Double-Digit Revenue Growth at Both FirstService
Residential and FirstService Brands
Adjusted EBITDA Up 38% Led by Operational Improvements
at FirstService Residential
Operating
highlights: |
|
|
Three months
ended |
Nine months
ended |
|
September
30 |
September
30 |
|
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Revenues (millions) |
$ 349.5 |
$ 312.0 |
$ 948.0 |
$ 849.8 |
Adjusted EBITDA (millions) (note
1) |
39.1 |
28.3 |
80.7 |
61.6 |
Adjusted EPS (note 2) |
0.50 |
0.39 |
0.92 |
0.70 |
FirstService Corporation (TSX:FSV) (Nasdaq:FSV) today reported
results for its third quarter ended September 30, 2015. All amounts
are in US dollars.
Revenues for the third quarter were $349.5 million, a 12%
increase relative to the same quarter in the prior year, Adjusted
EBITDA (note 1) increased 38% to $39.1 million, and Adjusted EPS
(note 2) was $0.50, a 28% increase versus the prior year quarter.
GAAP diluted earnings per share was $0.39 in the quarter, versus
$0.24 for the same quarter a year ago.
For the nine months ended September 30, 2015, revenues were
$948.0 million, a 12% increase relative to the comparable prior
year period, Adjusted EBITDA was $80.7 million, up 31%, and
Adjusted EPS was $0.92, a 31% increase versus the prior year
period. GAAP diluted EPS for the nine month period was $0.50,
compared to $0.46 in the prior year period.
"FirstService performed very well across all of its operations
for the quarter. At FirstService Residential, we continued to
realize strong organic growth primarily driven by market share
gains. The business also recorded a significant increase in
profitability in line with our expectations," said Scott Patterson,
Chief Executive Officer of FirstService. "FirstService Brands'
franchised systems continued to capitalize on a buoyant home
improvement sector and we made good progress in advancing the
operational foundation for our corporate store strategies to
position for future growth. We remain on track for delivering upon
our original expectations for current year consolidated results,"
he concluded.
About FirstService Corporation
FirstService Corporation is a North American
leader in the property services sector serving its customers
through two industry leading 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$1.1 billion in annual
revenues and has more than 15,000 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. The common shares of FirstService trade on
the NASDAQ under the symbol "FSV" and on the Toronto Stock Exchange
under the symbol "FSV". More information is available at
www.firstservice.com.
Segmented Quarterly Results
FirstService Residential revenues were $277.9 million for the
third quarter, up 11% versus the prior year quarter. Revenue growth
was comprised of 8% organic growth (10% on a local currency basis)
and 3% from recent acquisitions. Adjusted EBITDA for the quarter
was $25.3 million, versus $16.5 million in the prior year
period. Third quarter performance was driven by continued
strong growth from new client wins and margin expansion from
regional operational improvements. Prior period results were
adversely affected by higher than expected employee medical
benefits costs and non-recurring expenses related to the
down-sizing of our homeowner collection business.
FirstService Brands revenues grew to $71.6 million, up 16%
relative to the prior year period. Revenue growth was driven by
organic growth of 9% (11% on a local currency basis) and augmented
by 7% growth from recent acquisitions, the most significant being
our first Paul Davis Restoration corporate store investment.
Adjusted EBITDA for the third quarter was $16.6 million, up from
$15.1 million in the prior year period. Most of our franchised
operations contributed strong performance, partially offset by
slower weather-related claims growth at Paul Davis and further
investments in our corporate-owned strategies at both California
Closets and Paul Davis which resulted in a modest margin decline
for the division.
Corporate costs were $2.9 million in the second quarter,
relative to $3.3 million in the prior year period.
Conference Call
FirstService will be holding a conference call on Wednesday,
October 28, 2015 at 11:00 a.m. Eastern Time to discuss the
quarter's results. 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. Forward-looking statements include the Company's
financial performance outlook and statements regarding goals,
beliefs, strategies, objectives, plans or current
expectations. 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 the Company's services and the cost of providing services; (ii)
the ability of the Company to implement its business strategy,
including the Company'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 the Company's filings with
applicable Canadian and United States securities regulatory
authorities (which factors are adopted herein).
