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Edited Transcript of IBG.TO earnings conference call or presentation 9-Aug-19 12:30pm GMT

Q2 2019 IBI Group Inc Earnings Call

TORONTO Sep 1, 2019 (Thomson StreetEvents) -- Edited Transcript of IBI Group Inc earnings conference call or presentation Friday, August 9, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Scott E. Stewart

IBI Group Inc. - CEO & Director

* Stephen B. Taylor

IBI Group Inc. - CFO

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Conference Call Participants

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* Frederic Bastien

Raymond James Ltd., Research Division - MD & Equity Research Analyst

* Maxim Sytchev

National Bank Financial, Inc., Research Division - MD & AEC-Sector Analyst

* Michael Tupholme

TD Securities Equity Research - Research Analyst

* Nauman Waqar Satti

Laurentian Bank Securities, Inc., Research Division - Associate of Research

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. Welcome to the IBI Group Second Quarter 2019 Results Conference Call. Please note that IBI's complete financial statements and management's discussion and analysis for period ended June 30, 2019, were filed on SEDAR and have been posted on IBI's website at www.ibigroup.com. (Operator Instructions) As a reminder, this conference is being recorded.

Some of the statements made on today's call might contain forward-looking information. Listeners are cautioned not to place undue reliance on these forward-looking statements since a number of factors could cause the actual future results to differ materially from the targets and expectations expressed. The company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, unless expressly required by applicable securities law. For further information on risk factors, please view the company's annual information form filed with the Canadian Securities Regulatory Authorities and available on the company's website, the SEDAR website or by contacting the company.

All amounts discussed today are in Canadian dollars, unless otherwise stated.

I would now like to turn the conference over to Mr. Scott Stewart, Chief Executive Officer for IBI Group. Please go ahead.

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Scott E. Stewart, IBI Group Inc. - CEO & Director [2]

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Good morning, and thank you for joining us to review IBI's second quarter 2019 results, which were released yesterday afternoon. I'm here with IBI's Chief Financial Officer, Stephen Taylor.

For the second quarter, IBI demonstrated the strength of our business model, which is centered on urbanization and our 3 operating segments: intelligence, buildings and infrastructure. I'm very pleased with our strong Q2 results, during which, IBI generated adjusted EBITDA that was 34% higher than the same period in 2018 and a robust adjusted EBITDA margin of 12.6%.

IBI's transformational pivot to a technology-driven design firm will further improve our margins with continued growth, especially in our intelligence practice. To date, in 2019, we have continued the successful execution of our technology-focused strategic plan.

To set the stage, I will review the operational accomplishments in the second quarter and year-to-date, followed by Stephen sharing an overview of our financial results.

In Q2, we achieved notable successes and saw a positive traction with several of our launched products, including our asset management solution, InForm, and our Smart City platform.

IBI was awarded 7 new InForm contracts in India, and we have a growing pipeline of opportunities both in Canada and globally. We were also awarded a 5-year $1.6 million contract for our Smart City platform in [Hyderabad], India, and we'll also be integrating our Smart City platform on a project in San Pedro Sula, Honduras. In addition, we are preparing a Smart City road map for a 50-acre mixed-use development in Silicon Valley, a further opportunity to showcase our InForm and Smart City products.

We are increasingly working with our network of private sector development clients in implementing Smart City strategies, including energy-saving and green initiatives. This is an important added value in considering our current 55 major urban development projects across North America, representing some-5,000 acres of developable land. Developers see the value of -- for their end-use clients and are continually looking for technology-enabled and sustainable solution in their living experiences.

Other notable wins in the Smart City space include a major 150,000-kilometer fiber-optic communications projects in [Telangana], India. This is in addition to an ongoing contract of 36 -- 32,000 kilometers of fiber-optic network installation in the state of Chhattisgarh and the successful bid for an intelligent transportation system for Chennai Metropolitan Area fees of $4 million. These wins built off of our existing portfolio of Smart City work in India, the U.K. and North and Latin America, which combines our strong background in Smart City strategy work with our experience in the implementation and operation of technology.

As a general comment, Q2 was a very successful quarter for our India operations as we are awarded contracts totaling CAD 15.3 million.

In addition to the Smart City wins, we have also won a major toll project in Bangalore, India. The project includes 102 toll lanes valued at $4.5 million with a 5-year annual recurring revenue stream. This is in addition to the current toll projects underway in Greece, Mexico and the soon-to-be-opened toll system on the Mackinac Bridge, Michigan. These projects add to our global installed base of approximately 1,000 toll lanes.

