FirstService Reports Strong Third Quarter Results

Strong Organic Growth Drives Double-Digit Revenue Increases Across Both Divisions

Operating highlights:

		Three months ended						Nine months ended
		September 30						September 30
		2021			2020			2021			2020
Revenues (millions)		$	849.4		$	741.9		$	2,392.1		$	1,997.4
Adjusted EBITDA (millions) (note 1)			94.2			88.7			243.8			203.8
Adjusted EPS (note 2)			1.50			1.19			3.36			2.44
GAAP Operating Earnings			61.5			59.1			156.8			120.0
GAAP EPS			1.03			0.75			2.35			1.52

TORONTO, Oct. 26, 2021 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported strong results for its third quarter ended September 30, 2021. All amounts are in US dollars.

Consolidated revenues for the third quarter were $849.4 million, a 14% increase relative to the same quarter in the prior year, including 8% organic growth. Adjusted EBITDA (note 1) increased 6% to $94.2 million, and Adjusted EPS (note 2) was $1.50, representing 26% growth over the prior year quarter. During the third quarter, FirstService reported GAAP Operating Earnings of $61.5 million, up from $59.1 million in the prior year period. The GAAP diluted earnings per share was $1.03 in the quarter, compared to $0.75 for the same quarter a year ago.

For the nine months ended September 30, 2021, consolidated revenues were $2.39 billion, a 20% increase relative to the comparable prior year period, Adjusted EBITDA was $243.8 million, up 20%, and Adjusted EPS was $3.36, an increase of 38% versus the prior year period. FirstService’s GAAP Operating Earnings were $156.8 million in the current year period, versus $120.0 million in the prior year. The GAAP diluted earnings per share for the nine months year-to-date was $2.35, compared to $1.52 in the prior year period.

“We are pleased that all of our businesses contributed in delivering strong organic growth,” said Scott Patterson, Chief Executive Officer of FirstService. “This performance was particularly impressive, given the ongoing labour and resource constraints which limited our ability to drive further growth. Market demand indicators remain strong and provide us with confidence in navigating through the challenging macroeconomic environment,” 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 franchise systems and company-owned operations.

FirstService generates more than US$3.1 billion in annual revenues and has approximately 24,000 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 $423.1 million for the third quarter, up 13% compared to the prior year quarter, including organic growth of 8% and the remaining contribution from recent tuck-under acquisitions. Revenue growth in the quarter reflected ongoing contract wins and was augmented by increased labour-driven services in our amenity management offering related to further client facility reopenings in the aftermath of the pandemic. Adjusted EBITDA for the quarter was $45.1 million, versus $41.8 million in the prior year period. GAAP Operating Earnings were $38.0 million, versus $35.2 million for the third quarter of last year. Margins decreased during the quarter as a result of increased wage inflation compared to the prior year.

FirstService Brands revenues during the third quarter grew to $426.4 million, up 16% relative to the prior year period. Organic growth was 9%, with the balance from recent tuck-under acquisitions. Top-line growth was broad-based across all of our service lines, including double-digit organic growth at our home improvement brands and Century Fire Protection. Adjusted EBITDA for the third quarter was $53.0 million, versus $48.7 million in the prior year period. GAAP Operating Earnings were $31.1 million, versus $28.5 million in the prior year quarter. The division margin decline was due to increased supply chain costs and associated labour cost increases during the third quarter.

Corporate costs, as presented in Adjusted EBITDA, were $3.9 million in the third quarter, relative to $1.8 million in the prior year period. On a GAAP basis, corporate costs for the quarter were $7.5 million, relative to $4.5 million in the prior year period. The year-over-year cost increase reflects higher compensation expense compared to the prior year third quarter, which included significant COVID-19 expense reductions.

Conference Call
FirstService will be holding a conference call on Tuesday, October 26, 2021 at 11:00 a.m. Eastern Time to discuss the quarter’s results. The numbers to use for this call are 1) toll-free 1-888-241-0551; or 2) for international callers, 647-427-3415. The call will be simultaneously webcast and can be accessed live or after the call at www.firstservice.com in the “Investors / Newsroom” section.

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, 2020 under the heading “Risk factors” (a copy of which may be obtained at www.sedar.com) 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.sedar.com.

