IBI Group, Inc. (IBIBF) CEO Scott Stewart on Q2 2020 Results - Earnings Call Transcript

IBI Group, Inc. (OTCPK:IBIBF) Q2 2020 Earnings Conference Call August 7, 2020 8:30 AM ET

Company Participants

Scott Stewart - Chief Executive Officer

Stephen Taylor - Chief Financial Officer

Conference Call Participants

Benoit Poirier - Desjardins Capital Markets

Frederic Bastien - Raymond James

Michael Tupholme - TD Securities

Mona Nazir - Laurentian Bank

Maxim Sytchev - National Bank Financial

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the IBI Group Second Quarter 2020 Results Conference Call. Please note that IBI's complete financial statements and management's discussion and analysis for the period ended June 30, 2020, were filed on SEDAR and have been posted on IBI's website at www.ibigroup.com. During the formal remarks all participants will be in listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions]

As a reminder, this call is being recorded. Some of the statements 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 future 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 SEDAR or by contacting IBI directly. All amounts discussed today are in Canadian dollars unless otherwise stated.

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

Scott Stewart

Good morning, and thank you for joining us. Stephen Taylor is with us as well. Stephen Taylor is the Chief Financial Officer. We are physically separated in different locations. We will be sharing an update today on the firm's ongoing performance throughout the COVID-19 pandemic as well as providing some insights into our performance by region and sector.

Moving into the second quarter, COVID-19 still had major impacts on almost all of our regions of operations with the priority of the firm being the health and safety of our staff. Operationally, IBI's strong second quarter results clearly demonstrate our ability to operate seamlessly and effectively remotely as the pandemic continues. We've also seen our clients make the successful transition and in many instances, we support the clients in the needs of our helping them to implement new processes and technology, which helped drive our results.

In addition to strong adjusted EBITDA metrics, we increased backlog by 30% which currently sits at 16 months. Significant contributors to this backlog include Eastern Canada and U.S. regions with Western Canada, India and the U.K. experiencing some flattening. In the U.S. we are seeing significant improvement among offices that were having challenges in the past. The success is as a result of the restructuring that we undertook over a year ago. The positive outcome of our remote work environment has been a continued learning around working together across our global offices as one firm.

While not all regions are strong, we have been able to really bridge resources from one area where workloads may be softening to provide capacity in other regions where there may have been an influx of new work. The ability to reorganize resources is a direct result of our technology pivot and the collaboration tools we've implemented. It also means we can be working on a client refinement at all hours of the day providing speed and efficiency and project delivery. With a technology-driven strategic direction, we set a goal for the intelligence practice to generate 20% of net revenue with 20% adjusted EBITDA as a percentage of net revenue by the end of 2020. We are very close to meeting that goal in Q2. Net revenue from intelligence represented over 21% of IBI's net revenue and adjusted EBITDA was 19.1% of net revenue.

While COVID-19 has presented no shortage of challenges it has also created opportunities in the segment and for our product portfolio. This is evidenced by our work with the Ontario Ministry of Transportation we implemented our Trucker Mode feature within its existing five on one Ontario web application and we launched the feature in a few mobile apps versions of the traveler information service. The mobile app and Trucker Mode feature components of our TravelIQ software platform were launched within two weeks to support the product and it's critical supply chain operations during the pandemic.

In response to COVID-19, IBI found an app called End Space which is an extension of our informed asset management products and will soon be launched externally. End Space is designed to be part of an effective return to work strategy and it includes health assessments, test booking and the sanitization modules, which we believe will also have lasting benefits post-pandemic. Using End Space and our IBI parametric modeling tool, we're developing return-to-office strategies for our clients as well as IBI local offices. Welcoming our staff back in the office will be evaluated on case-by-case basis, taking into account local government regulations and the recommendation. We are also exploring how our office space may change in the future and looking at the functionality of the space with a different lens.

Another new product, which we are currently in market with -- already in market with and we plan to formally launch in Q4 is TravelIQ. The project allows cities to improve their curbside operations by digitizing regulations. It typically only exist in speech and text formats. Thereby IQ's models gives cities the opportunity to better visualize, manage, analyze and regulate their curbside space at a time when the street increased findings are changing rapidly to accommodate social distancing, as well as expanded timing [ph] usage by restaurants. The Pilot was the winner of our 2019 internal hackathon competition. It is currently being piloted towards the cities in North America, and it was a great complement to transportation of third site management strategies that we are already working on various in cities across North America.

