Financial Insights That Matter
Written by Aditya Raghunath at The Motley Fool Canada
Valued at a market cap of $800 million, GDI Integrated Facilities (TSX:GDI) specializes in outsourced facility management services across Canada and the United States. It provides comprehensive cleaning, mechanical maintenance, and building systems services. GDI operates approximately 700 franchises and serves diverse clients, including office buildings, shopping centers, hospitals, airports, and educational facilities.
Its services portfolio ranges from basic janitorial work to specialized technical services like HVAC maintenance, building automation, and security systems, along with cleaning product manufacturing and distribution.
In the last 10 years, GDI has returned close to 450% to shareholders, comfortably outpacing the broader market returns. However, it currently trades 42% below its 2022 highs, allowing you to buy the dip and gain exposure to an undervalued TSX stock.
GDI Integrated Facility reported revenue of $640 million in the third quarter (Q3) of 2024, an increase of 4% year over year. Its growth was attributed to acquisitions and a strong U.S. dollar, partially offset by an organic decline of 2%.
The Technical Services business achieved its highest adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin of 8% since 2015. Its strong performance marks a turnaround from challenges faced over the past 12 months, with the segment generating $20 million in adjusted EBITDA during the quarter, up $4 million year over year.
Both Canadian and U.S. operations maintained a stable performance in the Business Services division despite additional costs. The Canadian segment recorded revenue of $145 million with an 8% adjusted EBITDA margin, while the U.S. segment generated revenue of $222 million, boosted by the Atalian and Paramount acquisitions. However, the U.S. segment faced some headwinds due to the loss of a major customer in Q1 of 2024.
In Q3, GDI’s chief executive officer, Claude Bigras, highlighted the company’s successful debt reduction initiatives, as its operating working capital decreased by $25 million over the last three months. Combined with strong free cash flow generation, GDI reduced its net debt by $41 million in the September quarter. GDI expects to strengthen its balance sheet further through the planned sale of two former Superior Solution facilities, which is projected to generate $25-30 million in proceeds.
GDI remains optimistic about its future performance, particularly in its Technical Services segment, where the backlog remains near record levels with widening margins. Additionally, new contract wins are expected to start over the next two quarters and should support organic growth targets in the near term.
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