FirstService Reports First Quarter Results
Double-Digit Revenue Growth Across Both Divisions
*Operating highlights:* *Three months* *ended March 31* *2024* *2023*
*Revenues (millions)* *$* *1,158.0* *$* *1,018.4*
*Adjusted EBITDA (millions) (note 1)* *83.4* *82.1*
*Adjusted EPS (note 2)* *0.67* *0.85*
*GAAP Operating Earnings (millions)* *38.1* *41.0*
*GAAP EPS* *0.14* *0.36*
TORONTO, April 24, 2024 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported operating and financial results for its first quarter ended March 31, 2024. All amounts are in US dollars.
Consolidated revenues for the first quarter were $1.16 billion, up 14% relative to the same quarter in the prior year. Adjusted EBITDA (note 1) increased 2% to $83.4 million, and Adjusted EPS (note 2) was $0.67, compared to $0.85 in the prior year quarter. Operating Earnings were $38.1 million, relative to $41.0 million in the prior year period. Diluted earnings per share was $0.14 per share in the quarter, versus $0.36 in the same quarter a year ago.
“We are pleased with the first quarter, as our operations delivered solid results in-line with our expectations,” said Scott Patterson, Chief Executive Officer of FirstService. “We are confident in hitting our performance targets for the year, supported by the underlying indicators across our businesses,” he concluded.
*About FirstService Corporation*
*FirstService Corporation* is a North American leader in the essential outsourced property services sector, serving its customers through two industry-leading service platforms: *FirstService Residential* - North America’s largest manager of residential communities; and *FirstService Brands* - one of North America’s largest providers of essential property services delivered through individually branded company-owned operations and franchised systems.
FirstService generates more than US$4.4 billion in annual revenues and has approximately 29,000 employees across North America. With significant insider ownership and an experienced management team, FirstService has a long-term track record of creating value and superior returns for shareholders. The Common Shares of FirstService trade on the NASDAQ and the Toronto Stock Exchange under the symbol “FSV”, and are included in the S&P/TSX 60 Index. More information is available at www.firstservice.com.
*Segmented Quarterly Results*
FirstService Residential revenues were $496.1 million for the first quarter, an increase of 11% versus the prior year, including 8% organic growth. The top-line performance was broadly distributed across our markets and driven by new property management contract wins. Adjusted EBITDA for the quarter was $35.6 million, up from $32.0 million in the prior year period. Operating Earnings were $26.7 million, versus $22.7 million in the first quarter of last year. Operating margins were in-line with the prior year quarter.
FirstService Brands revenues for the first quarter totalled $661.9 million, up 16% relative to the prior year period. Revenue growth was driven by double-digit organic growth at Century Fire Protection and contribution from our recent Roofing Corp of America acquisition. On an organic basis, division revenues were down 6% compared to the first quarter of 2023, which benefited from significant weather-related claims activity at our restoration operations. Adjusted EBITDA was $55.5 million, compared to $54.8 million in the prior year quarter. Operating Earnings were $26.8 million, versus $30.2 million in the prior year quarter. Operating margins declined due to lower profitability at our restoration brands associated with milder weather patterns in the current year period, as well as increased promotional and marketing activity at our home services brands.
Corporate costs, as presented in Adjusted EBITDA (note 1), were $7.7 million in the first quarter, relative to $4.7 million in the prior year period. Corporate costs for the quarter were $15.4 million, relative to $11.9 million in the prior year period, with the increase primarily due to the impact of foreign exchange movements.
*Conference Call*
FirstService will be holding a conference call on Wednesday, April 24, 2024 at 11:00 a.m. ET to discuss results for the first quarter of 2024. This call is being webcast live at the Company’s website at www.firstservice.com. Participants may register for the call here https://register.vevent.com/register/BIc4398855ed2f45debdf4cb6cd683ca7b to receive the dial-in number and their unique PIN.
To join the webcast in listen only mode, use this link: https://edge.media-server.com/mmc/p/ifffxbiu.
*Forward-looking Statements*
This press release includes or may include forward-looking statements. Much of this information can be identified by words such as “expect to,” “expected,” “will,” “estimated” or similar expressions suggesting future outcomes or events. FirstService believes the expectations reflected in such forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Such factors include: (i) general economic and business conditions, which will, among other things, impact demand for FirstService’s services and the cost of providing services; (ii) the ability of FirstService to implement its business strategy, including FirstService’s ability to acquire suitable acquisition candidates on acceptable terms and successfully integrate newly acquired businesses with its existing businesses; (iii) changes in or the failure to comply with government regulations; and (iv) other factors which are described in FirstService’s annual information form for the year ended December 31, 2023 under the heading “Risk factors” (a copy of which may be obtained at www.sedarplus.ca) and Annual Report on Form 40-F filed with the United States Securities and Exchange Commission (a copy of which may be obtained at www.sec.gov), and subsequent filings (which factors are adopted herein). Forward-looking statements contained in this press release are made as of the date hereof and are subject to change. All forward-looking statements in this press release are qualified by these cautionary statements. Unless otherwise required by applicable securities laws, we do not intend, nor do we undertake any obligation, to update or revise any forward-looking statements contained in this press release to reflect subsequent information, events, results or circumstances or otherwise.