As we continue to launch new products as part of our technology returns strategic plan, we are evolving the way we approach our markets leveraging cloud-based tools like sales force for lead generation, and implementing more robust digital marketing strategies. I'm also proud to share that IBI transportation planning and currently buying professional support of the City of Toronto and the Alcohol & Gaming Commission in Ontario with the recent low lab in Toronto with Cafe TEOA progress. This program was rapidly rolled out in business improvement areas for the City of Toronto and slight expansion of restaurant patios in sidewalks improved and accommodate more customers supporting over 500 local businesses that might otherwise have had to close shop.

Another notable in our intelligence sector which we announced earlier this week was for the Massachusetts Department of Transportation. We were selected to provide a statewide go time system, which uses multiple datasets to determine reliable travel information and then it disseminates the information in public. The 5-year multi-million dollar SaaS contract levers, our advanced traffic management system software and our asset management platform. In addition to distinguishing ourselves as a result of our technology period our core business remained strong and our robust backlog where it also includes opportunities to concept buildings and infrastructure sectors.

In Canada East, Living Plus factors had a strong quarter with the heavy backlog of previously committed work in some significant new wins. A number of our teams were initially developers during the quarter and IV on a very high success rate. These wins include the rezoning of 12 sites which add up to approximately 4 million square feet in mixed-use development, fixed-rental buildings across in GTA totaling 2 million square feet and multiple condominium developments. IBI is now working on sales launches for a number of these culminating projects that will occur over the summer and in the fall. This bodes very well for the ongoing strength and sustainability of our alluded plus factors for the remainder of 2020 and beyond.

Our U.S. education practices also holding wins in Q2 including a multi-year multi-project engagement at the University of Florida. We continue to be awarded [Technical Difficulty] building that wish leveraging our technology capabilities drawing on the scale of the prior to our acquisition of Aspyr in Q3 2019. Ford Motor Company's research and engineering campuses is the next for our example. IBI has been commissioned architect, engineer our record for the significant new projects into Michigan. Alongside these services we are also leading Ford's global technology strategy, and it's mobility strategy for campuses and beyond

And then, our transportation sector, we had a declining second quarter with two major transportation projects that we've been pursuing coming to fruition. We were awarded technical adviser on behalf of Infrastructure Ontario and natural links to the Scarborough and the Broadway Subway extension in Toronto working with the unemployment. Most recently, we were named preferred proponent as part of the Acciona-Ghella joint venture on the Broadway Subway expansion in the improvement. We continue to pursue a number of significant global public trans projects and are well-positioned from the anticipated post-COVID-19 stimulus packages in the areas of transit transportation as well as broadband services.

I will now hand over the call to Stephen Taylor, our Chief Financial Officer to run through the highlights of IBI Q2 financial results.

Stephen Taylor

Thank you, Scott. Net revenue for the period was $99.9 million, a 3% increase over both Q2 2019 and Q1 2020 ended up at $196.6 million at the end of the first half of 2020. Adjusted EBITDA net of IFRS-16 impact was 22% higher than the prior quarter at $17.1 million or 17.1% of revenue at the high end of our peers' average range of adjusted EBITDA as a percent of net revenue. When presented in a historical manner and in accordance with definitions under our IBI banking agreement, adjusted EBITDA totaled $13.1 million or 13.2% of revenue a 42% and 7% increase over Q1 2020 and Q2 2019 respectively.

As at June 30, 2020, IBI had $518.4 million of work committed and under contract for the next five years, representing approximately 16 months of backlog across the firm, 30% higher than the same period in 2019. Across each of our business practices backlog increased by 14%, 37% and 28% for the intelligence buildings and infrastructure sectors respectively. With a client base that is weighted approximately 60% to the public sector and 40% to the private sector, IBI has been able to effectively mitigate collection risk and believe we're well-positioned going forward from a security of payment standpoint. IBI successfully reduced our days sales outstanding or DSOs to 65 days in Q2, which is two days lower than Q1 2020 and seven days lower than Q2 2019 reflecting our focus on improving DSOs from contract assets and accounts receivable.

IBI quarter end net debt decreased to $75.4 million compared to $84.6 million at the end of March. The company's net debt to adjusted EBITDA multiple was 1.8x below our target range of 2 to 2.5 times. Reflecting our continued commitment to strengthening liquidity and minimizing operational debt levels. From a capital allocation perspective, IBI intends to direct free cash flow to ongoing debt reduction and our strategic investments.

