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FirstService Reports Very Strong First Quarter Results

FirstService Corporation
FirstService Corporation

Robust Organic Top-Line Growth Drives Profitability

Operating highlights:

 

Three months

 

 

ended March 31

 

 

2023

 

2022

 

 

 

 

 

 

 

 

Revenues (millions)

$

1,018.4

 

$

834.6

 

Adjusted EBITDA (millions) (note 1)

 

82.1

 

 

62.3

 

Adjusted EPS (note 2)

 

0.85

 

 

0.73

 

 

 

 

 

 

 

 

GAAP Operating Earnings (millions)

 

41.0

 

 

29.0

 

GAAP EPS

 

0.36

 

 

0.32

 

 

 

 

 

 

 

 

TORONTO, April 26, 2023 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported operating and financial results for its first quarter ended March 31, 2023. All amounts are in US dollars.

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Consolidated revenues for the first quarter were $1.02 billion, up 22% relative to the same quarter in the prior year, including 17% from organic growth. Adjusted EBITDA (note 1) increased 32% to $82.1 million, and Adjusted EPS (note 2) was $0.85, representing 16% growth over the prior year quarter. GAAP Operating Earnings were $41.0 million, relative to $29.0 million in the prior year period. GAAP diluted earnings per share was $0.36 per share in the quarter, versus $0.32 in the same quarter a year ago.

“We are very pleased with our first quarter, building upon the strong results we delivered in Q4,” said Scott Patterson, Chief Executive Officer of FirstService. “The impressive organic growth and early year momentum across our brands sets us up for a strong expected performance in 2023,” 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$3.9 billion in annual revenues and has approximately 27,000 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 $445.6 million for the first quarter, an increase of 13% versus the prior year, including 11% organic growth. Top-line performance was driven by new property management contract wins and very strong growth in our labour-related services across most markets. Adjusted EBITDA for the quarter was $32.0 million, up from $30.4 million in the prior year period. GAAP Operating Earnings were $22.7 million, versus $23.4 million in the first quarter of last year. Operating margins were impacted by the strong year-over-year growth of lower margin labour-driven services, including the ramp-up of certain seasonal amenity management operations.

FirstService Brands revenues for the first quarter totalled $572.9 million, up 30% relative to the prior year period. The revenue increase was comprised of 23% organic growth, with the balance from recent tuck-under acquisitions. Top-line organic growth was exceptionally strong within our Century Fire Protection and restoration brands, the latter of which benefited from significant activity arising from area-wide weather events. Adjusted EBITDA was $54.8 million, up from $36.1 million in the prior year quarter. GAAP Operating Earnings were $30.2 million, versus $15.8 million in the prior year quarter. Operating margins increased primarily as a result of operating leverage driven by the strong revenue growth across our service lines.

Corporate costs, as presented in Adjusted EBITDA, were $4.7 million in the first quarter, relative to $4.2 million in the prior year period. On a GAAP basis, corporate costs for the quarter were $11.9 million, relative to $10.1 million in the prior year period, with the increase primarily due to stock-based compensation expense.

Conference Call
FirstService will be holding a conference call on Wednesday, April 26, 2023 at 11:00 a.m. ET to discuss results for the first quarter of 2023. 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/BI446eec37c1ec48bbb82f3d654d9ac7a7 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/yof939px .

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, 2022 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. Our interim consolidated financial statements and related management’s discussion and analysis will be made available on SEDAR at www.sedar.com.

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

 

2023

 

 

2022

 

 

 

 

 

 

 

Net earnings

$

22,667

 

 

$

18,821

 

Income tax

 

7,916

 

 

 

6,394

 

Other income

 

(264

)

 

 

(535

)

Interest expense, net

 

10,631

 

 

 

4,366

 

Operating earnings

 

40,950

 

 

 

29,046

 

Depreciation and amortization

 

31,882

 

 

 

25,910

 

Acquisition-related items

 

2,107

 

 

 

1,561

 

Stock-based compensation expense

 

7,157

 

 

 

5,821

 

Adjusted EBITDA

$

82,096

 

 

$

62,338

 

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

 

2023

 

 

2022

 

 

 

 

 

 

 

Net earnings

$

22,667

 

 

$

18,821

 

Non-controlling interest share of earnings

 

(2,433

)

 

 

(565

)

Acquisition-related items

 

2,107

 

 

 

1,561

 

Amortization of intangible assets

 

14,286

 

 

 

11,466

 

Stock-based compensation expense

 

7,157

 

 

 

5,821

 

Income tax on adjustments

 

(5,575

)

 

 

(4,495

)

Non-controlling interest on adjustments

 

(282

)

 

 

(228

)

Adjusted net earnings

$

37,927

 

 

$

32,381

 

 

 

 

 

 

 

 

Three months ended

(in US dollars)

March 31

 

2023

 

 

2022

 

 

 

 

 

 

 

Diluted net earnings per share

$

0.36

 

 

$

0.32

 

Non-controlling interest redemption increment

 

0.09

 

 

 

0.09

 

Acquisition-related items

 

0.05

 

 

 

0.03

 

Amortization of intangible assets, net of tax

 

0.23

 

 

 

0.19

 

Stock-based compensation expense, net of tax

 

0.12

 

 

 

0.10

 

Adjusted EPS

$

0.85

 

 

$

0.73

 


FIRSTSERVICE CORPORATION

Operating Results

 

 

 

 

 

 

 

(in thousands of US dollars, except per share amounts)

 

 

 

 

 

 

 

 

Three months

 

ended March 31

(unaudited)

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

Revenues

$

1,018,445

 

 

$

834,572

 

 

 

 

 

 

 

 

 