Summary financial information is provided in this press release. Our interim consolidated financial statements and related management’s discussion and analysis will be made available on SEDAR+ at www.sedarplus.ca.
*Notes*
1. Reconciliation of net earnings to Adjusted EBITDA:
Adjusted EBITDA is defined as net earnings, adjusted to exclude: (i) income tax; (ii) other (income) expense; (iii) interest expense; (iv) depreciation and amortization; (v) acquisition-related items; and (vi) stock-based compensation expense. The Company uses adjusted EBITDA to evaluate its own operating performance, its ability to service debt, and as an integral part of its planning and reporting systems. Additionally, this measure is used in conjunction with discounted cash flow models to determine the Company’s overall enterprise valuation and to evaluate acquisition targets. Adjusted EBITDA is presented as a supplemental measure because the Company believes such a measure is useful to investors as a reasonable indicator of operating performance, due to the low capital intensity of the Company’s service operations. The Company believes this measure is a financial metric used by many investors to compare companies, especially in the services industry. This measure is not a recognized measure of financial performance under GAAP in the United States, and should not be considered as a substitute for operating earnings, net earnings or cash flow from operating activities, as determined in accordance with GAAP. The Company’s method of calculating adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to adjusted EBITDA appears below.
Three months ended
(in thousands of US dollars) March 31 *2024* 2023
Net earnings *$* *14,897* $ 22,667
Income tax *6,015* 7,916
Other income *(1,880* *)* (264 )
Interest expense, net *19,026* 10,631
Operating earnings *38,058* 40,950
Depreciation and amortization *36,807* 31,882
Acquisition-related items *1,600* 2,107
Stock-based compensation expense *6,908* 7,157
Adjusted EBITDA *$* *83,373* $ 82,096
A reconciliation of segment operating earnings to segment Adjusted EBITDA appears below.
(in thousands of US$)
*Three months ended, March 31, 2024* *FirstService* *FirstService * *Residential* *Brands* *Corporate *^*(1)*
Operating earnings (loss) *$* *26,658* *$* *26,799* *$* *(15,399* *)*
Depreciation and amortization *8,423* *28,361* *23*
Acquisition-related items *518* *302* *780*
Stock-based compensation expense *-* *-* *6,908*
Adjusted EBITDA *$* *35,599* *$* *55,462* *$* *(7,688* *)*
Three months ended, March 31, 2023 FirstService FirstService Residential Brands Corporate^ (1)
Operating earnings (loss) $ 22,712 $ 30,160 $ (11,922 )
Depreciation and amortization 8,793 23,067 22
Acquisition-related items 463 1,566 78
Stock-based compensation expense - - 7,157
Adjusted EBITDA $ 31,968 $ 54,793 $ (4,665 )
(1) Corporate costs represent corporate overhead expenses not directly attributable to reportable segments and are therefore unallocated within segment operating earnings (loss) and Adjusted EBITDA.
2. Reconciliation of net earnings and net earnings per share to adjusted net earnings and adjusted EPS:
Adjusted EPS is defined as diluted net earnings per share, adjusted for the effect, after income tax, of: (i) the non-controlling interest redemption increment; (ii) acquisition-related items; (iii) amortization expense related to intangible assets recognized in connection with acquisitions; and (iv) stock-based compensation expense. The Company believes this measure is useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company and enhances the comparability of operating results from period to period. Adjusted EPS is not a recognized measure of financial performance under GAAP, and should not be considered as a substitute for diluted net earnings per share, as determined in accordance with GAAP. The Company’s method of calculating this non-GAAP measure may differ from other issuers and, accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to adjusted net earnings and of diluted net earnings per share to adjusted EPS appears below.
Three months ended
(in thousands of US dollars) March 31 *2024* 2023
Net earnings *$* *14,897* $ 22,667
Non-controlling interest share of earnings *(1,533* *)* (2,433 )
Acquisition-related items *1,600* 2,107
Amortization of intangible assets *15,231* 14,286
Stock-based compensation expense *6,908* 7,157
Income tax on adjustments *(6,421* *)* (5,575 )
Non-controlling interest on adjustments *(264* *)* (282 )
Adjusted net earnings *$* *30,418* $ 37,927 Three months ended
(in US dollars) March 31 *2024* 2023
Diluted net earnings per share *$* *0.14* $ 0.36
Non-controlling interest redemption increment *0.16* 0.09
Acquisition-related items *0.03* 0.05
Amortization of intangible assets, net of tax *0.23* 0.23
Stock-based compensation expense, net of tax *0.11* 0.12
Adjusted EPS *$* *0.67* $ 0.85
*FIRSTSERVICE CORPORATION*
*Operating Results*
(in thousands of US dollars, except per share amounts) Three months ended March 31
(unaudited) *2024* 2023
*Revenues* *$* *1,158,045* $ 1,018,445
Cost of revenues *788,577* 700,264
Selling, general and administrative expenses *293,003* 243,242
Depreciation *21,576* 17,596
Amortization of intangible assets *15,231* 14,286
Acquisition-related items (1) *1,600* 2,107
*Operating earnings* *38,058* 40,950
Interest expense, net *19,026* 10,631
Other income, net *(1,880* *)* (264 )
Earnings before income tax *20,912* 30,583
Income tax *6,015* 7,916
*Net earnings* *14,897* 22,667
Non-controlling interest share of earnings *1,533* 2,433
Non-controlling interest redemption increment *7,056* 4,116
*Net earnings attributable to Company * *6,308* 16,118
*Net earnings per share * Basic *$* *0.14* $ 0.36 Diluted *0.14* 0.36
*Adjusted EPS (2)* *$* *0.67* $ 0.85
Weighted average common shares (thousands) Basic *44,850* 44,396 Diluted *45,111* 44,661
(1) Acquisition-related items include contingent acquisition consideration fair value adjustments, and transaction costs.