We won the Florida Department of Transportation GreenWay project valued at $3.3 million. This project includes the development of a multimodal transformation solution for Orlando in partnership with the University of Central Florida. This win, combined with our application of the OpenTripPlanner, data tools and our TravelIQ product, provides a foundation for IBI to deliver mobility as a service, which is a growing movement towards combining public and private transportation operations to create a unified, efficient and convenient transportation service for the public.

This project adds to our active body of work in the sector, which includes strategic development for the City of Dayton, Ohio; the Mobility on Demand project in Portland TriMet; and the development of the San Francisco Airport's Ground Transportation Management System, which integrates with ride-sharing companies, Uber and Lyft.

We are also providing travel demand and revenue forecast for several investment funds, including CPPIB, CDPQ, Brookfield and Macquarie, are looking to expand their asset portfolio on highways in India.

Work in our building infrastructure practice remains stable, and the delivery of large and linear transit projects continues to be a hallmark of the firm. In Q2, we are awarded the lead architecture role and 2 new transit stations in Seattle's Downtown Redmond line. And our current body of work is significantly encompassing some 44 stations, 10 surface transit stops and 13 maintenance facilities in the design infrastructure phase. Of the note, this work is global, with major projects in Tel Aviv to Vancouver. What's also important is that IBI has some 30 stations in the bidding phase.

Our Living+ practice has also had an impressive quarter. And IBI's architectural portfolio is increasingly being recognized in a global scale through major design awards and international media coverage. In Eastern Canada, in Q2, we were awarded 27 new residential buildings, representing 1/3 of the current workload.

We have also been awarded a number of feasibility studies, including a 20-acre master plan. In Western Canada, we were awarded 28 new residential and hospitality commissions, including 18 projects in Vancouver and the Lower Mainland, 2 in Kelowna and 1 in Calgary.

In the U.S., we won 5 projects in Southern California, with additional project wins in Reno and Seattle.

These wins add to our global portfolio of buildings under design or construction, representing the success of the West Coast strategy that we put in place.

We are maintaining our 2019 total revenue forecast at approximately $374 million with approximately $397 million of work that is committed and under contract for the next 5 years, translating to approximately 12 months of backlog.

I will now hand over the call to Stephen Taylor, our Chief Financial Officer, who will provide an overview of IBI's key financial results. Stephen?

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Stephen B. Taylor, IBI Group Inc. - CFO [3]

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Thank you, Scott. IBI's Q2 net revenue growth was largely driven by our U.S. buildings and intelligence practices, which posted revenue increases of 14.7% and 15.7%, respectively, over Q2 2018.

In Canada, revenue from the infrastructure practice increased 4.5% compared to Q2 2018, while the intelligence and building segments remained stable. During the first half of this year, continued performance improvements from the U.S. buildings practice led to revenue increases of 10.7%, while the U.S. intelligence practice increased revenue 14.2% compared to the first half of 2018.

For the first 6 months of 2019, our Canadian building practice realized revenue growth of 4.5% relative to the same period in 2018 and related to improvements in living and mixed-use buildings, while the Canadian infrastructure practice grew revenue 1.4% over the first half of 2018.

IBI's robust revenue generation in Q2 led to total adjusted EBITDA of $12.2 million, an increase of 34% compared with the second quarter of 2018 and $22.9 million for the first half of the year, a 26% increase over the first half of 2018. This led to healthy adjusted EBITDA margins of 12.6% in Q2 and 12% for the first half of 2019.

Our U.S. operating segment continued to improve, generating $1.5 million of adjusted EBITDA in Q2 and $3.3 million for the first 6 months of 2019, which is a significant increase over the prior year periods and reflects our continued cost savings realizations stemming from our strategic tech pivot initiatives, combined with a restructuring of operations in the region.

As of June 30, 2019, the U.S. segment had a 25% increase in backlog to be completed in the remainder of the fiscal year related to a more rapid pace of securing future work. In the second quarter, IBI's net income from operations was $5.6 million or $0.15 per share basic and diluted and 88% increase over Q2 in 2018 and a 20% -- and 20% higher than Q1 2019.

Net income totaled $3.9 million in Q2 2019, 219% higher than Q2 2018 and a 67% increase over Q1 2019, largely due to adopting the impact of IFRS 16.

