.

Claude Girouard, President and CEO, GDI Integrated Facility Services: Thank you.

Conference Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next your next question comes from with Desjardins. Your line is now open.

Claude Girouard, President and CEO, GDI Integrated Facility Services: Good morning. Good morning,

Frederic, Analyst, Desjardins: Just coming back to Canada. You know, in The US, we’ve seen the I walk away from some low margin contracts at Italian, for example. Just trying to gauge the, I guess, your your view on Canada as it relates to the the margin pressure. Are you willing to also walk away from some some agreements and sacrifice a bit of the growth near term to to make sure that you sustain those those margins that we’ve seen in past quarters there?

Claude Girouard, President and CEO, GDI Integrated Facility Services: Well, Frederic, this is you know what? This I would say it like this. This disciplined approach sometimes is costly on ego. But again, you know, this is exactly what we do is we are not we are really, really working hard with customers, but there’s a point where we cannot just reduce it to a point where it will attack our either our quality and reputation or the margin. So, yes, it’s a costly decision to do on the top line.

But on the bottom line, if you look, you know what, the loss of margin is not comparable to the decline in organic growth because we are keeping the disciplined approach to pricing. And that’s the only ticket long term. Short term, you know what? Yeah. I get I get beaten up a little bit, but long term, I think it’s the right thing to do.

Frederic, Analyst, Desjardins: Yeah. That’s really helpful comments. Thanks for that. Maybe switching to Business Services USA. I think last quarter, you you sort of mentioned that you expected organic growth there to come back to more normalized levels around late twenty twenty five.

You know, we’re seeing minus 11% organic decline in in q two. Is your expectation still to be more at normalized level towards the end of this year or has that changed?

Claude Girouard, President and CEO, GDI Integrated Facility Services: Well, the answer is is twofold. There is a mathematical answer. We left this huge client last year, and and you know what? We hear that they would be coming back to the market sooner than later. So that’s not a bad thing, but that’s the fewest clients.

So mathematically, as, you know, the quarter passes and we keep this numbers in organic growth, you know what, it would do an upswing. And secondly, we’re very strong sales approach will also pop up these numbers. So this is why we said by the 2025, it should all adjust then and back into a normal organic growth. But a little bit of it is mathematical through the the the client movements for sure.

Frederic, Analyst, Desjardins: Yep. Understood. Okay. And then just lastly for me on potential m and a. Just wanted maybe to get a few comments on what you’re seeing in terms of the, you know, the flow and, I guess, number of opportunities.

Has that changed lately one way or the other? And similarly, like, multiples that sellers are expecting? Like, are you are you seeing a good pipeline of of transactions that you could potentially complete at similar multiples than what we’ve seen you do in the past?

Claude Girouard, President and CEO, GDI Integrated Facility Services: Okay. Okay. So, Frederic, let me do a comment. Again, the they just will look at me as a big eye, but listen. You know, lately, what we have been seeing is, you know, we’ve been looking at some businesses that were very aggressive over the last three, four years on acquisitions.

And if you remember, I was saying that we have to keep discipline. I can tell you that I’m very happy we kept discipline. So you know what? You cannot be you cannot buy everything at any price and and be happy and have no debt and, you know, generating cash. So I’m very happy we kept our disciplined approach to that.

Secondly, yes, there is a pipeline. We’re working hard on it. Again, disciplined approach is the key element. The merge you know what? The multiple that we were seeing during COVID, a little bit pre COVID, right, there there was a lot of, I would not say, private equity back.

I did not say it. Businesses that were actually, I would say, driving the multiple up. I think that is more quiet on that front. So I think we’re reverting back to a more reasonable multiple. And, hopefully hopefully, I will work with their future sooner than later.

Frederic, Analyst, Desjardins: Okay. That’s helpful. I think so.

Claude Girouard, President and CEO, GDI Integrated Facility Services: Okay. Good.

