22% Revenue Increase and Significant
Margin Expansion Drive Strong Profitability
FirstService Corporation (TSX:FSV) (NASDAQ:FSV) today reported very
strong results for its first quarter ended March 31, 2017. All
amounts are in US dollars.
Revenues for the first quarter were $376.0
million, up 22% relative to the same quarter in the prior year,
Adjusted EBITDA (note 1) increased 63% to $20.7 million, and
Adjusted EPS (note 2) was $0.17, compared to $0.08 in the prior
year quarter. GAAP Operating Earnings were $9.5 million, relative
to $4.3 million in the prior year period. GAAP diluted earnings per
share was $0.13 per share in the quarter, versus a loss of $0.05 in
the same quarter a year ago.
“We reported strong results for the first three
months of the year, which is a seasonally light quarter for us in
terms of revenues and cash flow,” said Scott Patterson, Chief
Executive Officer of FirstService. “Strong organic and acquisition
growth at FirstService Brands, together with continued operating
margin improvement at FirstService Residential, drove significant
increases in profitability during the quarter and establishes the
foundation to meet our goals for the balance of 2017.”
About FirstService
CorporationFirstService 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$1.5 billion
in annual revenues and has approximately 17,000 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
Subordinate Voting Shares of FirstService trade on the NASDAQ and
the Toronto Stock Exchange under the symbol “FSV.” More
information is available at www.firstservice.com.
Segmented Quarterly
ResultsFirstService Residential revenues were $265.9
million for the first quarter, up 6% versus the prior year quarter.
Organic growth for the quarter was 5%, with performance
particularly strong in our New York and California markets.
Adjusted EBITDA for the quarter was $14.4 million, up from $11.7
million in the prior year period. GAAP Operating earnings were $9.1
million, up 44% versus the prior year period. First quarter
profitability was driven by continued margin expansion from ongoing
operating efficiencies.
FirstService Brands revenues for the first
quarter totalled $110.1 million, up 91% relative to the prior year
period. The revenue increase was comprised of 10% organic growth,
with the balance coming from recent acquisitions, including the
larger Century Fire transaction and several additions to our
company-owned platform. Organic growth was strong at Paul Davis
Restoration, as well as California Closets, Pillar to Post and
Floor Coverings International which continue to benefit from a
strong U.S. home improvement market. Adjusted EBITDA was $8.9
million, a significant increase over the $3.2 million in the prior
year quarter. GAAP Operating Earnings were $4.5 million, versus
$1.4 million in the prior year quarter.
Corporate costs, as presented in Adjusted EBITDA
were $2.6 million in the first quarter, relative to $2.2 million in
the prior year period. On a GAAP basis, corporate costs for the
quarter were $4.1 million, relative to $3.5 million in the prior
year period.
Conference CallFirstService
will be holding a conference call on Wednesday, April 26, 2017 at
11:00 a.m. Eastern Time to discuss results for the first quarter of
2017. The call will be simultaneously web cast and can be accessed
live or after the call at www.firstservice.com in the “Investors /
Newsroom” section.
Forward-looking StatementsThis
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.
Notes1. Reconciliation of net
earnings (loss) 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 (loss) to
adjusted EBITDA appears below.
|
|
|
|
Three months ended |
(in
thousands of US dollars) |
|
|
March 31 |
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings (loss) |
|
|
|
|
|
|
$ |
8,620 |
|
|
$ |
1,517 |
|
Income
tax |
|
|
|
|
|
|
|
(1,302 |
) |
|
|
850 |
|
Other
(income) expense |
|
|
|
|
|
|
|
(95 |
) |
|
|
(75 |
) |
Interest
expense, net |
|
|
|
|
|
|
|
2,325 |
|
|
|
1,969 |
|
Operating
earnings |
|
|
|
|
|
|
|
