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A facility services value stock backed by profitable growth

GDI's investment highlights C$2.6 billion in revenue and C$137 million Adjusted EBITDA. 53 acquisitions sine 2008 including 32 closed since TSX IPO in 2015. Significant opportunity for growth in the U.S. market. Trading at all-time low valuation multiples post-COVID normalization. The rational investor builds conviction in a company through data, steering clear of the narratives and heightened emotions driving the hot stocks of the week. This approach is the surest way to keep a portfolio aligned with long-term value creation but requires constant discipline, based on a thorough due diligence process, to identify the pillars of a worthwhile investment. We can break these pillars down as follows: A proven track record of profitable growth. A target market with strong long-term prospects. Leadership optimally fit to convert these prospects into shareholder value by delivering on the income statement and balance sheet. While by definition elusive, companies that tick these three boxes are present in every industry, often lingering in obscurity because of their small size, understated business and/or absence from the news headlines. A proven compounder with a long-term runway Suppose you begin your search for your next investment encyclopedically, a la Warren Buffett, starting from the A companies listed on the TSX and working your way down, scouring press releases, decks and financial statements, adding high-potential prospects to your watchlist along the way. Not far into the Gs, keeping the bullet points above in mind, you'd likely stop for a closer look at GDI Integrated Facility Services (TSX:GDI), market capitalization C$808.26 million, struck by how the stock seems to be short-changing the underlying company's impressive operational history, including 53 acquisitions since 2004 (32 since it went public on the TSX in 2015) and revenue growth from C$600 million in 2014 to C$2.6 billion in 2024, suggesting the potential for significant value to be harvested over the long term. GDI is Canada's largest integrated facility services provider and one of the top-3 largest in North America, including a high-growth platform in the United States. The company provides commercial janitorial services as well as maintenance, repair and replacement services for most of the equipment in buildings – HVAC, building automation systems, boilers, chillers, etc. It also services the full range of facility types – office buildings, universities and schools, data centers, distribution centers, industrial spaces, healthcare environments, stadiums, hotels, shopping malls and airports. The company's acquisition strategy, focused on principled management teams, strong cultures and strategic regions and business lines, has resulted in one of the most diversified facility service offerings on the continent. It's under this holistic framework that GDI has managed to compound revenue at 19.8% annually from C$169 million in 2008 to C$2.55 billion in 2024, supported by adjusted EBITDA compounded at 18.6% from C$10.6 million to C$137 million, respectively. From a shorter-term perspective, the company has been no less impressive, growing revenue every year over the past five years while generating positive net income, laying the foundation for strong conviction in continued profitable growth. GDI's shares represents a meaningful opportunity given the stock's over 40% decline from its all-time-high in 2021. As an essential services provider, the company dramatically outperformed during the COVID pandemic delivering unsustainably high levels of profitability. As its business normalized in the years post-COVID, its trading multiple has fallen well below pre-COVID levels. If GDI continues to deliver on its proven growth strategy and its trading multiple reverts to historic averages, the shares should deliver outsized returns. Let's analyze GDI's business segments and get meticulous about what this conviction is made of. Business Services Canada segment The company's North American presence is anchored by a leadership position in the Canadian market. Its Business Services Canada segment is the country's largest commercial cleaning operation, significantly larger than its nearest competitor, with two brands specializing in strategic segments of the industry: GDI Integrated Facility Services, the top janitorial provider in all major Canadian markets, focuses on mid-to-large commercial, industrial and institutional facilities in primary markets. Modern Cleaning Concept operates a franchise model equipped to serve multi-location portfolios, such as retail chains, in smaller secondary