(2) See definition and reconciliation above.
*Condensed Consolidated Balance Sheets*
(in thousands of US dollars)
(unaudited) *March 31, 2024* December 31, 2023
*Assets*
Cash and cash equivalents *$* *164,846* $ 187,617
Restricted cash *19,249* 19,260
Accounts receivable *829,376* 842,236
Prepaid and other current assets *325,364* 311,889 *Current assets* *1,338,835* 1,361,002
Other non-current assets *33,759* 32,666
Deferred income tax *1,746* 1,752
Fixed assets *220,832* 204,188
Operating lease right-of-use assets *208,992* 218,299
Goodwill and intangible assets *1,839,996* 1,807,836 *Total assets* *$* *3,644,160* $ 3,625,743
*Liabilities and shareholders' equity*
Accounts payable and accrued liabilities *$* *419,976* $ 471,083
Unearned revenues *187,826* 178,587
Other current liabilities *31,677* 33,074
Operating lease liabilities - current *47,467* 50,898
Long-term debt - current *41,413* 37,132 *Current liabilities* *728,359* 770,774
Long-term debt - non-current *1,198,852* 1,144,975
Operating lease liabilities - non-current *178,399* 183,923
Other liabilities *96,761* 115,938
Deferred income tax *53,468* 53,024
Non-controlling interests *339,356* 332,963
Shareholders' equity *1,048,965* 1,024,146 *Total liabilities and equity* *$* *3,644,160* $ 3,625,743
*Supplemental balance sheet information*
Total debt *$* 1,240,265 $ 1,182,107
Total debt, net of cash 1,075,419 994,490
*Condensed Consolidated Statements of Cash Flows*
(in thousands of US dollars) Three months ended March 31
(unaudited) *2024* 2023
*Cash provided by (used in)*
*Operating activities*
Net earnings *$* *14,897* $ 22,667
Items not affecting cash: Depreciation and amortization *36,807* 31,882 Deferred income tax *(2,274* *)* (272 ) Other *6,332* 9,003 *55,762* 63,280
Changes in non cash working capital Accounts receivable *19,997* (48,588 ) Payables and accruals *(56,284* *)* (30,406 ) Other *(8,920* *)* 15,411
Contingent acquisition consideration *(19,355* *)* -
Net cash used in operating activities *(8,800* *)* (303 )
*Investing activities*
Acquisition of businesses, net of cash acquired *(31,618* *)* (82,351 )
Purchases of fixed assets *(25,021* *)* (21,481 )
Other investing activities *(701* *)* (5,304 )
Net cash used in investing activities *(57,340* *)* (109,136 )
*Financing activities*
Increase in long-term debt, net *46,255* 103,900
Purchases of non-controlling interests, net *(11,221* *)* (2,719 )
Dividends paid to common shareholders *(10,054* *)* (8,956 )
Other financing activities *18,150* 15,122
Net cash provided by financing activities *43,130* 107,347
Effect of exchange rate changes on cash *228* (13 )
Decrease in cash, cash equivalents and restricted cash *(22,782* *)* (2,105 )
Cash, cash equivalents and restricted cash, beginning of period *206,877* 159,348
Cash, cash equivalents and restricted cash, end of period *$* *184,095* $ 157,243
*Segmented Results*
(in thousands of US dollars) FirstService FirstService
(unaudited) Residential Brands Corporate Consolidated
*Three months ended March 31*
*2024* *Revenues* *$* *496,124* *$* *661,921* *$* *-* *$* *1,158,045* *Adjusted EBITDA* *35,599* *55,462* *(7,688* *)* *83,373* *Operating earnings* *26,658* *26,799* *(15,399* *)* *38,058*
2023 Revenues $ 445,580 $ 572,865 $ - $ 1,018,445 Adjusted EBITDA 31,968 54,793 (4,665 ) 82,096 Operating earnings 22,712 30,160 (11,922 ) 40,950
*COMPANY CONTACTS:*
*D. Scott Patterson*
*Chief Executive Officer*
*Jeremy Rakusin*
*Chief Financial Officer*
*(416) 960-9566*