COMPANY CONTACTS:

D. Scott Patterson
President & CEO

Jeremy Rakusin
Chief Financial Officer

(416) 960-9566

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; (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								Nine months ended
(in thousands of US$)		September 30								September 30
		2021				2020				2021				2020
Net earnings		$	52,872			$	40,966			$	120,735			$	76,663
Income tax			17,321				12,969				39,321				24,118
Other income, net			(12,539	)			(269	)			(15,295	)			(645	)
Interest expense, net			3,873				5,464				12,031				19,881
Operating earnings			61,527				59,130				156,792				120,017
Depreciation and amortization			23,977				26,184				70,876				73,179
Acquisition-related items			5,152				950				4,946				1,752
Stock-based compensation expense			3,540				2,468				11,230				8,880
Adjusted EBITDA		$	94,196			$	88,732			$	243,844			$	203,828

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								Nine months ended
(in thousands of US$)		September 30								September 30
		2021				2020				2021				2020
Net earnings		$	52,872			$	40,966			$	120,735			$	76,663
Non-controlling interest share of earnings			(1,564	)			(760	)			(6,927	)			(5,841	)
Acquisition-related items			5,152				950				4,946				1,752
Amortization of intangible assets			10,567				13,191				30,987				35,416
Stock-based compensation expense			3,540				2,468				11,230				8,880
Income tax on adjustments			(3,668	)			(4,071	)			(10,977	)			(11,517	)
Non-controlling interest on adjustments			(404	)			(303	)			(756	)			(823	)
Adjusted net earnings		$	66,495			$	52,441			$	149,238			$	104,530
		Three months ended								Nine months ended
(in US$)		September 30								September 30
		2021				2020				2021				2020
Diluted net earnings per share		$	1.03			$	0.75			$	2.35			$	1.52
Non-controlling interest redemption increment			0.13				0.17				0.22				0.13
Acquisition-related items			0.11				0.02				0.11				0.04
Amortization of intangible assets, net of tax			0.17				0.21				0.50				0.60
Stock-based compensation expense, net of tax			0.06				0.04				0.18				0.15
Adjusted earnings per share		$	1.50			$	1.19			$	3.36			$	2.44

FIRSTSERVICE CORPORATION
Condensed Consolidated Statements of Earnings
(in thousands of US dollars, except per share amounts)
					Three months								Nine months
					ended September 30								ended September 30
				2021				2020				2021				2020
Revenues				$	849,431			$	741,932			$	2,392,127			$	1,997,360
Cost of revenues					579,309				496,367				1,624,797				1,343,526
Selling, general and administrative expenses					179,466				159,301				534,716				458,886
Depreciation					13,410				12,993				39,889				37,763
Amortization of intangible assets					10,567				13,191				30,987				35,416
Acquisition-related items (1)					5,152				950				4,946				1,752
Operating earnings					61,527				59,130				156,792				120,017
Interest expense, net					3,873				5,464				12,031				19,881
Other income (2)					(12,539	)			(269	)			(15,295	)			(645	)
Earnings before income tax					70,193				53,935				160,056				100,781
Income tax					17,321				12,969				39,321				24,118
Net earnings					52,872				40,966				120,735				76,663
Non-controlling interest share of earnings					1,564				760				6,927				5,841
Non-controlling interest redemption increment					5,693				7,379				9,603				5,588
Net earnings attributable to Company				$	45,615			$	32,827			$	104,205			$	65,234
Net earnings per common share
	Basic			$	1.04			$	0.76			$	2.38			$	1.54
	Diluted				1.03				0.75				2.35				1.52
Adjusted earnings per share (3)				$	1.50			$	1.19			$	3.36			$	2.44
Weighted average common shares (thousands)
		Basic			43,865				43,476				43,798				42,480
		Diluted			44,471				43,942				44,351				42,868

Notes to Condensed Consolidated Statements of Earnings
(1) Acquisition-related items include transaction costs, and contingent acquisition consideration fair value adjustments.
(2) Other income includes a $12.5 million pre-tax gain from the divestiture of a small, non-core operation in the FirstService Residential segment.
(3) See definition and reconciliation above.