IBI's intelligence practice showed growth over the previous quarter and the same periods in 2019. Q2 net revenue was $20.7 million representing 21% of total revenue and it was $41 million for the first half of the year. Adjusted EBITDA totaled $4 million or 19.1% of net revenue for the quarter and $7.8 million or 18.9% of net revenue for the first six months. As Scott noted we are very close to delivering on our target of intelligence generating 20% of net revenue with 20% adjusted EBITDA as a percentage of net revenue by the end of 2020. Intelligence generated $5.1 million in the quarter from recurring software support and maintenance work, an increase of 2% over Q2 2019. We anticipate growth in this area as we capture a larger proportion of ongoing subscription revenue through the lifecycle assets we are designing and implementing

Buildings recorded 4% higher net revenue than the previous quarter at $50.9 million with adjusted EBITDA of $8.1 million or 15.9% of net revenue. Net revenue from infrastructure was $28.2 million, also 4% higher than Q1 2020 with adjusted -- while adjusted EBITDA rose 45% over Q1 2020 to $2.9 million or 10.3% of net revenue. Q2 net income from operating activities totaled $6.2 million or $0.16 per basic and diluted share, 20% higher than Q1 2020. While net income increased to $6.8 million or $0.18 a share, 21% higher than the previous quarter.

Well IBI's Q2 and first half 2020 results has highlighted the resiliency and diversification of our business model to date. The longer-term impacts of COVID-19 on rising public sector debt and contracting private sector cash flows have not yet been fully realized or understood and the future effects on IBI cannot be accurately measured at this time. As such, we're not in a position to reinstate guidance for 2020. However, as a majority of our projects under contract are government-funded, we believe the viability of such projects is supported, particularly once post-COVID-19 transit and transportation stimulus packages are released.

To learn a bit more about IBI's business and how we continue to navigate through the COVID pandemic please take a few minutes to watch a video featuring Scott Stewart, which will be released by the TMX Group at market opened this morning. Links to the video are available on IBI's website, TMX Group side or embedded within the Q2 news release we issued yesterday.

Thank you and I'll now turn you back to Scott for closing remarks.

Scott Stewart

Thanks, Stephen. With cautious optimism based on our Q2 results and backlog, we are moving into the second half of 2020 well positioned but acknowledging that the world continues to face many uncertainties. While certain of our regions have remained strong, including along the Eastern Coast of Canada and the U.S. some international regions such as the U.K., EMEA and the Middle East are falling. I expect to see further slowdowns potentially into early next year.

This concludes our comments. Operator, we are now ready to take questions.

Question-And-Answer Session

Operator

Thank you. [Operator Instructions] So your first question comes from Benoit Poirier of Desjardins Capital Markets. Benoit, Please go ahead.

Benoit Poirier

Thank you very much and good morning, Scott and Stephen and congratulations for the very strong quarter. First question, if we go through intelligence very impressive revenue growth in the quarter could you may be provide some color on what drove this strong performance.

Scott Stewart

Well, certainly intelligence grew as it was mentioned by Steve and myself. What's nice about the intelligence practice generally is that a lot of the work that we had especially in recurring invoicing billing side is that it continues to screw down the economy and that was part of the strategic direction about why we have to get into that sector in a more powerful and compelling way. But not only that, we continue to then win new work in that area and add to the overall base contracts that we had in place. So we had very strong growth in intelligence. In the building, it is an area especially many plus that we watch very closely as we're always concerned about the housing market and the ability of the market to absorb new development. What we are seeing, especially in the Toronto area is Eastern Canada but Toronto Center region is very strong demand that has continued throughout the pandemic strong demand for housing. A lot of that has to do with the fact that this is largely a knowledge-based economy. We continue to see migration, maybe not as robust as it has been in the past because of the pandemic, but we continue to see immigration into the Toronto area. We continue to see demand for housing.

One of the underpinning elements certainly in the Greater Toronto Area was the historical average home size and it is much higher than it is elsewhere in part because the family is sizably larger because people were living at home. It's a pent-up demand that even if immigration came to zero one is its economic strength and there is economic strength. There is a pent-up demand over the last two or three years. It was immigration. Then the other part on the infrastructure in terms of the growth was the ramping up of Ontario a major LRT project and now the ramping up of the major new wins that were mentioned in terms of transit netFC NY [ph] in the Scarborough line, and the Broadway line in Vancouver. So, those are all contributing to the fundamental strength and growth of the firm.

Benoit Poirier

That's great color. And looking at intelligence, how should we be thinking about the ramp-up of recurring revenues in the second half as you ramp up some key SaaS contracts as they gain traction?

Scott Stewart

We're still in the early stages of some of our product launches. So I would suggest that it would be anything like an open text or any of those kinds of the IT firms. We would see it as a major growth but what is interesting is that the measured growth keeps compounding itself because the base stays there. Again, even if you're only adding single-digit growth the value continues and for long periods of time, because they're multi-year contracts. All of our modeling that we've done would suggest that we're still anywhere from 12 to 18 months out in seeing some of the significant targets we had set out for ourselves with some of these SaaS services and the change and I'd say that because as mentioned it's a different way of going to market for a professional services company. It's about identifying large numbers outside the potential clients using tools like salesforce to then establish large scale digital marketing campaigns and then strategic pricing around being able to capture market share. It's a much different model than the traditional if you are professional services. So that will still take some time and it will continue recurring. If you are billing will continue to grow, but at very much your pace.