Conference Operator: Your next question comes from Zachary Evershed with National Bank Financial. Your line is now open.

Claude Girouard, President and CEO, GDI Integrated Facility Services: Good morning, Zachary. Good morning.

Frederic, Analyst, Desjardins: Could you go into more detail on the specific types of contracts that are experiencing the highest churn? Any particular customer type or region?

Claude Girouard, President and CEO, GDI Integrated Facility Services: You know, could I would say that, you know, I don’t have my latest latest report on business segment, but I would say it’s more in the traditional b and I businesses more or less. This is where we experience the largest churn, commercial real estate. So this is where we have to and this I would say that this these sectors are compressible on service short term. So I think that these clients, as soon as the market, I think, will get in a better place and they realize that there is a cost of reducing their services will come back to the market. This is what we have seen.

And and every time I’ve been in this for forty forty years almost. I see this all the time. There is a big contraction in margin pressure. Customers, you know, they they they do some they they do manage differently and they come back to a more normal sector and we’re happy campers. So, yes, BNI has been primarily the sector.

Frederic, Analyst, Desjardins: Got you. Thanks. And has that affected your outlook for the sector in the context of hybrid work and downtown office occupancy trends?

Claude Girouard, President and CEO, GDI Integrated Facility Services: Well, for sure, you know what? We see that there is a reoccupancy that is gradually getting in place. You know, I I cannot tell you exact you know, I don’t have a forecast of occupancy in the next one to three quarters, but I do feel like over the next two, three, four quarters, we’ll see occupancy to gradually also increase. That but this is what to be expected at some point.

Frederic, Analyst, Desjardins: Got you. Thanks. And then just one last one for me. Could you give us a refresher on the types of strategic initiatives you’re implementing to address that margin pressure and contract churn?

Claude Girouard, President and CEO, GDI Integrated Facility Services: Okay. One is I would say that we are working well, Zachary, the only as our book, the only right strategy in those times is to keep focus and focus on sales and business development. You know what? We are focusing on higher margin sectors where we feel it’s more sticky, but it it is an investment. We invested couple of millions of resources and technical and expertise and systems, but it’s the right thing to do.

Secondly, we continue to invest and grow our sales force across both markets because, again, the remedy to churn is not to cut margin, it’s to be more aggressive in developing customers. So this is the the two main things we’re doing on our strategy. Thirdly, for sure, we have to adjust and we adjust our operating expenses, but without sacrificing, you know, the sustainability of the company and, you know but we are coping with the market volatility. But again, you know what? The shrinking your rate of greatness is not the best approach all the time, but we are just paying to market volatility.

So this is mainly the strategy we’re doing to cope with the churn and the market pressure.

Frederic, Analyst, Desjardins: Thanks very much. I’ll turn it over.

Conference Operator: There are no further questions at this time. I will now turn the call one moment, please. There’s another question from Cheryl Zhang with TD Cowen. Your line is now open.

Cheryl Zhang, Analyst, TD Cowen: Hi. Thank you. Just just a couple follow ups. So one, so is there any update on the timing of the Static Solutions Building Sale?

Claude Girouard, President and CEO, GDI Integrated Facility Services: Okay. Oh, yes. You know, the the the the the the the the Static Solutions Building, we expect to close probably, like, by the September. The building is, as you know, is still under contract. Most of the I’m sorry to say the my English is bad.

I’m gonna need help. Conditions? Okay. Thank you. Most of the conditions are waived.

So we’re just expecting to close at the end of between now and the September.

Cheryl Zhang, Analyst, TD Cowen: Got it. Thank you. And are there any changes to your expectations for working capital and CapEx for for the year?

Claude Girouard, President and CEO, GDI Integrated Facility Services: Okay. And you what, Michelle? Can can I just go back to the first question? You asked me the Family Solution Building for me. It’s a Quebec building.

This is the one you were referring to?

Conference Operator: Yes.