9,548 |
|
|
|
4,261 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
9,495 |
|
|
|
7,414 |
|
Acquisition-related items |
|
|
|
|
|
|
|
246 |
|
|
|
71 |
|
Stock-based
compensation expense |
|
|
|
|
|
|
|
1,415 |
|
|
|
970 |
|
Adjusted
EBITDA |
|
|
|
|
|
|
$ |
20,704 |
|
|
$ |
12,716 |
|
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; (iv)
stock-based compensation expense; and (v) a stock-based
compensation tax adjustment related to a US GAAP change. 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 |
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings |
|
|
|
|
|
|
$ |
8,620 |
|
|
$ |
1,517 |
|
Non-controlling interest share of earnings |
|
|
|
|
|
|
|
(1,829 |
) |
|
|
(808 |
) |
Acquisition-related items |
|
|
|
|
|
|
|
246 |
|
|
|
71 |
|
Amortization of intangible assets |
|
|
|
|
|
|
|
3,186 |
|
|
|
2,392 |
|
Stock-based
compensation expense |
|
|
|
|
|
|
|
1,415 |
|
|
|
970 |
|
Stock-based
compensation tax adjustment for US GAAP change |
|
|
|
|
|
|
|
(3,743 |
) |
|
|
- |
|
Income tax
on adjustments |
|
|
|
|
|
|
|
(1,770 |
) |
|
|
(1,296 |
) |
Non-controlling interest on adjustments |
|
|
|
|
|
|
|
(71 |
) |
|
|
(33 |
) |
Adjusted
net earnings |
|
|
|
|
|
|
$ |
6,054 |
|
|
$ |
2,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
(in US
dollars) |
|
|
March 31 |
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net
earnings (loss) per share |
|
|
|
|
|
|
$ |
0.13 |
|
|
$ |
(0.05 |
) |
Non-controlling interest redemption increment |
|
|
|
|
|
|
|
0.06 |
|
|
|
0.07 |
|
Acquisition-related items |
|
|
|
|
|
|
|
0.01 |
|
|
|
- |
|
Amortization of intangible assets, net of tax |
|
|
|
|
|
|
|
0.05 |
|
|
|
0.04 |
|
Stock-based
compensation expense, net of tax |
|
|
|
|
|
|
|
0.02 |
|
|
|
0.02 |
|
Stock-based
compensation tax adjustment for US GAAP change |
|
|
|
|
|
|
|
(0.10 |
) |
|
|
- |
|
Adjusted
EPS |
|
|
|
|
|
|
$ |
0.17 |
|
|
$ |
0.08 |
|
FIRSTSERVICE CORPORATION |
Operating Results |
(in
thousands of US dollars, except per share amounts) |
|
|
|
|
|
|
|
|
Three months |
|
|
|
|
|
|
|
|
ended March 31 |
(unaudited) |
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
$ |
375,969 |
|
|
$ |
307,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues |
|
|
|
|
|
|
|
272,412 |
|
|
|
222,506 |
|
Selling,
general and administrative expenses |
|
|
|
|
|
|
|
84,268 |
|
|
|
73,334 |
|
Depreciation |
|
|
|
|
|
|
|
6,309 |
|
|
|
5,022 |
|
Amortization of intangible assets |
|
|
|
|
|
|
|
3,186 |
|
|
|
2,392 |
|
Acquisition-related items (1) |
|
|
|
|
|
|
|
246 |
|
|
|
71 |
|
Operating earnings |
|
|
|
|
|
|
|
9,548 |
|
|
|
4,261 |
|
Interest
expense, net |
|
|
|
|
|
|
|
2,325 |
|
|
|
1,969 |
|
Other
(income) expense |
|
|
|
|
|
|
|
(95 |
) |
|
|
(75 |
) |
Earnings
before income tax |
|
|
|
|
|
|
|
7,318 |
|
|
|
2,367 |
|
Income
tax |
|
|
|
|
|
|
|
(1,302 |
) |
|
|
850 |
|
Net
earnings |
|
|
|
|
|
|
|
8,620 |
|
|
|
1,517 |
|
Non-controlling interest share of earnings |
|
|
|
|
|
|
|
1,829 |
|
|
|
808 |
|
Non-controlling interest redemption increment |
|
|
|
|
|
|
|
2,147 |
|
|
|
2,366 |
|
Net
earnings (loss) attributable to Company |
|
|
|
|
|
|
|
4,644 |
|
|
|
(1,657 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
$ |
0.13 |
|
|
$ |
(0.05 |
) |
|
Diluted |
|
|
|
|
|
|
|
0.13 |
|
|
|
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EPS (2) |
|
|
|
|
|
|
$ |
0.17 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares (thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
35,880 |
|
|
|
35,991 |
|
|
|
Diluted |
|
|
|
|
|
|
|
36,561 |
|
|
|
36,368 |
|
|
(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, 2017 |
|
December 31, 2016 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
Cash and
cash equivalents |
$ |
45,675 |
|
$ |
43,384 |
Restricted
cash |
|
14,587 |
|
|
13,450 |
Accounts
receivable |
|
159,985 |
|
|
164,074 |
Prepaid and
other current assets |
|
69,996 |
|
|
58,146 |
Deferred
income tax |
|
- |
|
|
24,738 |
|
Current
assets |
|
290,243 |
|
|
303,792 |
Other
non-current assets |
|
5,171 |
|
|
5,115 |
Fixed
assets |