Benoit Poirier

Okay. The last one for before I pass over to other gentlemen. But in terms of capital allocation, obviously leverage refuel below your target range. Could you talk about the pipeline of acquisition that you have in front of you and maybe the statements or geographies that you're looking at?

Scott Stewart

As everyone on the line knows we have been very conservative historically. Our focus has been to get our leverage down because we were anticipating that there would be downsizing in the economy and well and behold it is. Here's where we are. That being said, we are looking at strategic investments and it can be an investment in a firm. It can be such as the one that we have and switch the electric vehicle charging platform that we see as a natural complement to our building projects. It could be investments in a more traditional A&E firm where we see that the A&E firm may be a route to market for our technology, especially in some of the core and key urban infrastructure considerations. So we are looking at that and then also just looking at our strategic tuck-in in the area of technology such as the Aspyr investment and the Green investment, which has proven to be very beneficial for us where they just add a whole array of services to our clients, but more than half of the people of the firms that we've acquired it expands the geography and route to market for the services they provide. We're looking and continue to keep our eye on a number of opportunities certainly from the past number of months. So we have been focused on making sure that we were performing given the circumstances around the pandemic.

Benoit Poirier

Okay, thank you very much for the time.

Operator

Your next question comes from Frederic Bastien of Raymond James. Frederic. Please go ahead.

Frederic Bastien

Thank you very much. Good results guys. I do appreciate that the underlying fundamentals are quite strong and you've done really exemplary, very well in dealing with working remotely and things like that, but we are still dealing with a pandemic. So I was wondering if you were compelled to lay off some of your staff at all or if this is something that you may need to turn to?

Scott Stewart

Frederic, there were some initiatives that we're taking in Western Canada, but not related to the pandemic. It was more related to oil and gas in Alberta. We had taken certain actions. I think we announced that we had put a certain number of staff on quoting mostly. I'm pleased to say that those staff are now that full time. We have furloughed some staff in the U.K. taking advantage of the U.K. program for support in a modest way. At the moment we're not anticipating but we obviously are watching very closely. We are especially concerned about what will happen especially in the United States the state entity, the transportation agency as an example and local municipalities across North America and their ability to proceed with programs that they had in place if there isn't any funding. So we're watching that very closely. We have seen by example, the drop in Highway Trust Fund in GAAP taxes. We've seen massive drops in transit fare revenue that is affecting our transit plans. But at the moment, we've not had to lay anybody off because of the pandemic that is at least anything that's material and we're just watching very closely.

Frederic Bastien

Okay, thank you. You mentioned, obviously we saw some good growth in the backlog. You did mention Eastern Canada and the U.S. being sources of that growth. Can you point to some specific projects that help grow backlog?

Scott Stewart

Well, some of the big ones are the online and the starter line in the transit zeal car; those are very big long-term contracts with the IO to maximize. They are in the order of 10 years backlog although we're only reporting five years of that. The Broadway project in Vancouver where we had the Preferred Proponent we're not reporting that right now as from the backlog, and that's not included as we provided. We are seeing, as I had mentioned earlier very strong backlog of demand in housing and rental in particular in Eastern Canada because the demand for housing is still very strong. The knowledge-based economy here is very compelling as witnessed by the U.K. Investment House. I think it's until better ones. There is a $500 million fund and they're going to be headquartered out of Toronto to cover their North American Investments. So we're seeing still a lot of movement if you will into the sort of that Ontario marketplace. We still have some -- I think we have about 50 major planning projects across the firm. I mentioned this last time that represents 5,000 acres of urban land redevelopment.

As we've noted previously, in situation like the CN lands and Liberty Village in Toronto. Those all represent very long-term opportunities for us to continue to provide service over long periods of time. The planning work on that continues and we continue to pick up some very significant planning projects and what is nice about that is it sets the table for the next 5 and 10 years as the development planning proceeds. They're not part of the backlog, obviously the current work is, but not the long-term and we just see that some very strong market areas for us that we own that have continued through the pandemic.

Frederic Bastien

Great, thanks for that color. My last question, Scott, I've been asking that a few executives already, but what's the most important lesson you're taking away from this pandemic?

