FirstService Reports Second Quarter 2024 Results

Operating highlights:

  Three months ended Six months ended 
  June 30 June 30 
  2024 2023 2024 2023 
              
Revenues (millions)$1,297.5 $1,119.7 $2,455.5 $2,138.2 
Adjusted EBITDA (millions) (note 1) 132.5  118.4  215.9  200.4 
Adjusted EPS (note 2) 1.36  1.46  2.03  2.31 
              
GAAP Operating Earnings 83.9  82.3  122.0  123.3 
GAAP EPS 0.78  1.01  0.92  1.37 
              

TORONTO, July 25, 2024 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported results for its second quarter ended June 30, 2024. All amounts are in US dollars.

Consolidated revenues for the second quarter were $1.30 billion, a 16% increase relative to the same quarter in the prior year. Adjusted EBITDA (note 1) increased 12% to $132.5 million, and Adjusted EPS (note 2) was $1.36, versus $1.46 in the prior year quarter. During the second quarter, FirstService reported Operating Earnings of $83.9 million, up from $82.3 million in the prior year period. Diluted earnings per share was $0.78 in the quarter, compared to $1.01 for the same quarter a year ago.

For the six months ended June 30, 2024, consolidated revenues were $2.46 billion, a 15% increase relative to the comparable prior year period, Adjusted EBITDA was $215.9 million, up 8%, and Adjusted EPS was $2.03, versus $2.31 in the prior year period. FirstService’s Operating Earnings were $122.0 million in the current year period, versus $123.3 million in the prior year. Diluted earnings per share for the six months year-to-date was $0.92, compared to $1.37 in the prior year period.

“We are pleased with our second quarter financial results which were driven by strong revenue growth,” said Scott Patterson, Chief Executive Officer of FirstService. “Based on the current momentum and indicators across our businesses, we are optimistic we will hit our top and bottom line targets in the back half of the year,” 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 franchise systems.

FirstService generates more than US$4.6 billion in annual revenues and has approximately 30,000 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 under the symbol “FSV” and on 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 $557.5 million for the second quarter, up 8% compared to the prior year quarter, including organic growth of 7%. The growth was driven by new property management contract wins across most markets. Adjusted EBITDA for the quarter was $59.1 million, versus $55.7 million in the prior year period. Operating Earnings were $49.1 million, versus $49.2 million for the second quarter of last year. The Adjusted EBITDA margin for the division was relatively in-line with the prior year, while the operating earnings margin was modestly lower due to amortization expense related to recently completed tuck-under acquisitions.

FirstService Brands revenues during the second quarter grew to $740.0 million, up 23% relative to the prior year period. The revenue increase was driven by solid growth from Century Fire Protection and a significant contribution from our recent Roofing Corp of America acquisition. On an organic basis, division revenues were down 6% versus the prior year second quarter, which benefited from elevated weather-related claims activity at our restoration operations. Adjusted EBITDA for the second quarter was $77.6 million, up from $65.8 million in the prior year period. Operating Earnings were $46.3 million, versus $41.8 million in the prior year quarter. The decline in operating margins was attributable to lower profitability at our restoration brands due to milder weather patterns in the current quarter compared to the prior year period.

Corporate costs, as presented in Adjusted EBITDA (note 1), were $4.2 million in the second quarter, relative to $3.2 million in the prior year period. Corporate costs for the quarter were $11.5 million, relative to $8.6 million in the prior year period, with the year-over-year cost increase driven by the impact of foreign exchange as well as higher stock-based compensation expense.

Conference Call
FirstService will be holding a conference call on Thursday, July 25, 2024 at 11:00 a.m. Eastern Time to discuss the quarter’s results. 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/BI3340c2e12de24175a540beba39003a0e 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/e2z4g4ax . It is recommended that you join 10 minutes prior to the event start (although you may register and dial in at any time during the call).

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. This press release should be read in conjunction with the Company's consolidated financial statements and MD&A to 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 expense (income); (iii) interest expense, net; (iv) depreciation and amortization; (v) acquisition-related items; and (vi) stock-based compensation expense. We use adjusted EBITDA to evaluate our own operating performance and our ability to service debt, as well as an integral part of our planning and reporting systems. Additionally, we use this measure in conjunction with discounted cash flow models to determine the Company’s overall enterprise valuation and to evaluate acquisition targets. We present adjusted EBITDA as a supplemental measure because we believe such measure is useful to investors as a reasonable indicator of operating performance because of the low capital intensity of the Company’s service operations. We believe 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. Our 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 Six months ended
(in thousands of US$)June 30 June 30
  2024
 2023 2024
 2023
             
Net earnings$44,937  $54,713  $59,834  $77,380 
Income tax 18,584   19,903   24,599   27,819 
Other income, net (115)  (4,249)  (1,995)  (4,513)
Interest expense, net 20,531   11,954   39,557   22,585 
Operating earnings 83,937   82,321   121,995   123,271 
Depreciation and amortization 39,225   29,034   76,032   60,916 
Acquisition-related items 2,306   1,651   3,906   3,758 
Stock-based compensation expense 7,019   5,347   13,927   12,504 
Adjusted EBITDA$132,487  $118,353  $215,860  $200,449 


A reconciliation of segment operating earnings to segment Adjusted EBITDA appears below.   
            