|
77,107 |
|
|
73,083 |
Deferred
income tax |
|
477 |
|
|
1,693 |
Goodwill
and intangible assets |
|
400,747 |
|
|
387,281 |
|
Total
assets |
$ |
773,745 |
|
$ |
770,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders\' equity |
|
|
|
|
|
Accounts
payable and accrued liabilities |
$ |
136,246 |
|
$ |
142,966 |
Other
current liabilities |
|
38,365 |
|
|
38,813 |
Long-term
debt - current |
|
1,312 |
|
|
1,043 |
|
Current
liabilities |
|
175,923 |
|
|
182,822 |
Long-term
debt - non-current |
|
283,950 |
|
|
249,866 |
Other
liabilities |
|
27,226 |
|
|
23,729 |
Deferred
income tax |
|
7,551 |
|
|
31,167 |
Non-controlling interests |
|
100,692 |
|
|
102,352 |
Shareholders' equity |
|
178,403 |
|
|
181,028 |
|
Total
liabilities and equity |
$ |
773,745 |
|
$ |
770,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental balance sheet information |
|
|
|
|
|
Total
debt |
$ |
285,262 |
|
$ |
250,909 |
Total debt,
net of cash |
|
239,587 |
|
|
207,525 |
Condensed Consolidated Statements of Cash
Flows |
|
|
|
|
|
|
(in
thousands of US dollars) |
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|
|
March 31 |
(unaudited) |
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
Net
earnings |
|
|
|
|
|
|
$ |
8,620 |
|
|
$ |
1,517 |
|
Items not
affecting cash: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
|
|
|
|
|
9,494 |
|
|
|
7,414 |
|
|
Deferred income
tax |
|
|
|
|
|
|
|
(3,817 |
) |
|
|
(536 |
) |
|
Other |
|
|
|
|
|
|
|
1,670 |
|
|
|
(94 |
) |
|
|
|
|
|
|
|
|
|
15,967 |
|
|
|
8,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
non cash working capital |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
|
|
|
|
|
4,090 |
|
|
|
(3,389 |
) |
|
Payables and
accruals |
|
|
|
|
|
|
|
(16,778 |
) |
|
|
(3,427 |
) |
|
Other |
|
|
|
|
|
|
|
4,325 |
|
|
|
353 |
|
Net cash
provided by operating activities |
|
|
|
|
|
|
|
7,604 |
|
|
|
1,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
Acquisition
of businesses, net of cash acquired |
|
|
|
|
|
|
|
(10,363 |
) |
|
|
(5,038 |
) |
Purchases
of fixed assets |
|
|
|
|
|
|
|
(9,968 |
) |
|
|
(6,900 |
) |
Other
investing activities |
|
|
|
|
|
|
|
(4,318 |
) |
|
|
(4,581 |
) |
Net cash
used in investing activities |
|
|
|
|
|
|
|
(24,649 |
) |
|
|
(16,519 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
Increase in
long-term debt, net |
|
|
|
|
|
|
|
34,353 |
|
|
|
10,076 |
|
Sale
(purchases) of non-controlling interests, net |
|
|
|
|
|
|
|
(3,780 |
) |
|
|
246 |
|
Dividends
paid to common shareholders |
|
|
|
|
|
|
|
(3,943 |
) |
|
|
(3,461 |
) |
Other
financing activities |
|
|
|
|
|
|
|
(7,317 |
) |
|
|
(789 |
) |
Net cash
provided by financing activities |
|
|
|
|
|
|
|
19,313 |
|
|
|
6,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash |
|
|
|
|
|
|
|
23 |
|
|
|
124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents |
|
|
|
|
|
|
|
2,291 |
|
|
|
(8,485 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents, beginning of period |
|
|
|
|
|
|
|
43,384 |
|
|
|
45,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents, end of period |
|
|
|
|
|
|
$ |
45,675 |
|
|
$ |
37,075 |
|
Segmented Results |
(in
thousands of US dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FirstService |
|
FirstService |
|
|
|
|
(unaudited) |
Residential |
|
Brands |
|
Corporate |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
265,853 |
|
$ |
110,116 |
|
$ |
- |
|
|
$ |
375,969 |
|
Adjusted
EBITDA |
|
14,433 |
|
|
8,876 |
|
|
(2,605 |
) |
|
|
20,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
earnings |
|
9,127 |
|
|
4,474 |
|
|
(4,053 |
) |
|
|
9,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
249,806 |
|
$ |
57,780 |
|
$ |
- |
|
|
$ |
307,586 |
|
Adjusted EBITDA |
|
11,738 |
|
|
3,195 |
|
|
(2,217 |
) |
|
|
12,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings |
|
6,357 |
|
|
1,391 |
|
|
(3,487 |
) |
|
|
4,261 |
COMPANY CONTACTS:
D. Scott Patterson
Chief Executive Officer
Jeremy Rakusin
Chief Financial Officer
(416) 960-9500
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