Scott Stewart

The necessity to be agile and in our case, we witnessed the move, we had a 100% of our staff work from home within two weeks of declaring that we needed to do that, and the agility for us is driven by the digital strategy, the pivot to be a technology company. The agility is further indicated on our part by the ability to then create new product and services that are responding to client's needs and anticipate client needs. We know that our clients are looking for much better value, they are going to have reduced budgets, but they still have to deliver program. So the extent to that we can create solutions that respond to those needs and allow us to scale up with multiple clients, share common platforms, that's part of our strategy and that underpins our direction in all of our sectors of transportation, infrastructure, and buildings.

Operator

Your next question comes from Michael Tupholme. Michael, please go ahead.

Michael Tupholme

Thank you. Good morning, just a question about the backlog, obviously very nice, strong backlog growth across all three practice areas in the quarter. But Scott, as you mentioned, there have been some additional wins that I don't believe were actually included in the Q2 backlog figure. So I'm just wondering, when you look at across the various markets you are serving and try to take account of the various dynamics and some of the more recent awards, would it be fair to think that there is room for potential further backlog growth in the second half, or is that a little bit optimistic at this point?

Scott Stewart

I wouldn't want to provide guidance that it will increase, but wasn't that long ago that we were providing observations that eight to nine month backlog was the industry average, and we were there with eight to nine months of backlog. So 16 is, quite frankly I believe, an extraordinary number. So I wouldn't want to anticipate that will expand. I think if once we stay in that 12 plus region, I think we'll be in reasonable shape.

Michael Tupholme

Okay. If we look at the actual dollar value of the growth, I think it's up around 30%. But if you look at the month's growth, it's up by a similar amount. So is the dollar increase in backlog-- is that simply, sort of, resulting in a situation where you've got better visibility over a longer period of time, or do you think that this will actually be a catalyst for driving some increases in revenue, as opposed to simply stretching it out over a longer period of time?

Scott Stewart

Well, one of the major contributors to the backlog was, as I mentioned [indiscernible]; and those are multi-year and up to 10 years. We are not reflecting 10 years in our backlog, but we are reflecting-- we use the 5-year forecast to look at backlog, but it's rare that you would see projects that would expand much beyond a couple of years, at least in their traditional design market. So those add nicely to the backlog. What it is nice is that virtually all of our systems projects, especially when we are delivering any service and maintenance support, those typically end up being long-term contracts. And we've had some good wins in that area and they add then to the backlog number of a period of time.

But to your question, I don't anticipate and wouldn't expect that we would then see extraordinary growth. It's certainly our objective to be able to have a backlog that allows us to continue in a comfortable pace, but also through that period of time effect that pivot investments of the size, it's even more so the technology side. And what we've been blessed with, the strength that we have right now is that time allowance to be able to anticipate what the client needs will be, how we can create new solutions and services and then move into those areas. So that's an aspiration, and that would provide the basis for better growth, but I wouldn't describe that as something that would take the bank at the moment.

Michael Tupholme

Okay. You've talked a fair bit on the call already about residential lumber, residential work, and I'm just wondering, there is some concern obviously in the market about potential pull-back in private sector demand given the pandemic. It sounds like you're quite constructive on the residential sector still. I'm just wondering if you have seen any deferrals or cancellations either in that area or, for that matter, any other parts of the business at this point given what's going on.

Scott Stewart

There and some of the other regions, there have been causes, especially in California on the residential side and especially few months ago, where some of the work was stopped, put on pause and we are seeing more interest now, as an example, in Los Angeles. We are seeing still a demand in British Columbia and Vancouver. I must say just as a footnote, what we are concerned about is that some of the competition for work is going to become ever more price-sensitive. And I would expect that some of the firms will be looking to give up on margin simply to have a backlog of work. That's certainly not a part of our philosophy. Our philosophy is much more about being able to create value in such a way that we can not only sustain and improve margin, and again, that's where the technology comes into the play, so that we're competing in a much different way than the conventional designing firm.

Michael Tupholme

Okay. It was mentioned that you did benefit from some government grants or subsidies. I think it was in the UK, you mentioned it did, in some of it was already material. But I'm just wondering across the overall business, if there is a number that maybe Stephen can put on any wage subsidies or anything of that nature in the quarter? And as a follow on to that, if you did receive some benefits of that nature, would it be fair to think about it in the sense of - if you had not received those, you would have simply about other means of achieving cost savings to effectively get to the same place from an earnings perspective?

Stephen Taylor

Michael, the number is well south of $500,000. It's not very significant at all. We took the measures that we needed to take in, particularly in Alberta, with the downturn in the economy there. In the UK, it would have been more difficult because the process for laying off or terminating staff is a lot more onerous. So I would say that, if those programs hadn't been in place, that our UK results would have been worse than they have been, so we have benefited from the subsidies there, but it is not a very large number.