Summary financial information is provided in this press
release. This press release should be read in conjunction with
the Company's quarterly financial statements and MD&A to be
made available on SEDAR at www.sedar.com.
Notes
1. Reconciliation of net earnings from continuing operations 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; (vi) stock-based compensation expense
and (vii) spin-off transaction costs. 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 from continuing operations 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
from continuing operations to adjusted EBITDA appears below.
|
Three months ended |
Nine months ended |
(in thousands of US$) |
September 30 |
September 30 |
|
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Net earnings |
$ 18,917 |
$ 14,144 |
$ 30,291 |
$ 24,928 |
Income tax |
10,057 |
4,096 |
19,316 |
10,719 |
Other income, net |
(10) |
31 |
109 |
(97) |
Interest expense, net |
2,453 |
1,733 |
7,044 |
5,199 |
Operating earnings |
31,417 |
20,004 |
56,760 |
40,749 |
Depreciation and amortization |
6,979 |
7,049 |
21,112 |
18,365 |
Acquisition-related items |
186 |
795 |
469 |
1,118 |
Stock-based compensation expense |
495 |
462 |
1,629 |
1,374 |
Spin-off transaction costs |
-- |
-- |
740 |
-- |
Adjusted EBITDA |
$ 39,077 |
$ 28,310 |
$ 80,710 |
$ 61,606 |
2. Reconciliation of net earnings from continuing operations and
diluted net earnings (loss) per share from continuing operations to
adjusted net earnings and adjusted net earnings per share:
Adjusted earnings per share is defined as diluted net earnings
(loss) 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; (iv)
stock-based compensation expense; (v) spin-off transaction costs
and (vi) a spin-off tax charge. 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 from continuing
operations, 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 from
continuing operations to adjusted net earnings and of diluted net
earnings (loss) per share from continuing operations to adjusted
earnings per share appears below.
|
Three months ended |
Nine months ended |
(in thousands of US$) |
September 30 |
September 30 |
|
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Net earnings |
$ 18,917 |
$ 14,144 |
$ 30,291 |
$ 24,928 |
Non-controlling interest share of
earnings |
(2,421) |
(2,676) |
(4,834) |
(5,108) |
Acquisition-related items |
186 |
795 |
469 |
1,118 |
Amortization of intangible assets |
2,334 |
3,091 |
7,275 |
6,513 |
Stock-based compensation expense |
495 |
462 |
1,629 |
1,374 |
Spin-off transaction costs |
-- |
-- |
740 |
-- |
Spin-off tax charge |
-- |
-- |
1,646 |
-- |
Income tax on adjustments |
(1,107) |
(1,398) |
(3,628) |
(3,086) |
Non-controlling interest on adjustments |
(44) |
(74) |
(133) |
(141) |
Adjusted net earnings |
$ 18,360 |
$ 14,344 |
$ 33,455 |
$ 25,598 |
|
|
|
|
|
|
Three months ended |
Nine months ended |
(in US$) |
September 30 |
September 30 |
|
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Diluted net earnings per share |
$ 0.39 |
$ 0.24 |
$ 0.50 |
$ 0.46 |
Non-controlling interest redemption
increment |
0.07 |
0.08 |
0.20 |
0.09 |
Acquisition-related items |
-- |
0.02 |
0.01 |
0.03 |
Amortization of intangible assets, net of
tax |
0.03 |
0.05 |
0.11 |
0.10 |
Stock-based compensation expense, net of