Q2 and first half 2019 cash flows from operating activities rose to $6 million and $13.8 million, respectively, compared to cash flows used in operating activities of $5 million in Q2 2018 and $1.5 million in the first half of last year, which represents a $15 million swing.

Based on forecast for free cash flow generation in 2019, IBI continues to prioritize strengthening the balance sheet with a debt reduction target of approximately $10 million in the -- by the year-end 2019 and a forward debt to adjusted EBITDA ratio, which is to be maintained between 2 and 2.5x adjusted EBITDA.

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Scott E. Stewart, IBI Group Inc. - CEO & Director [4]

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Thanks, Stephen. In closing, we are very pleased with IBI's second quarter and year-to-date results, which demonstrated strong performance and a clear execution of our core business. We have continued to make progress in advancing new value-added Software-as-a-Service offerings for our clients while focusing on opportunities that can enhance our recurring revenue streams. The company is at the forefront of applying technology in our industry.

Operator, we're now ready for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Frederic Bastien with Raymond James from Vancouver, BC.

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Frederic Bastien, Raymond James Ltd., Research Division - MD & Equity Research Analyst [2]

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Thank you for highlighting some of your recent successes in winning awards across your regions. I found that very useful. First question, around capital allocation. You're obviously doing much better, generating some good cash. And as you pointed out, you have -- you think you can achieve your goals of deleveraging, and that's been a long, long road for you guys. Any goals beyond that? I mean I know we always look forward, so I was just wondering if you had any consideration with respect to potentially reinstating a dividend. Or what do you expect to do with your free cash?

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Scott E. Stewart, IBI Group Inc. - CEO & Director [3]

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Hey, Frederic, good to hear from you. The -- once we get into a reasonable range, the target that we have outlined, usually, we'd look at the best allocation of the cash that we have in hand. And the -- certainly, looking into next year, dividends are a clear option but also acquisitions. Maybe a more active role in the acquisition of strategic firms that fit our target. Both are on the table. And even in the interim, I would see that there may be opportunities for smaller tuck-ins into the firm to strengthen the technology direction that we're involved with now.

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Frederic Bastien, Raymond James Ltd., Research Division - MD & Equity Research Analyst [4]

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Okay. Good to hear. In the U.S., obviously, your turnaround has been successful. Things are going better, but the overall market has been softening just based on what the architectural billings index has been indicated. What are your views on sort of the end-market strength and your position, particularly on the West Coast?

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Scott E. Stewart, IBI Group Inc. - CEO & Director [5]

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Well, we're still seeing movement from our development clients out of Vancouver and down on the West Coast. There are still -- we see significant opportunities. There's still significant opportunities to bid in the private sector as well as with government. And I must say that we really do see that the technology aspect of our business is a really -- is a real distinguishing quality of the offerings that we have, not only in how we embed it into the outcomes but also in creating new business service -- business arrangements for ourselves. And we see very significant opportunities because there is a real sea change of interest in those areas.

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Frederic Bastien, Raymond James Ltd., Research Division - MD & Equity Research Analyst [6]

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Cool. Last question for me. I know you've still I mean, I guess, in the last 3, 4 years, you've said you're targeting an EBITDA margin range in the 8% to 12%. You're kind of closing in on the high end of that range. Is there a point that, I guess, at some point, you kind of provide a different guidance? I mean do you -- it seems like your ability to sustain a higher margin is kind of in place right now. So I was just wondering what your thoughts were around that specific target.

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Scott E. Stewart, IBI Group Inc. - CEO & Director [7]

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The more we -- harder the strategic plan that we have in direction of technology is it just make us so much more efficient through the application of bots and RPAs and design technology tools. And we are investing heavily in those areas. And we are starting to see some of the benefit of that, and that's showing up, in part, in the margins. It will still be -- we anticipate that there will be continued opportunity to improve on that. As it then relates to the guidance we might offer, I would see that it will be another quarter or 2 to before we might change the guidance and maybe tighten the bands and increase the bands.

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Frederic Bastien, Raymond James Ltd., Research Division - MD & Equity Research Analyst [8]

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Okay. Last question for me around the U.K., see any pressure from the Brexit situation?

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Scott E. Stewart, IBI Group Inc. - CEO & Director [9]

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Yes. I mean the U.K. is a challenge. Our intelligence practice is quite strong there. The work in the country is very competitive. But what we do see is that out of the U.K., we are leaders in the health care field. And now with the pound being cheaper, we see an ever-greater opportunity to take our health care practice and extend it globally from the Middle East to North America. And that, we have underway. We just have to do -- take further advantage of the opportunity that now presents.