Condensed Consolidated Balance Sheets
(in thousands of US dollars)
																September 30, 2021										December 31, 2020
Assets
Cash and cash equivalents																$	140,861									$					184,295
Restricted cash																	31,262														24,643
Accounts receivable																	534,279														418,890
Prepaid and other current assets																	223,442														191,488
			Current assets														929,844														819,316
Other non-current assets																	17,430														14,970
Fixed assets																	134,791														126,569
Operating lease right-of-use assets																	156,708														153,185
Goodwill and intangible assets																	1,155,621														1,082,500
			Total assets													$	2,394,394									$					2,196,540
Liabilities and shareholders' equity
Accounts payable and accrued liabilities																$	400,015									$					349,692
Other current liabilities																	134,922														102,266
Operating lease liabilities - current																	38,740														35,315
Long-term debt - current																	56,378														56,478
			Current liabilities														630,055														543,751
Long-term debt - non-current																	509,270														533,126
Operating lease liabilities - non-current																	128,885														128,793
Other liabilities																	105,191														96,093
Deferred income tax																	40,078														41,345
Redeemable non-controlling interests																	212,814														193,034
Shareholders' equity																	768,101														660,398
			Total liabilities and equity													$	2,394,394									$					2,196,540
Supplemental balance sheet information
Total debt																$	565,648									$					589,604
Total debt, net of cash																	424,787														405,309

Consolidated Statements of Cash Flows
(in thousands of US dollars)
						Three months ended																	Nine months ended
						September 30																	September 30
						2021								2020									2021											2020
Cash provided by (used in)
Operating activities
Net earnings					$	52,872					$			40,966								$	120,735										$	76,663
Items not affecting cash:
		Depreciation and amortization				23,978								26,184									70,877											73,179
		Deferred income tax				(995			)					(2,134				)					(2,725				)							(6,339	)
		Other				(3,998			)					2,486									4,000											8,155
						71,857								67,502									192,887											151,658
Changes in non-cash working capital
		Accounts receivable				(41,135			)					(27,384				)					(79,821				)							5,509
		Payables and accruals				22,073								34,295									13,705											52,630
		Other				(24,254			)					(32,494				)					8,493											(14,837	)
Net cash provided by operating activities						28,541								41,919									135,264											194,960
Investing activities
Acquisition of businesses, net of cash acquired						(46,408			)					(64,507				)					(86,011				)							(64,507	)
Disposition of business, net of cash disposed						15,780								-									15,780											-
Purchases of fixed assets						(13,245			)					(8,820				)					(42,348				)							(30,901	)
Other investing activities						(1,836			)					(544				)					(6,112				)							(1,330	)
Net cash used in investing activities						(45,709			)					(73,871				)					(118,691				)							(96,738	)
Financing activities
Increase in long-term debt, net						(6,922			)					(41,863				)					(24,827				)							(163,787	)
Proceeds received on common share issuance						-								-									-											150,008
Purchases of non-controlling interests, net						(276			)					(3,723				)					(5,676				)							(18,790	)
Dividends paid to common shareholders						(7,999			)					(7,168				)					(23,190				)							(20,259	)
Distributions paid to non-controlling interests						(1,057			)					(3,368				)					(8,213				)							(3,418	)
Other financing activities						(1,345			)					5,255									8,516											6,483
Net cash used in financing activities						(17,599			)					(50,867				)					(53,390				)							(49,763	)
Effect of exchange rate changes on cash						(531			)					(101				)					2											(385	)
Increase (decrease) in cash, cash equivalents and restricted cash						(35,298			)					(82,920				)					(36,815				)							48,074
Cash, cash equivalents and restricted cash, beginning of period						207,421								265,285									208,938											134,291
Cash, cash equivalents and restricted cash, end of period					$	172,123					$			182,365								$	172,123										$	182,365

Segmented Results
(in thousands of US dollars)
							FirstService						FirstService
							Residential						Brands								Corporate											Consolidated
Three months ended September 30
2021
	Revenues						$	423,069					$		426,362						$			-								$		849,431
	Adjusted EBITDA							45,083							53,009									(3,896					)					94,196
	Operating earnings							37,998							31,074									(7,545					)					61,527
2020
	Revenues						$	374,756					$		367,176						$			-								$		741,932
	Adjusted EBITDA							41,805							48,678									(1,751					)					88,732
	Operating earnings							35,200							28,451									(4,521					)					59,130
							FirstService						FirstService
							Residential						Brands								Corporate											Consolidated
Nine months ended September 30
2021
	Revenues						$	1,179,770					$		1,212,357						$			-								$		2,392,127
	Adjusted EBITDA							120,984							134,587									(11,727					)					243,844
	Operating earnings							101,646							78,329									(23,183					)					156,792
2020
	Revenues						$	1,052,572					$		944,788						$			-								$		1,997,360
	Adjusted EBITDA							102,940							106,468									(5,580					)					203,828
	Operating earnings							84,604							50,722									(15,309					)					120,017