Michael Tupholme

Okay. And yes, it doesn't sound material, but in the UK, do those continue on or is there an end in coaching for those?

Stephen Taylor

Well, there is an interesting thing happening in the UK in that, those benefits do continue on into October. However, we're sort of pleased to see that the UK government has decided that one of the areas that they would like to invest in, following the COVID problem, is in healthcare, which is-- as you know, we're quite strong in our healthcare practice in the UK. So we are cautiously optimistic that we might in future be able to share in some of those additional dollars that the UK government is throwing at the healthcare industry.

Michael Tupholme

Okay, that's helpful. Just a last one for me again for you, Stephen. In terms of the changes in non-cash working capital in the third quarter and fourth quarter, can you talk about how we should be thinking about that?

Stephen Taylor

Some of the transit projects that we've been involved in for quite some time, they are in that sort of phase of the project where the cash flow has been slower than it was at the beginning of the project. If that situation doesn't reverse in Q3 and Q4, I think that will probably be pretty-- we won't see working capital degrading, but we will see some of the receivables getting a little bit older. I think nothing to worry about, but it's just a reflection of the points we are on those projects.

Michael Tupholme

Okay. So if we put all that together, just from an overall perspective, are you suggesting sort of neutral, is that what I'm to take from that?

Stephen Taylor

I would go with neutral, whereas I wouldn't replicate what happened to us in Q4 of last year where we had a very large inflow of cash, I would stick with kind of neutral use of working capital.

Michael Tupholme

Okay, that's helpful. Thank you.

Operator

Your next question comes from Mona Nazir of Laurentian Bank. Mona, please go ahead.

Mona Nazir

Good morning, congratulations and thank you for taking my questions. So you had some of the strongest performance in Q2 versus Canadian peers, although they are quite a bit larger. I'm just wondering, is it fair to say that Q2 surpassed your expectations, given the backdrop of COVID and oil price weakness? And if so, do you think that has to do with your leaner structure, your technology offering, public mix or anything out the highlights?

Scott Stewart

When the pandemic hit in March, the immediate thing we did was to go back and look at the budgets bottom up and the project's budget fees, potential risks and we did a re-forecast that was negative, not significant, but nonetheless negative. So that being the case, we're very delighted to see the actual results. The contribution is that throughout the period of the quarter, the staff were very productive, almost too much so working from home, because we are concerned about their health and they were putting in -- they were very committed and so that's one of the contributing factors. And there was real progress annuities, as opposed to just people charging a lot of hours and that was in part technology-driven. We continue to make investments in technology to make us just more and more efficient, and that has continued throughout the period.

And then, some of the technology win, it's some of the numbers that Steve sighted in the report, that it's the margins on technology and the growth in that business is out significantly. So, I would say it's technology at a few different levels that has made us more agile, that has made us more efficient. And that has also just simply continued to contribute financially, we have one of that additional order.

Mona Nazir

That's very helpful. And just secondly, and continuing on that technology wave. I understand that technology somewhat remain more of a stand-alone and not yet married fully with the infrastructure and building sectors. Do you think that the COVID pandemic has any pull forward of that as you're seeing you need to incorporate technology or you are dependent on technology more, with work-from-home mode and moving projects forward, although from a distance?

Scott Stewart

Well, there are two parts there is, how we work day-to-day, and the tools that we use in just doing traditional conventional design work, and we continue to invest in that, ensuring that we have the right kinds of platforms, we stay current in terms of protection and cyber security and all of that around, just the day-to-day operations that's making it more efficient. But the other part is the services that we can provide to our clients in the areas of buildings, the building clients and the infrastructure clients. So, as one example, the investment in SWTCH, the electric vehicle charging, there is still very strong, growing interest in electric vehicles and it's one that interests; it's real.

And so, there's a big demand now that electric vehicle charging platform then becomes logical addition to the services that we provide to our clients. There is, I must say, a growing interest throughout the building infrastructure area of those large design teams announced the large [ph] professional practice individuals, because they see that the conversations they have with their clients about the service that we provide changes as soon as we start talking about technology, and they too are seeing that they can now offer an added range of services to client that distinguishes them from the competition, that also establishes long-term relationships throughout the lifecycle of the assets. And there is, what we have seen with the pandemic, as there has been certain reflection in certain market areas, we have seen the individuals now come back and say, I get it, I now understand it, now I'm much more engaged in it. So we see that in, for example, we have mentioned n-space, and the office management platform for return-to-work, our interiors people see this as a vital tool for them, and all of the interiors work that they do for a multitude of clients, and that's one example.