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Operator [10]

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Our next question comes from Michael Tupholme with TD Securities from Toronto, Ontario.

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Michael Tupholme, TD Securities Equity Research - Research Analyst [11]

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Scott, you gave a good rundown of many of the initiatives and things that are going on within the intelligence practice, and we saw some strong results in that area this quarter. I'm just wondering if you can talk a little bit about how we should think about the second half of this year and maybe even into next year as far as further progression of that particular practice area and any particular initiatives or new products and things of that nature that we should be aware of that might play into the results and the outlook for that business.

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Scott E. Stewart, IBI Group Inc. - CEO & Director [12]

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I think we had offered guidance before that our target was to have our intelligence practice account for 20% of our revenue with a 20% EBITDA, that is our -- by the end of 2020. And that is still our goal. And we do see that with the performance to date this year that we are making good progress against that.

The -- but I would say, the other thing that is happening, that is important and again as it relates to our strategy of improving productivity and efficiency across the firm by applying technology, is that I do expect that we will be able to, a, win more work but also to be able to do more work efficiently in our traditional areas of buildings and infrastructure. And we have seen very significant opportunities arise because of that and also being able to offer a different perspective to our clients on how we embed technology and create strategic plans around technology to create new value for our clients. It's really helping us gain traction with clients because they don't see it in other firms that we're competing with. And it's -- we do great design, fabulous buildings, but we also bring this dimension that nobody else has. So we're finding that. That, too, is opening up doors for us. So the technology strategy not only will improve the intelligence side, but it will improve the other sector that we -- or segments that we report on.

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Michael Tupholme, TD Securities Equity Research - Research Analyst [13]

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Okay. Did I hear in the prepared remarks that you described the intelligence practice in Canada as being stable year-over-year? If so, why is it that you would not be seeing some growth in Canada as well, given the new products and solutions you've rolled out?

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Scott E. Stewart, IBI Group Inc. - CEO & Director [14]

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That may have been a misread on my part. Well, I think the stable was referencing the transportation architecture practice in a number of stations and maintenance facilities. We certainly see that our intelligence practice globally is right for strong growth and keeping what we've reported on the sort of 8% growth in the intelligence practice.

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Michael Tupholme, TD Securities Equity Research - Research Analyst [15]

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Okay. Maybe a misread that, so I'll double check. Just a couple of other questions. The -- if we look at the U.S. adjusted EBITDA margins, the 5.4%, that was down sequentially after seeing a few quarters of sequential improvement. Just wondering if there's anything going on there that would have attributed or accounted for that sequential decline we saw there, not huge decline, but nevertheless, keep coming down?

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Stephen B. Taylor, IBI Group Inc. - CFO [16]

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I don't -- I wouldn't read too much into it, Mike. I mean we do have projects that are milestone-based and that sort of thing. So I think you can -- we had said that we were targeting in the U.S. for somewhere between 6% and 8% EBITDA return for the full year this year, and that we would be back to margins that were closer to the overall margin of the corporation by the time we rolled into the beginning of 2020. And I think we're still tracking very well to achieve those targets.

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Michael Tupholme, TD Securities Equity Research - Research Analyst [17]

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Okay. And then maybe there's a similar explanation here with respect to milestone payments. But infrastructure EBITDA margins were very healthy at 12% compared to 6% in the prior year, just wondering I guess, what the driver there was and if that is a representative margin for infrastructure going forward.

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Stephen B. Taylor, IBI Group Inc. - CFO [18]

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I think one of the things that was impacting 2018 and has sort of followed us into the early part of 2019 is that on infrastructure projects, we were doing a lot of bid phase work at very low multipliers of direct labor cost last year. I think we talked about that last year. More of those opportunities are starting to present themselves as potential real work in the coming quarters. But it also means that the staff that were tied up working on those initiatives have largely migrated back into some other projects where we are achieving more normal returns on the type of infrastructure work that we do. So I think that you will see the current trends to be more representative of what we're doing as we move forward for the balance of this year and into next year.

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Michael Tupholme, TD Securities Equity Research - Research Analyst [19]

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Okay. That's helpful. And then just lastly. Scott, you spoke pretty constructively about some of the awards and activity in your living and mixed-use buildings industry in Canada. Do you see that sort of what sounds like a pretty healthy pace of activity and level of activity continuing on? Do you have any visibility into that, if that's going to be something that's going to carry on going forward?