and tertiary markets. With the largest market share and most entrenched company in Canada, the Business Services Canada segment has grown revenue by approximately 2.5% per year from C$452 million in 2014 to C$585 million in 2024. After normalizing from significant earnings growth during COVID, the business has delivered an adjusted EBITDA margin of 7% each quarter for the past five quarters. Business Services USA segment GDI's Business Services USA segment employs more than 15,000 people and serves clients in 40 states with a focus on commercial janitorial services for the office, education, industrial, healthcare and food sanitization markets. GDI entered the U.S. market with its first acquisition in 2012. The company has made a total of 12 acquisitions in this segment to date and has an office in 15 U.S. cities while serving clients across 40 states. The purchase of Atalian in 2023 stands out as one of its largest and most strategic, adding 2,000 employees with a strong presence in New York, complementing the five-borough presence of its Ainsworth Technical Services segment covered below. Business Services USA has grown revenue by 24% per year since the company's IPO in 2015 to reach C$884 million in 2024. During the same period the segment grew adjusted EBITDA over 6 times from C$9 million to C$55 million. While organic revenue declined in 2024 from the loss of the segment's largest client in Q1 2024, as well as from exiting lower-margin contracts to improve Atalian's margins, GDI has since retraced these dips and is expecting organic growth to reach the historic average by the end of 2025. Business Services USA represents a very large potential for growth. There are over 50 U.S. metro area with a population of 1 million or more, and GDI currently has an office in only 15 of them. With the competitively fragmented (slide 10) and growing US market, which is valued at more than US$300 billion, GDI has a long runway for continued growth by executing on its proven acquisition strategy. Technical Services segment Continuing on our survey of GDI's efficient operations, we have the Technical Services segment, the largest multi-trade services business in Canada, where its technicians are within a one hour truck roll of 90% of the population. GDI entered this business line with an acquisition at the end of 2015 and has grown it to over C$1 billion in revenue through strong organic growth and 19 acquisitions. Operating under the Ainsworth brand, the segment's over 3,500 employees and 2,700 tradesmen have established a leadership position in smart building technologies, while delivering a full suite of HVAC, mechanical, electrical, cabling and energy management services (slide 13), granting it diversified revenue streams across the facility services industry. Technical Services has enjoyed consistent growth as of late, almost tripling revenue from C$375 million in 2019 to C$1.03 billion in 2024, while justifying this greater market share with almost 3x adjusted EBITDA growth from C$21.6 million to C$60 million, respectively, including its strongest Q3 and Q4 to date in 2024 thanks to project-level margin improvements. With 19 acquisitions integrated to date in all major Canadian markets, as well as initial expansion into the US Northwest and Northeast in 2021, GDI intends to leverage the segment's ability to serve clients locally, nationally and on a multi-region basis to reinforce its leadership position. The opportunity to expand this segment in the U.S. market represents yet another long runway for continued growth. GDI posts profitable growth in Q1 2025 GDI's results for Q1 ending March 31, 2025, were marked by profitability and balance sheet optimization. Here are the highlights: Revenue fell by C$28 million or 4% year-over-year (YoY) to C$616 million, largely because of an organic decline of 7% due to a one-time client loss. fell by C$28 million or 4% year-over-year (YoY) to C$616 million, largely because of an organic decline of 7% due to a one-time client loss. Adjusted EBITDA rose by 21% to C$34 million at a margin of 6%, up from C$28 million and 4% YoY. rose by 21% to C$34 million at a margin of 6%, up from C$28 million and 4% YoY. Net income hit C$6 million or C$0.26 per share, up from C$0.4 million or C$0.02 per share YoY. hit C$6 million or C$0.26 per share, up from C$0.4 million or C$0.02 per share YoY. Long-term debt , net of cash, fell by C$14 million during the quarter. Considered alongside the increase in adjusted EBITDA, GDI's leverage ratio now sits below its comfort zone of 3x-3.5x. , net of cash, fell by C$14 million during the quarter. Considered alongside the increase in adjusted EBITDA, GDI's leverage ratio now sits below its comfort