So we're seeing this since groundswell of enthusiasm with key individuals within the building infrastructure, that wasn't so much there, we're going back a couple of years because they were busy doing the things that they do. So the investment in the SWTCH is becoming a technology-driven design firm. We're certainly see pay off more and more, and from my perspective, it was gratifying because it's starting to accelerate with its adoption and throughout the brand.

Mona Nazir

That's great color, thank you. Just another question from me. I appreciate building revenues were revenues relatively were flat year-over-year, although EBITDA was and margins were down. I'm just wondering, looking at the two segments, how do you expect margins to trend? I know that you haven't given guidance for the back half of the year, but are you seeing any client ask for pricing concessions, is the mix going to change there, any additional information that could prove useful?

Scott Stewart

On the first part of your question about clients asking for concessions, there was a little bit of that, but I would not say if it was material, and there is certainly more so in the early stages where, my example, are tolling clients. So a huge drop in traffic and therefore revenue, and they asked for a concession and we gave them the concession, we are partners with them in many ways. But the concession was modest relative to their drop in revenue. Where I see the bigger challenge though is in the conventional kinds of public-competed design projects or maybe any range of projects where clients are concerned, other firms are seeing a drop in revenue and that they are going to be going after that work in a very aggressive manner, with impact on margin. And that's why we see our position and it's being more focused on technology and differentiating ourselves in the market, either by a way of how we do the work, or the incremental service we provide. We're looking to protect the margin, if not grow it.

Mona Nazir

Thank you. That's great. That's it from me.

Operator

Your next question comes from Maxim Sytchev of National Bank. Maxim please go ahead.

Maxim Sytchev

Hi, good morning gentlemen. Just one sort of big picture question, I mean, obviously you're making great progress on the intelligence side, and some of the SaaS offerings. And when we look at the valuation of IBI versus the peers, it seems to me investors are more excited about that intelligence part of the business; and when you talk about capital allocation, looking at other potential A&E firms would it not make more sense to accelerate the growth of -- sort of the good parts of the business that you have within IBI? Just -- maybe, if you can share some thoughts on that front, if possible.

Scott Stewart

Maxim, one other things that distinguishes us in the technology areas that we have the new launch; and that really, really is important where we don't create solutions that we don't know. We know the value in going to market, so all of our set-up, our intelligence practice has really being focused around transportation that we know incredibly well, whatever it is, domain knowledge we have and client relations, and that has evolved over a long period of time. We can take that technology and apply it in other areas and A&E firms, as an example, in other areas that we may not be practicing. So as much as we do want to look at the right kind of tuck-ins in the technology area, I don't want to exclude consideration of a more traditional business where they become a route-to-market for our technology because of the relationship that they have with their clients. So, I don't want to discount that.

That being said, we are always going to look out for other investments, and start-ups that are going to give us a lot time return on the investment.

Maxim Sytchev

I guess my point was more around committing internal resources to a greater extent to the intelligence vertical so that you can show greater momentum in terms of growth; vis-à-vis looking at sort of external deployment of capital. And I'm just trying to see whether -- what you have right now as part of the platform will actually, potentially enable you that internal acceleration of growth or you think that it's much more sort of always steady progression as you alluded to?

Scott Stewart

I would say for the moment it's still steady progression because as we change the way we go-to-market, it's still new for us. Our clients are not in our cases so [indiscernible] with SaaS services, government tend to be little hesitant; I would say that the pandemic though is going to cause those traditional clients that may have been hesitant to reflect on now having to conduct business in a different way. And most of our -- for the [indiscernible], our business in the go-to-market platforms with SaaS involved are still directed at government, and there -- they can be slow really.

Maxim Sytchev

All right. And actually just following up on SaaS; just -- what is your go-to-market strategy? Is it really sort of experts talking to experts or do you have a dedicated sales force trying to push out these projects or products? Just -- do you mind providing a little more color on that?

Scott Stewart

It is the latter, it is putting together a dedicated sales force or in particular products. Using sales force is identifying a large volume of potential clients and we've identified in one case, particularly, when we have a sales program underway, digital program underway, with over 2,000 prospective clients. We would never do that in the traditional world; it's all about what RFPs are coming out, what's the relationship with the client, what's the schedule, putting a network mind, how do we put a team together; it tends to be a very long sales cycle for that, and it's much different. So we're making a change, we're adapting into this new model. And we have dedicated sales people in place for certain products and we are bringing on more dedicated salespeople certain other products that we're yet to launch

Maxim Sytchev

All right. And so I guess that's -- that's kind of my point. I mean, like, if hypothetically, if you want to triple the size of the sales force for these types of offerings, would that not lead to an acceleration of growth on intelligence side or that's just too simplistic?