Cost of revenues

 

700,264

 

 

 

575,834

 

Selling, general and administrative expenses

 

243,242

 

 

 

202,221

 

Depreciation

 

17,596

 

 

 

14,444

 

Amortization of intangible assets

 

14,286

 

 

 

11,466

 

Acquisition-related items (1)

 

2,107

 

 

 

1,561

 

Operating earnings

 

40,950

 

 

 

29,046

 

Interest expense, net

 

10,631

 

 

 

4,366

 

Other income, net

 

(264

)

 

 

(535

)

Earnings before income tax

 

30,583

 

 

 

25,215

 

Income tax

 

7,916

 

 

 

6,394

 

Net earnings

 

22,667

 

 

 

18,821

 

Non-controlling interest share of earnings

 

2,433

 

 

 

565

 

Non-controlling interest redemption increment

 

4,116

 

 

 

4,171

 

Net earnings attributable to Company

 

16,118

 

 

 

14,085

 

 

 

 

 

 

 

 

 

Net earnings per share

 

 

 

 

 

 

 

Basic

$

0.36

 

 

$

0.32

 

Diluted

 

0.36

 

 

 

0.32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS (2)

$

0.85

 

 

$

0.73

 

 

 

 

 

 

 

 

 

Weighted average common shares (thousands)

 

 

 

 

 

 

 

Basic

 

44,396

 

 

 

44,085

 

Diluted

 

44,661

 

 

 

44,500

 

(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, 2023

 

December 31, 2022

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Cash and cash equivalents

$

131,350

 

$

136,219

Restricted cash

 

25,893

 

 

23,129

Accounts receivable

 

690,342

 

 

635,942

Prepaid and other current assets

 

336,511

 

 

313,582

 

Current assets

 

1,184,096

 

 

1,108,872

Other non-current assets

 

23,019

 

 

36,853

Deferred income tax

 

1,688

 

 

1,696

Fixed assets

 

171,577

 

 

167,012

Operating lease right-of-use assets

 

211,284

 

 

205,544

Goodwill and intangible assets

 

1,365,154

 

 

1,254,537

 

Total assets

$

2,956,818

 

$

2,774,514

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

 

Accounts payable and accrued liabilities

$

374,245

 

$

398,313

Unearned revenues

 

161,284

 

 

125,542

Other current liabilities

 

25,834

 

 

28,324

Operating lease liabilities - current

 

49,951

 

 

49,145

Long-term debt - current

 

35,320

 

 

35,665

 

Current liabilities

 

646,634

 

 

636,989

Long-term debt - non-current

 

803,261

 

 

698,798

Operating lease liabilities - non-current

 

174,186

 

 

168,557

Other liabilities

 

80,783

 

 

78,178

Deferred income tax

 

65,069

 

 

51,097

Non-controlling interests

 

244,675

 

 

233,429

Shareholders' equity

 

942,210

 

 

907,466

 

Total liabilities and equity

$

2,956,818

 

$

2,774,514

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental balance sheet information

 

 

 

 

 

Total debt

$

838,581

 

$

734,463

Total debt, net of cash

 

707,231

 

 

598,244


Condensed Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

(in thousands of US dollars)

 

 

 

 

 

 

 

 

Three months ended

 

March 31

(unaudited)

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

Cash provided by (used in)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

 

Net earnings

$

22,667

 

 

$

18,821

 

Items not affecting cash:

 

 

 

 

 

 

 

Depreciation and amortization

 

31,882

 

 

 

25,910

 

Deferred income tax

 

(272

)

 

 

(623

)

Other

 

9,003

 

 

 

6,773

 

 

 

63,280

 

 

 

50,881

 

 

 

 

 

 

 

 

 

Changes in non cash working capital

 

 

 

 

 

 

 

Accounts receivable

 

(48,588

)

 

 

24,834

 

Payables and accruals

 

(30,406

)

 

 

(39,950

)

Other

 

15,411

 

 

 

(34,264

)

Net cash provided by (used in) operating activities

 

(303

)

 

 

1,501

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

Acquisition of businesses, net of cash acquired

 

(82,351

)

 

 

-

 

Purchases of fixed assets

 

(21,481

)

 

 

(16,583

)

Other investing activities

 

(5,304

)

 

 

(6,114

)

Net cash used in investing activities

 

(109,136

)

 

 

(22,697

)

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

Increase in long-term debt, net

 

103,900

 

 

 

29,910

 

Purchases of non-controlling interests, net

 

(2,719

)

 

 

(5,764

)

Dividends paid to common shareholders

 

(8,956

)

 

 

(8,032

)

Other financing activities

 

15,122

 

 

 

7,539

 

Net cash provided by financing activities

 

107,347

 

 

 

23,653

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(13

)

 

 

(134

)

 

 

 

 

 

 

 

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

(2,105

)

 

 

2,323

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, beginning of period

 

159,348

 

 

 

194,271

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, end of period

$

157,243

 

 

$

196,594

 

 

 

 

 

 

 

 

 


Segmented Results

 

 

 

 

 

 

 

 

 

 

 

(in thousands of US dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FirstService

 

FirstService

 

 

 

 

 

 

(unaudited)

 

Residential

 

 

Brands

 

Corporate

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

394,083

 

$

440,489

 

$

-

 

$

834,572

Adjusted EBITDA

 

30,410

 

 

36,082

 

 

(4,154

)

 

62,338

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

23,397

 

 

15,751

 

 

(10,102

)

 

29,046

 

 

 

 

 

 

 

 

 

 

 

 

COMPANY CONTACTS:

D. Scott Patterson
Chief Executive Officer

Jeremy Rakusin
Chief Financial Officer

(416) 960-9566