zone of 3x-3.5x. Net operating working capital fell by C$9 million in the quarter, reflecting greater efficiencies in billing and project management. The reduction expands to C$53 million since Q3 2023, surpassing the company's C$50 million goal. Let's consider these consolidated results from a segmented perspective to get a better sense of GDI's year ahead. Here's a breakdown: The Business Services Canada segment recorded C$147 million in revenue, up from C$145 million YoY, generating C$11 million in adjusted EBITDA at a margin of 7%. segment recorded C$147 million in revenue, up from C$145 million YoY, generating C$11 million in adjusted EBITDA at a margin of 7%. The Business Services USA segment took in revenue of C$217 million and adjusted EBITDA of C$15 million at a margin of 7%. Revenue declined from C$225 million YoY because of the aforementioned client loss and low-margin contract exits, partially offset by new customer wins. Additionally, revenue from one specific customer fluctuates based on recurring project work volume, which was lower in Q1. segment took in revenue of C$217 million and adjusted EBITDA of C$15 million at a margin of 7%. Revenue declined from C$225 million YoY because of the aforementioned client loss and low-margin contract exits, partially offset by new customer wins. Additionally, revenue from one specific customer fluctuates based on recurring project work volume, which was lower in Q1. Technical Services earned revenue of C$246 million, down from C$260 million YoY, and adjusted EBITDA of C$12 million (5% margin), up from C$6 million (2% margin) YoY. The quarter represents Ainsworth's highest adjusted EBITDA margin in Q1 since acquiring the business in 2015. earned revenue of C$246 million, down from C$260 million YoY, and adjusted EBITDA of C$12 million (5% margin), up from C$6 million (2% margin) YoY. The quarter represents Ainsworth's highest adjusted EBITDA margin in Q1 since acquiring the business in 2015. The Corporate and Other segment took in C$6 million and negative adjusted EBITDA of C$4 million, down from C$14 million and C$2 million YoY, reflecting a divestiture from the segment's distribution business to focus on higher-margin manufacturing both in-house and for a growing list of white-label clients. Claude Bigras, GDI's president and chief executive officer, put these results into context in the Q1 news release, stating that 'each segment delivered profitability levels that were either in-line or above expectations, which contributed to a 21% increase in adjusted EBITDA over Q1 2024. Business Services Canada has been performing well with a very stable margin profile. Organic growth at our Business Services USA segment is expected to show progressive improvement through the year and rebound to more historic levels by Q4. Ainsworth will continue to focus on higher-margin business, and the outlook is positive. I am looking forward to GDI delivering on our expectations for the remainder of 2025.' With a handful of potential acquisitions in the pipeline and a balance sheet healthy enough to wait for undervalued opportunities to present themselves, GDI has set preliminary goals of C$3 billion in revenue and C$200 million in EBITDA on a run-rate basis by the end of 2026 – up from C$2.55 billion and C$140 million in 2024 – keen on expanding its almost two decades of profitable growth and continuing to foster shareholder value with no narrative required, just greater market share and cold, hard cash. A textbook value stock Resistant to recessions thanks to operating in an essential industry and shielded from the news cycle by fitting firmly in the proverbial under-the-radar business category, GDI epitomizes what single stock investors are looking for when they set out in search of the highest probabilities for market-beating returns. The company's strong fundamentals and exponential growth potential, trusted in the right hands, paired with a stock nearly cut in half from its all-time high, offer you exposure to a concentrated, data-driven case for a significant re-rating, one where profitable growth reaches a breakout point and can no longer be ignored by the broader market. Until this moment comes, you have an opportunity to invest at a pessimistic price, which fails to reflect the business' ability to consistently generate cash and bankroll the expansion of its proven acquisition track record. Join the discussion: Find out what everybody's saying about this facility services stock on the GDI Integrated Facility Services Inc. Bullboard and check out Stockhouse's stock forums and message boards. This is sponsored content issued on behalf of GDI Integrated Facility Services Inc., please see full disclaimer here.