(in thousands of US$)          
        
Three months ended, June 30, 2024   FirstService  FirstService    
     Residential  Brands  Corporate (1)
            
Operating earnings (loss)  $49,107 $46,308 $(11,478)
Depreciation and amortization   9,773  29,429  23 
Acquisition-related items   207  1,827  272 
Stock-based compensation expense   -  -  7,019 
Adjusted EBITDA  $59,087 $77,564 $(4,164)
            
            
Three months ended, June 30, 2023   FirstService  FirstService   
     Residential  Brands  Corporate (1)
            
Operating earnings (loss)  $49,195 $41,770 $(8,644)
Depreciation and amortization   6,029  22,981  24 
Acquisition-related items   514  1,048  89 
Stock-based compensation expense   -  -  5,347 
Adjusted EBITDA  $55,738 $65,799 $(3,184)
            
            
Six months ended, June 30, 2024   FirstService  FirstService    
     Residential  Brands  Corporate (1)
            
Operating earnings (loss)  $75,765 $73,107 $(26,877)
Depreciation and amortization   18,196  57,790  46 
Acquisition-related items   725  2,129  1,052 
Stock-based compensation expense   -  -  13,927 
Adjusted EBITDA  $94,686 $133,026 $(11,852)
            
            
Six months ended, June 30, 2023   FirstService  FirstService   
     Residential  Brands  Corporate (1)
            
Operating earnings (loss)  $71,907 $71,930 $(20,566)
Depreciation and amortization   14,822  46,048  46 
Acquisition-related items   977  2,614  167 
Stock-based compensation expense   -  -  12,504 
Adjusted EBITDA  $87,706 $120,592 $(7,849)
            
(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 diluted net earnings per share to adjusted net earnings and adjusted net earnings per share:

Adjusted earnings per share 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. We believe 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 earnings per share 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. Our 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 earnings per share appears below.

  Three months ended Six months ended
(in thousands of US$)June 30 June 30
  2024 2023 2024
 2023
             
Net earnings$44,937  $54,713  $59,834  $77,380 
Non-controlling interest share of earnings (2,696)  (3,376)  (4,229)  (5,809)
Acquisition-related items 2,306   1,651   3,906   3,758 
Amortization of intangible assets 17,009   11,556   32,240   25,842 
Stock-based compensation expense 7,019   5,347   13,927   12,504 
Income tax on adjustments (6,968)  (4,395)  (13,389)  (9,970)
Non-controlling interest on adjustments (320)  (249)  (584)  (531)
Adjusted net earnings$61,287  $65,247  $91,705  $103,174 
             
  Three months ended Six months ended
(in US$)June 30 June 30
  2024
 2023 2024 2023
             
Diluted net earnings per share$0.78  $1.01  $0.92  $1.37 
Non-controlling interest redemption increment 0.16   0.13   0.32   0.23 
Acquisition-related items 0.05   0.04   0.08   0.08 
Amortization of intangible assets, net of tax 0.26   0.19   0.49   0.42 
Stock-based compensation expense, net of tax 0.11   0.09   0.22   0.21 
Adjusted earnings per share$1.36  $1.46  $2.03  $2.31 
             


FIRSTSERVICE CORPORATION
Condensed Consolidated Statements of Earnings
(in thousands of US dollars, except per share amounts)
     Three months  Six months
     ended June 30  ended June 30
   2024  2023  2024  2023
               
Revenues $1,297,459  $1,119,734  $2,455,504  $2,138,179 
               
Cost of revenues  862,463   754,263   1,651,040   1,454,527 
Selling, general and administrative expenses  309,528   252,465   602,531   495,707 
Depreciation  22,216   17,478   43,792   35,074 
Amortization of intangible assets  17,009   11,556   32,240   25,842 
Acquisition-related items (1)  2,306   1,651   3,906   3,758 
Operating earnings  83,937   82,321   121,995   123,271 
Interest expense, net  20,531   11,954   39,557   22,585 
Other income, net  (115)  (4,249)  (1,995)  (4,513)
Earnings before income tax  63,521   74,616   84,433   105,199 
Income tax  18,584   19,903   24,599   27,819 
Net earnings   44,937   54,713   59,834   77,380 
Non-controlling interest share of earnings  2,696   3,376   4,229   5,809 
Non-controlling interest redemption increment  7,183   5,977   14,239   10,093 
Net earnings attributable to Company  $35,058  $45,360  $41,366  $61,478 
               
Net earnings per common share             
 Basic $0.78  $1.02  $0.92  $1.38 
 Diluted  0.78   1.01   0.92   1.37 
              
               
Adjusted earnings per share (2) $1.36  $1.46  $2.03  $2.31 
               
Weighted average common shares (thousands)            
  Basic  44,984   44,574   44,917   44,486 
  Diluted  45,100   44,800   45,087   44,733 
 

Notes to Condensed Consolidated Statements of Earnings
(1) Acquisition-related items include transaction costs, and contingent acquisition consideration fair value adjustments.
(2) See definition and reconciliation above.