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Scott E. Stewart, IBI Group Inc. - CEO & Director [20]

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The -- well, we are continuing to see growth in -- from a population and employment standpoint in the major Canadian cities of, obviously, Toronto, Vancouver, Montréal, Calgary and to a larger extent, Ottawa, largely driven by technology and -- technology start-ups and investments. To the extent that, that continues, those are right markets for us in Canada. But we're also targeting very much the U.S., and we see that the success that we've achieved in Canada is exportable into the U.S., especially into, what I would call, the knowledge-based cities, like the Silicon Valley and such where we are pursuing opportunities very aggressively because those are also growth areas in the U.S., and we're seeing success there. I think we have a great opportunity to be able to do much more work in the United States but use the Canadian presence and advantage on the dollar to be able to do that work much more cost-effectively than entirely out of the U.S. So we're really looking to integrate the practices in a very fulsome way and again, using technology to stitch them together in a very uniform way across North America.

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Operator [21]

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Our next question comes from Nauman Satti with Laurentian Bank from Toronto, Ontario.

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Nauman Waqar Satti, Laurentian Bank Securities, Inc., Research Division - Associate of Research [22]

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So my first question is regarding the intelligence segment. I understand you guys had provided the guidance that you expect it to reach 20% EBITDA margin by 2020. But I also see that you've mentioned that, eventually, you wanted to reach 25%. Just wondering if there are any developments or progress that provides this confidence. Or is it just as you scale, it's going to go up?

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Scott E. Stewart, IBI Group Inc. - CEO & Director [23]

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No. It has to do more with the development of new products and services delivered under the Software-as-a-Service module or format. We have launched the InForm product. We're continuing to refine it to tailor it to specific sectors of health care, education and justice as well as Living+, so that we have 1 platform that is configurable to any number of clients, and it becomes more of a marketing sales initiative as opposed to a product development. And it's a very different business model, which gets us into then the different margins that are more in the 25%-plus range for those products.

The -- we have launched InForm, and we have InForm for transportation, InForm for buildings, and we will be continuing to refine that and go to market with it in a very compelling way. And in that regard, Microsoft is a partner with us that will help take us -- take that globally.

We have also launched TravelIQ, which is a Pan-North American platform that, again, will allow us to expand the client base from large state organizations and promises to cities and even smaller cities, so that we'll be able to build a data platform that links travel information, construction information, maintenance information, et cetera, across North America. And it will take us a while to achieve that objective, but we have the product, and we will be going to market in a much more aggressive way this fall.

We have also the Smart City platform that we are tailoring again to address more of the interests and needs of developers, especially in their larger-scale community developments. The Smart Cities themselves are a bit of a challenge because it's government procurement processes. But with developers, we can take our InForm platforms and our Smart City platforms immediately into the work that we are doing with them, both in master plans as well as in the building designs. And we're finding a lot of interests in that area. And as we scale those products, again, model on a Software-as-a-Service, that's where we'll see the much bigger margins.

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Nauman Waqar Satti, Laurentian Bank Securities, Inc., Research Division - Associate of Research [24]

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It's really helpful. Just going back to Smart City. What are generally the duration of these contracts?

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Scott E. Stewart, IBI Group Inc. - CEO & Director [25]

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The -- well, I could say that anytime IBI has ever implemented a system, we have been there for the life of the project. We've never lost a client, except if they close down the system. The only one I can think of is the Coquihalla Highway where they removed the toll system. So as much as we might build in a 5- to 8-year support contract on these larger-scale projects, they go on forever. However, as we move to Software-as-a-Service, they might have a shorter time span of 4, 5 years. But on the other hand, our market is so much wider that -- and the number of potential clients is so much greater that I wouldn't see that as being any particular challenge because it's -- and again, it would still support the 25%-plus margin on those kinds of projects.

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Nauman Waqar Satti, Laurentian Bank Securities, Inc., Research Division - Associate of Research [26]

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Fair enough. And just one last one from my end. In your other international segment, how much of contribution is from India?

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Scott E. Stewart, IBI Group Inc. - CEO & Director [27]

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Stephen?

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Stephen B. Taylor, IBI Group Inc. - CFO [28]

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Sorry. When you talk about contribution, are you talking about the scope of revenue?

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Nauman Waqar Satti, Laurentian Bank Securities, Inc., Research Division - Associate of Research [29]

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Yes.

