FirstService Reports First Quarter Results

FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported operating and financial results for its first quarter ended March 31, 2024. All amounts are in US dollars.

Consolidated revenues for the first quarter were $1.16 billion, up 14% relative to the same quarter in the prior year. Adjusted EBITDA (note 1) increased 2% to $83.4 million, and Adjusted EPS (note 2) was $0.67, compared to $0.85 in the prior year quarter. Operating Earnings were $38.1 million, relative to $41.0 million in the prior year period. Diluted earnings per share was $0.14 per share in the quarter, versus $0.36 in the same quarter a year ago.

“We are pleased with the first quarter, as our operations delivered solid results in-line with our expectations,” said Scott Patterson, Chief Executive Officer of FirstService. “We are confident in hitting our performance targets for the year, supported by the underlying indicators across our businesses,” he concluded.

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 company-owned operations and franchised systems.

FirstService generates more than US$4.4 billion in annual revenues and has approximately 29,000 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 ResultsFirstService Residential revenues were $496.1 million for the first quarter, an increase of 11% versus the prior year, including 8% organic growth. The top-line performance was broadly distributed across our markets and driven by new property management contract wins. Adjusted EBITDA for the quarter was $35.6 million, up from $32.0 million in the prior year period. Operating Earnings were $26.7 million, versus $22.7 million in the first quarter of last year. Operating margins were in-line with the prior year quarter.

FirstService Brands revenues for the first quarter totalled $661.9 million, up 16% relative to the prior year period. Revenue growth was driven by double-digit organic growth at Century Fire Protection and contribution from our recent Roofing Corp of America acquisition. On an organic basis, division revenues were down 6% compared to the first quarter of 2023, which benefited from significant weather-related claims activity at our restoration operations. Adjusted EBITDA was $55.5 million, compared to $54.8 million in the prior year quarter. Operating Earnings were $26.8 million, versus $30.2 million in the prior year quarter. Operating margins declined due to lower profitability at our restoration brands associated with milder weather patterns in the current year period, as well as increased promotional and marketing activity at our home services brands.

Corporate costs, as presented in Adjusted EBITDA (note 1), were $7.7 million in the first quarter, relative to $4.7 million in the prior year period. Corporate costs for the quarter were $15.4 million, relative to $11.9 million in the prior year period, with the increase primarily due to the impact of foreign exchange movements.

Conference CallFirstService will be holding a conference call on Wednesday, April 24, 2024 at 11:00 a.m. ET to discuss results for the first quarter of 2024. 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/BIc4398855ed2f45debdf4cb6cd683ca7b 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/ifffxbiu.

Forward-looking StatementsThis 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. Our interim consolidated financial statements and related management’s discussion and analysis will be made available on SEDAR+ at www.sedarplus.ca.

Notes1. 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
	2024			2023

Net earnings	$	14,897		$	22,667
Income tax		6,015			7,916
Other income		(1,880	)		(264	)
Interest expense, net		19,026			10,631
Operating earnings		38,058			40,950
Depreciation and amortization		36,807			31,882
Acquisition-related items		1,600			2,107
Stock-based compensation expense		6,908			7,157
Adjusted EBITDA	$	83,373		$	82,096


A reconciliation of segment operating earnings to segment Adjusted EBITDA appears below.

(in thousands of US$)

Three months ended, March 31, 2024		FirstService		FirstService
		Residential		Brands		Corporate (1)

Operating earnings (loss)	$	26,658	$	26,799	$	(15,399	)
Depreciation and amortization		8,423		28,361		23
Acquisition-related items		518		302		780
Stock-based compensation expense		-		-		6,908
Adjusted EBITDA	$	35,599	$	55,462	$	(7,688	)


Three months ended, March 31, 2023		FirstService		FirstService
		Residential		Brands		Corporate (1)

Operating earnings (loss)	$	22,712	$	30,160	$	(11,922	)
Depreciation and amortization		8,793		23,067		22
Acquisition-related items		463		1,566		78
Stock-based compensation expense		-		-		7,157
Adjusted EBITDA	$	31,968	$	54,793	$	(4,665	)

(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 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
	2024			2023

Net earnings	$	14,897		$	22,667
Non-controlling interest share of earnings		(1,533	)		(2,433	)
Acquisition-related items		1,600			2,107
Amortization of intangible assets		15,231			14,286
Stock-based compensation expense		6,908			7,157
Income tax on adjustments		(6,421	)		(5,575	)
Non-controlling interest on adjustments		(264	)		(282	)
Adjusted net earnings	$	30,418		$	37,927