tax |
0.01 |
-- |
0.03 |
0.02 |
Spin-off transaction costs, net of tax |
-- |
-- |
0.02 |
-- |
Spin-off tax charge |
-- |
-- |
0.05 |
-- |
Adjusted earnings per share |
$ 0.50 |
$ 0.39 |
$ 0.92 |
$ 0.70 |
|
|
|
|
|
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 |
(unaudited) |
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Revenues |
$ 349,525 |
$ 312,029 |
$ 947,965 |
$ 849,828 |
|
|
|
|
|
Cost of revenues |
241,048 |
215,906 |
662,497 |
598,412 |
Selling, general and administrative
expenses |
69,895 |
68,275 |
206,387 |
191,184 |
Depreciation |
4,645 |
3,958 |
13,837 |
11,852 |
Amortization of intangible assets |
2,334 |
3,091 |
7,275 |
6,513 |
Acquisition-related items (1) |
186 |
795 |
469 |
1,118 |
Spin-off transaction costs |
-- |
-- |
740 |
-- |
Operating earnings |
31,417 |
20,004 |
56,760 |
40,749 |
Interest expense, net |
2,453 |
1,733 |
7,044 |
5,199 |
Other expense (income) |
(10) |
31 |
109 |
(97) |
Earnings before income tax |
28,974 |
18,240 |
49,607 |
35,647 |
Income tax |
10,057 |
4,096 |
19,316 |
10,719 |
Net earnings |
18,917 |
14,144 |
30,291 |
24,928 |
Non-controlling interest share of
earnings |
2,421 |
2,676 |
4,834 |
5,108 |
Non-controlling interest redemption
increment |
2,431 |
2,870 |
7,326 |
3,251 |
Net earnings attributable to
Company |
$ 14,065 |
$ 8,598 |
$ 18,131 |
$ 16,569 |
|
|
|
|
|
Net earnings per common
share |
|
|
|
|
Basic |
$ 0.39 |
$ 0.24 |
$ 0.50 |
$ 0.46 |
Diluted |
$ 0.39 |
$ 0.24 |
$ 0.50 |
$ 0.46 |
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share
(2) |
$ 0.50 |
$ 0.39 |
$ 0.92 |
$ 0.70 |
|
|
|
|
|
Weighted average common shares
(thousands) |
|
|
|
|
Basic |
35,974 |
35,971 |
35,973 |
35,971 |
Diluted |
36,457 |
36,365 |
36,581 |
36,371 |
|
|
|
|
|
Notes to Condensed
Consolidated Statements of Earnings (Loss) |
(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) |
|
(unaudited) |
September 30,
2015 |
December 31, 2014 |
|
|
|
Assets |
|
|
Cash and cash equivalents |
$ 49,606 |
$ 66,790 |
Accounts receivable |
116,926 |
115,143 |
Inventories |
14,493 |
9,489 |
Prepaid expenses and other current
assets |
55,398 |
59,301 |
Current assets |
236,423 |
250,723 |
Other non-current assets |
5,776 |
4,736 |
Fixed assets |
57,232 |
55,203 |
Deferred income tax |
8,348 |
4,572 |
Goodwill and intangible assets |
301,951 |
300,310 |
Total assets |
$ 609,730 |
$ 615,544 |
|
|
|
Liabilities and shareholders'
equity |
|
|
Accounts payable and accrued liabilities |
$ 109,323 |
$ 80,250 |
Other current liabilities |
30,584 |
28,119 |
Long-term debt - current |
1,133 |
17,725 |
Current liabilities |
141,040 |
126,094 |
Long-term debt - non-current |
197,464 |
221,632 |
Other liabilities |
14,677 |
13,907 |
Deferred income tax |
13,412 |
14,236 |
Redeemable non-controlling interests |
74,240 |
80,926 |
Shareholders' equity |
168,897 |
158,749 |
Total liabilities and
equity |
$ 609,730 |
$ 615,544 |
|
|
|
Supplemental balance sheet
information |
|
|
Total debt |
$ 198,597 |
$ 239,357 |
Total debt, net of cash |
148,991 |
172,567 |
|
|
|
Consolidated Statements
of Cash Flows |
(in thousands of US dollars) |
|
Three months ended |
Nine months ended |
|
September 30 |
September 30 |
(unaudited) |
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Cash provided by (used
in) |