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Stephen B. Taylor, IBI Group Inc. - CFO [30]

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Okay. So currently, the revenue number is about -- it's only about 2% to 3% of the revenue overall of IBI. But as Scott articulated in his comments, we've won several new contracts, fairly sizable contracts, in India that have basically come our way because of the Indian government's focus on Smart City's technology, areas where we're really at the forefront. So we see that as: a, an emerging market that is going to grow; and b, of increasing importance to us as we move forward.

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Scott E. Stewart, IBI Group Inc. - CEO & Director [31]

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I should say as well that one of the things we see about India that's so compelling, and this actually relates to all of the tech-echo environments that we operate in, that the Indian business, it's not an isolated business. So every product that we create, tailor and modify in the Indian context, we're then able to adapt and configure into all of our other market areas. And in that development environment, we really do operate as one very integrated platform of designers and developers from India to Scotland, to Florida, to Toronto, and we really do operate in a very seamless way.

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Operator [32]

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Our next question comes from Maxim Sytchev with National Bank Financial from Toronto, Ontario.

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Maxim Sytchev, National Bank Financial, Inc., Research Division - MD & AEC-Sector Analyst [33]

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I was wondering if you don't mind maybe expanding a little bit on your M&A commentary and a couple of things there. Maybe if you don't mind talking about the discipline, multiples and size, just how do you want to go about it?

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Scott E. Stewart, IBI Group Inc. - CEO & Director [34]

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In the -- we'd be looking for, I'd say, tuck-ins. We're not going to be -- going to market to look for a very large scale firm necessarily because we want to make sure that whatever we target would fit in nicely into the organization. Some of the target areas could be in traditional areas but broaden our presence either geographically or functionally. And we certainly see in the urban environments that we focus on, we do fabulous physical infrastructure, the vertical and horizontal. But one of the distinguishing qualities of IBI has always been our engagement in movement and mobility transportation. We also see, though, that in urban environments, what is going to be ever more important is energy and water resources. And we see those areas as being natural complements to our technology pivots, and we had launched our BlueIQ, which is an energy-focused system to manage the supply of water for the City of Toronto where we're realizing, on behalf of the City of Toronto, very significant savings for them. So we intend to focus on smaller firms that are complements geographically and functionally and/or are tuck-ins in terms of being able to bring new technology to the market. And they might be firms that would be in the order of anywhere from 20 to 100 people.

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Maxim Sytchev, National Bank Financial, Inc., Research Division - MD & AEC-Sector Analyst [35]

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Okay. And then in terms of -- when you think about the accretion, your own shares are trailing at 7x EBITDA, so what are your expectations on the other side just to make sure that whatever you are doing is actually accretive?

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Stephen B. Taylor, IBI Group Inc. - CFO [36]

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Well, I don't think we're going to be doing too many, Max, that given the size and scope that Scott just articulated, we're unlikely to be doing many transactions that are not accretive. So we see definitely an uptick on anything that we bring in the door.

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Maxim Sytchev, National Bank Financial, Inc., Research Division - MD & AEC-Sector Analyst [37]

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Okay. No, that's very helpful. Do you mind maybe providing a bit of color also on the type of payment terms that you guys are going to be facing in places like India just to make sure that we don't avoid any potential issues there?

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Stephen B. Taylor, IBI Group Inc. - CFO [38]

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Well, we are watching that very closely. And on the new contracts that we're bidding, we are ensuring that the payment terms are payment terms that we can live with, and that they don't cause our working capital to balloon. Because you are, I think, headed in the right direction and knowing that in India, payments are slower than they are in some of our businesses in North America, but we're watching and monitoring it and building it into the contracts right upfront.

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Maxim Sytchev, National Bank Financial, Inc., Research Division - MD & AEC-Sector Analyst [39]

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Okay. No, that's very helpful. And then maybe just last question. I mean I know that we're all kind of beating the bush around the margin sort of outlook. But there was nothing unusual, right, in Q2 that enabled you to expand the margins so significantly versus last year. I mean like, obviously, U.S. is doing better right now, but we should kind of build on that trajectory. Is that a fair assumption for the back half of the year?

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Stephen B. Taylor, IBI Group Inc. - CFO [40]

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Yes. There were no large onetime items or anything unusual in the quarter.

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Operator [41]

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I'm showing no further questions at this time.

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Scott E. Stewart, IBI Group Inc. - CEO & Director [42]

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Well, thank you, everybody, for joining us this morning. And it's a beautiful day here. I trust you will enjoy the rest of the summer. Thank you very much.

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Operator [43]

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That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.