 
Condensed Consolidated Balance Sheets     
(in thousands of US dollars)
      
       
 June 30, 2024 December 31, 2023
       
Assets     
Cash and cash equivalents$210,918 $187,617 
Restricted cash 20,591  19,260 
Accounts receivable 895,182  842,236 
Prepaid and other current assets 354,824  311,889 
 Current assets 1,481,515  1,361,002 
Other non-current assets 34,516  34,418 
Fixed assets 237,755  204,188 
Operating lease right-of-use assets 227,230  218,299 
Goodwill and intangible assets 2,065,169  1,807,836 
 Total assets$4,046,185 $3,625,743 
       
       
Liabilities and shareholders' equity     
Accounts payable and accrued liabilities$502,549 $471,083 
Other current liabilities 254,937  211,661 
Operating lease liabilities - current 50,266  50,898 
Long-term debt - current 41,985  37,132 
 Current liabilities 849,737  770,774 
Long-term debt - non-current 1,289,151  1,144,975 
Operating lease liabilities - non-current 194,668  183,923 
Other liabilities 131,692  115,938 
Deferred income tax 83,908  53,024 
Redeemable non-controlling interests 415,559  332,963 
Shareholders' equity 1,081,470  1,024,146 
 Total liabilities and equity$4,046,185 $3,625,743 
       
       
Supplemental balance sheet information     
Total debt$1,331,136 $1,182,107 
Total debt, net of cash 1,120,218  994,490 


Consolidated Statements of Cash Flows       
(in thousands of US dollars)
    Three months ended  Six months ended
    June 30  June 30
  2024
 2023 2024
 2023
              
Cash provided by (used in)            
              
Operating activities            
Net earnings $44,937  $54,713  $59,834  $77,380 
Items not affecting cash:            
 Depreciation and amortization  39,225   29,034   76,032   60,916 
 Deferred income tax  (2,275)  (419)  (4,549)  (691)
 Other  8,052   1,995   14,384   10,998 
    89,939   85,323   145,701   148,603 
              
Changes in non-cash working capital            
 Accounts receivable  (22,637)  (73,765)  (2,640)  (122,353)
 Payables and accruals  33,002   41,398   (23,282)  10,992 
 Other  30,440   33,296   2,165   48,707 
Net cash provided by operating activities  130,744   86,252   121,944   85,949 
              
Investing activities            
Acquisition of businesses, net of cash acquired  (123,031)  (11,099)  (154,649)  (93,450)
Purchases of fixed assets  (29,301)  (22,723)  (54,322)  (44,204)
Other investing activities  (299)  6,560   (1,000)  1,256 
Net cash used in investing activities  (152,631)  (27,262)  (209,971)  (136,398)
              
Financing activities            
Increase (decrease) in long-term debt, net  90,473   (18,855)  136,728   85,045 
Purchases of non-controlling interests, net  (10,221)  (891)  (21,442)  (3,610)
Dividends paid to common shareholders  (11,244)  (10,024)  (21,298)  (18,980)
Distributions paid to non-controlling interests  (3,817)  (4,114)  (4,470)  (4,472)
Other financing activities  3,987   1,664   22,790   17,144 
Net cash provided by (used in) financing activities  69,178   (32,220)  112,308   75,127 
              
Effect of exchange rate changes on cash  123   (591)  351   (604)
              
Increase in cash, cash equivalents and restricted cash  47,414   26,179   24,632   24,074 
              
Cash, cash equivalents and restricted cash, beginning of period  184,095   157,243   206,877   159,348 
              
Cash, cash equivalents and restricted cash, end of period $231,509  $183,422  $231,509  $183,422 
              
              
              


Segmented Results
(in thousands of US dollars)
             
           
  FirstService FirstService    
 Residential Brands Corporate Consolidated
             
Three months ended June 30           
             
2024           
 Revenues$557,504 $739,955 $-  $1,297,459 
 Adjusted EBITDA 59,087  77,564  (4,164)  132,487 
             
 Operating earnings 49,107  46,308  (11,478)  83,937 
             
2023           
 Revenues$517,134 $602,600 $-  $1,119,734 
 Adjusted EBITDA 55,738  65,799  (3,184)  118,353 
             
 Operating earnings 49,195  41,770  (8,644)  82,321 
             
             
           
  FirstService FirstService    
  Residential Brands Corporate Consolidated
             
Six months ended June 30           
             
2024           
 Revenues$1,053,628 $1,401,876 $-  $2,455,504 
 Adjusted EBITDA 94,686  133,026  (11,852)  215,860 
             
 Operating earnings 75,765  73,107  (26,877)  121,995 
             
2023           
 Revenues$962,714 $1,175,465 $-  $2,138,179 
 Adjusted EBITDA 87,706  120,592  (7,849)  200,449 
             
 Operating earnings 71,907  71,930  (20,566)  123,271 
 

COMPANY CONTACTS:

D. Scott Patterson
Chief Executive Officer

Jeremy Rakusin
Chief Financial Officer

(416) 960-9566


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