Claude Girouard, President and CEO, GDI Integrated Facility Services: Thank you. So can you repeat the question, the your second question, please?

Cheryl Zhang, Analyst, TD Cowen: Yes. So I was just curious if, like, what your expectations are for working capital and CapEx for the rest of the year.

Claude Girouard, President and CEO, GDI Integrated Facility Services: CapEx, we’re very savvy on CapEx for sure in those market conditions. You know, again, it’s cash is king. So we’re very savvy. We we spend money where we have new project, new contracts, and and where we need to replace some equipment. But we are not we’re not overspending.

We’re keeping our IT transformation program because it’s very important. And on cash management, we continue to be very adamant on managing cash. People are at all hands on bridge on managing the cash, managing our customer DSOs. And so, yeah, this is the first priority all the time. As you see, you know what, we’re not depleting cash.

We’re paying the debt a little bit, and we expect between now and the end of the year, it’s gonna continue to to to improve improve. Yeah.

Cheryl Zhang, Analyst, TD Cowen: Okay. Got it. Great to hear. And and just one final one for me. So how how is this project volume trending in technical services and what is the backlog in in that business?

Claude Girouard, President and CEO, GDI Integrated Facility Services: Okay. Well, you know what? For sure, it’s normal. We always we focus always on, you know, the child that shows a little bit of volatility. But on the technical side, you know what?

I think a lot of things have happened over the last year. As you see, even though we had a slower start of the season, even though that our revenues were a little bit down, you saw the margin increase, and we’re very optimistic between now and the end of the year. So the work we have done there is really breaking, you know, bearing fruit. And the backlog is still very high, almost like it is like our record high. And the more and the set margin is about a 150 to 200 bps higher.

So it’s all very good signs. So, yes, the technical business, we’re optimistic on it. And again, if we own the business side, the business service side, we have this a little bit of a piece because of the market volatility. On the technical side, we are doing good. So, you know, I think I we’ll take everything we can take.

Cheryl Zhang, Analyst, TD Cowen: Okay. That is awesome. Sorry. Just one final one for me. So in the business services USA, you highlighted one of the new customer contractors of volume kind of as of both between quarter and how low volumes, I think, from q four through q two.

I’m curious where you see volume trending in the 2025.

Claude Girouard, President and CEO, GDI Integrated Facility Services: You know, it’s again, I think everybody knows what’s happening lately in in the global geopolitics and everything. So this I have no control over it. So but, again, I can tell you this is with what we’re doing in The US, the effort of the sales teams, the wins that we have, the start up we have in q three, that’s what’s pending that, you know, what the, you know, the the clients are still very adamant on savings. I think that by the end of the year, we’re gonna be back to a normal cruise and speed on the business US. But again, yes, the top line.

But the bottom line, I think it’s still pretty pretty acceptable. And again, this is always the focus I’m saying to the team is, you know what, we need to make sure that the business we do is profitable. This is always the key element.

Cheryl Zhang, Analyst, TD Cowen: Got it. Thanks so much for answering all my questions.

Claude Girouard, President and CEO, GDI Integrated Facility Services: Alright. No problem. My pleasure.

Conference Operator: There are no further questions at this time. I will now turn the call over to Code for closing remarks.

Claude Girouard, President and CEO, GDI Integrated Facility Services: Well, thank you very much, operator. Thank you everyone for participating in our call. As as we said, you know, we’re spending time and working on the, you know, and improving the business service segment, working on sales growth. And, you know, as we are navigating in some volatility, I do believe that we’re doing the right things. And people are focused on the business.

And, again, our strategy is based on business sales and business growth. It’s on adjusting the business and then keeping the margin and optimizing our technical business. This is a simple strategy, but that’s a strategy that people understand. And it’s a strategy that will make us go through, you know, those times and win, you know. So this is our focus.

So thank you again, and I wanna thank the team for all the efforts we’re doing, and and we look forward to continuity in the next quarters and to improve. Thank you very much.

Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please

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