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
Net earnings |
$ 18,917 |
$ 14,144 |
$ 30,291 |
$ 24,928 |
Items not affecting cash: |
|
|
|
|
Depreciation and amortization |
6,980 |
7,049 |
21,113 |
18,365 |
Deferred income tax |
(4,535) |
(186) |
(4,312) |
(1,339) |
Other |
(1,345) |
630 |
(1,165) |
1,532 |
|
20,017 |
21,637 |
45,927 |
43,486 |
|
|
|
|
|
Changes in non-cash working capital |
|
|
|
|
Accounts receivable |
(150) |
7,114 |
469 |
289 |
Payables and accruals |
28,469 |
3,623 |
28,811 |
4,641 |
Other |
(14,326) |
(8,860) |
681 |
(3,848) |
Net cash provided by operating
activities |
34,010 |
23,514 |
75,888 |
44,568 |
|
|
|
|
|
Investing activities |
|
|
|
|
Acquisition of businesses, net of cash
acquired |
(3,502) |
(7,724) |
(12,002) |
(16,509) |
Purchases of fixed assets |
(3,884) |
(4,069) |
(14,291) |
(15,963) |
Other investing activities |
(1,262) |
(48) |
(2,735) |
(835) |
Net cash used in investing activities |
(8,648) |
(11,841) |
(29,028) |
(33,307) |
|
|
|
|
|
Financing activities |
|
|
|
|
Increase in long-term debt, net |
(23,497) |
(28,493) |
(40,760) |
29,880 |
Net contributions (distributions) from/to Old
FSV |
-- |
13,774 |
1,995 |
(17,177) |
Purchases of non-controlling interests |
(29) |
(365) |
(17,415) |
(8,857) |
Financing fees paid |
(4) |
-- |
(1,090) |
-- |
Dividends paid to common shareholders |
(3,597) |
-- |
(3,597) |
-- |
Distributions paid to non-controlling
interests |
(412) |
(422) |
(2,699) |
(2,806) |
Other financing activities |
1,523 |
-- |
(246) |
(1,774) |
Net cash (used in) provided by financing
activities |
(26,016) |
(15,506) |
(63,812) |
(734) |
|
|
|
|
|
Effect of exchange rate changes on cash |
(1,578) |
(206) |
(232) |
(231) |
|
|
|
|
|
(Decrease) increase in cash and cash
equivalents |
(2,232) |
(4,039) |
(17,184) |
10,296 |
|
|
|
|
|
Cash and cash equivalents, beginning of
period |
51,838 |
100,701 |
66,790 |
86,366 |
|
|
|
|
|
Cash and cash equivalents, end of period |
$ 49,606 |
$ 96,662 |
$ 49,606 |
$ 96,662 |
|
|
|
|
|
Segmented
Results |
(in thousands of US dollars) |
|
|
FirstService |
FirstService |
|
|
(unaudited) |
Residential |
Brands |
Corporate |
Consolidated |
|
|
|
|
|
Three months ended September
30 |
|
|
|
|
2015 |
|
|
|
|
Revenues |
$ 277,938 |
$ 71,587 |
$ -- |
$ 349,525 |
Adjusted EBITDA |
25,310 |
16,648 |
(2,881) |
39,077 |
|
|
|
|
|
Operating earnings |
20,298 |
14,524 |
(3,405) |
31,417 |
2014 |
|
|
|
|
Revenues |
$ 250,209 |
$ 61,820 |
$ -- |
$ 312,029 |
Adjusted EBITDA |
16,518 |
15,065 |
(3,273) |
28,310 |
|
|
|
|
|
Operating earnings |
10,460 |
13,302 |
(3,758) |
20,004 |
|
|
|
|
|
|
FirstService |
FirstService |
|
|
|
Residential |
Brands |
Corporate |
Consolidated |
|
|
|
|
|
Nine months ended September
30 |
|
|
|
|
2015 |
|
|
|
|
Revenues |
$ 766,535 |
$ 181,430 |
$ -- |
$ 947,965 |
Adjusted EBITDA |
55,141 |
31,657 |
(6,088) |
80,710 |
|
|
|
|
|
Operating earnings |
38,655 |
25,897 |
(7,792) |
56,760 |
|
|
|
|
|
2014 |
|
|
|
|
Revenues |
$ 691,675 |
$ 158,153 |
$ -- |
$ 849,828 |
Adjusted EBITDA |
38,702 |
28,722 |
(5,818) |
61,606 |
|
|
|
|
|
Operating earnings |
24,427 |
23,587 |
(7,265) |
40,749 |
CONTACT: Scott Patterson
President & CEO
Jeremy Rakusin
Chief Financial Officer
(416) 960-9500
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