Scott Stewart

It's a business I think. You mean having on any given product, have triple inside sales force market and result in tripling of whatever you're seeing because we're using digital tools to go-to-market with it. But that's the whole principle around this; it's that you use digital methods to build -- first, build the funnel of prospective clients, and then to -- if you will, filter that down into who is the best prospects having banked over the market. And what's -- and then, how do you engage with those. So, we will never traditionally have 1,500-2,000-2,500 prospective clients for a design project; but that's what we have with some of these products.

Maxim Sytchev

Okay, that's very helpful and great performance, obviously. Thank you.

Scott Stewart

Thanks.

Operator

Your next question comes from Dave Plum [ph], a Private Investor. Dave, please go ahead.

Unidentified Analyst

Good morning, gentlemen. I have a question about the credit facility agreement. Under the restrictions and that you're not allowed to do a dividend or share buyback; I was wondering why you decided on a potential share buyback?

Stephen Taylor

Sorry, the credit agreement at the moment, allows us to pay dividends.

Unidentified Analyst

It does?

Stephen Taylor

Yes. It does not at the moment, allow us to do a normal course issuer bid, that is obviously something that we're looking at going forward as our debt situation continues to improve. So, we have chosen not to go down the route at the moment of a dividends because we have other uses of the capital that we think will fuel more growth in the business as we move forward, but -- so that's basically where we stand.

Unidentified Analyst

Okay. I have follow-up question on that. And I do like the fact that you have better uses for the money. If a normal cards issuer bid goes forward, there is a large percentage of sharing filed by insiders; would insiders be selling into that normal cards issuer bid?

Stephen Taylor

That wouldn't be the intention.

Scott Stewart

No. And speaking about it at front, from the standpoint of an insider, no. What would be -- that would not be the expectation from those who hold those significant number of shares.

Unidentified Analyst

Okay. It's interesting to me. What's the insider percentage at the moment? Something like 36% or something?

Scott Stewart

The management partnership, which is the original partners that established IBI Group hold in the order, 46% of shares and convertible units.

Unidentified Analyst

Okay. This is maybe an unfair question, and I'll acknowledge to that ahead of time. But no way it -- wouldn't it personally make more sense to own 20% of say $600 million market cap company or then 36% of $160 million company

Scott Stewart

So, I guess the question I'd ask back Dave is, what would be the strategy to get to a $600 million market capital? And what sort of -- lead you to think that we would be able to get there by changing the shares structure?

Scott Stewart

Liquidity.

Unidentified Analyst

Okay. Just by making more shares, more available with the ongoing good results that might drive the stock price up.

Scott Stewart

I'd like -- the partnership is not anticipating those. GMP [ph] does not have an expectation of having 36% of the public company forever. There is a plan that the partnership has in place, it is time to some respect to the departments of the shares, and is that net performance was achieved; one might anticipate that there would be an improvement in liquidity.

Unidentified Analyst

Okay. Okay, I want to thank you for answering these questions.

Scott Stewart

My pleasure. Thanks, Dave.

Operator

Your next question -- well, another question comes from Benoit Poirier of Desjardins Capital Markets. Benoit, please go ahead.

Benoit Poirier

Yes. So just coming back on the U.S. performance; when we look at the adjusted EBITDA margin was 14.4%, obviously a very strong improvement. So could you provide maybe some color on what drove that? And if you foresee some potential for more margin improvement going in the U.S.?

Stephen Taylor

Yes. I think, Benoit. First and foremost, we would say that we would be cautious in terms of providing any future guidance on what more there might be to realize over the U.S. market. First of all, COVID, is the far more serious concern in the U.S. than it is in Canada. We also see that as -- Scott alluded to before, some of the public agencies in the U.S. that rely on fare box revenue for transit projects, that -- the future of that is a little up in the air at the moment. As well in the education sector, as we've talked on many quarterly calls before the education sector tends to be a little bit cyclical, somewhat cyclical, in that it relies on -- for new projects, it relies on bond initiatives to be put out by approved by the voters. There were a series of bond measures in the U.S. that was supposed to go out in May that have been put off till the fall. In the education sector, we're waiting to see what the result of that is.

So, I think we would sort of leave it at saying that the U.S. has done better because certain of our larger offices in the U.S. that had not been performing up to standard before are now performing at a much better rate, but we're very cautious about where the future might go in the back half of 2020 and into 2021?

Stephen Taylor

Okay, that's great color. Thank you very much.

Operator

Okay. So there are no further questions at this time. Please proceed.

Scott Stewart

Well, I want to thank everybody for being on the call today. It has been a pleasure, and I wish everybody a great weekend. And please look after yourselves. Thank you.

Operator

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