	Three months ended
(in US dollars)	March 31
	2024			2023

Diluted net earnings per share	$	0.14		$	0.36
Non-controlling interest redemption increment		0.16			0.09
Acquisition-related items		0.03			0.05
Amortization of intangible assets, net of tax		0.23			0.23
Stock-based compensation expense, net of tax		0.11			0.12
Adjusted EPS	$	0.67		$	0.85

FIRSTSERVICE CORPORATION

Operating Results

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

Three months

ended March 31

(unaudited)

2024

2023

Revenues

1,158,045

1,018,445

Cost of revenues

788,577

700,264

Selling, general and administrative expenses

293,003

243,242

Depreciation

21,576

17,596

Amortization of intangible assets

15,231

14,286

Acquisition-related items (1)

1,600

2,107

Operating earnings

38,058

40,950

Interest expense, net

19,026

10,631

Other income, net

(1,880

)

(264

)

Earnings before income tax

20,912

30,583

Income tax

6,015

7,916

Net earnings

14,897

22,667

Non-controlling interest share of earnings

1,533

2,433

Non-controlling interest redemption increment

7,056

4,116

Net earnings attributable to Company

6,308

16,118

Net earnings per share

Basic

0.14

0.36

Diluted

0.14

0.36

Adjusted EPS (2)

0.67

0.85

Weighted average common shares (thousands)

Basic

44,850

44,396

Diluted

45,111

44,661

(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, 2024

December 31, 2023

Assets

Cash and cash equivalents

164,846

187,617

Restricted cash

19,249

19,260

Accounts receivable

829,376

842,236

Prepaid and other current assets

325,364

311,889

Current assets

1,338,835

1,361,002

Other non-current assets

33,759

32,666

Deferred income tax

1,746

1,752

Fixed assets

220,832

204,188

Operating lease right-of-use assets

208,992

218,299

Goodwill and intangible assets

1,839,996

1,807,836

Total assets

3,644,160

3,625,743

Liabilities and shareholders' equity

Accounts payable and accrued liabilities

419,976

471,083

Unearned revenues

187,826

178,587

Other current liabilities

31,677

33,074

Operating lease liabilities - current

47,467

50,898

Long-term debt - current

41,413

37,132

Current liabilities

728,359

770,774

Long-term debt - non-current

1,198,852

1,144,975

Operating lease liabilities - non-current

178,399

183,923

Other liabilities

96,761

115,938

Deferred income tax

53,468

53,024

Non-controlling interests

339,356

332,963

Shareholders' equity

1,048,965

1,024,146

Total liabilities and equity

3,644,160

3,625,743

Supplemental balance sheet information

Total debt

1,240,265

1,182,107

Total debt, net of cash

1,075,419

994,490

Condensed Consolidated Statements of Cash Flows
(in thousands of US dollars)
			Three months ended
			March 31
(unaudited)			2024			2023

Cash provided by (used in)

Operating activities
Net earnings		$	14,897		$	22,667
Items not affecting cash:
	Depreciation and amortization		36,807			31,882
	Deferred income tax		(2,274	)		(272	)
	Other		6,332			9,003
			55,762			63,280

Changes in non cash working capital
	Accounts receivable		19,997			(48,588	)
	Payables and accruals		(56,284	)		(30,406	)
	Other		(8,920	)		15,411

Contingent acquisition consideration			(19,355	)		-
Net cash used in operating activities			(8,800	)		(303	)

Investing activities
Acquisition of businesses, net of cash acquired			(31,618	)		(82,351	)
Purchases of fixed assets			(25,021	)		(21,481	)
Other investing activities			(701	)		(5,304	)
Net cash used in investing activities			(57,340	)		(109,136	)

Financing activities
Increase in long-term debt, net			46,255			103,900
Purchases of non-controlling interests, net			(11,221	)		(2,719	)
Dividends paid to common shareholders			(10,054	)		(8,956	)
Other financing activities			18,150			15,122
Net cash provided by financing activities			43,130			107,347

Effect of exchange rate changes on cash			228			(13	)

Decrease in cash, cash equivalents and restricted cash			(22,782	)		(2,105	)

Cash, cash equivalents and restricted cash, beginning of period			206,877			159,348

Cash, cash equivalents and restricted cash, end of period		$	184,095		$	157,243

Segmented Results
(in thousands of US dollars)


		FirstService		FirstService
(unaudited)		Residential		Brands		Corporate			Consolidated

Three months ended March 31

2024
	Revenues	$	496,124	$	661,921	$	-		$	1,158,045
	Adjusted EBITDA		35,599		55,462		(7,688	)		83,373

	Operating earnings		26,658		26,799		(15,399	)		38,058

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