Top

FirstService Corporation

TSX Exchange | Aug 24, 2019, 12:39 PM EDT | Real-time price

FSV $ 132.51 RT
CHANGE
-2.83 (-2.0910%)
VOLUME
24,899.00
Day Low: 132.29
Day High: 135.69
 Back
FirstService Reports Strong Second Quarter Results

Robust, Balanced Organic Growth Drives Double-Digit Revenue Increases Across Both FirstService Residential and FirstService Brands

Operating highlights:

  Three months ended Six months ended
  June 30 June 30
  2019  2018 2019  2018
             
Revenues (millions)$573.9  $495.3 $1,059.6  $921.8
Adjusted EBITDA (millions) (note 1) 65.0   57.1  94.2   82.5
Adjusted EPS (note 2) 1.12   0.86  1.45   1.10
             
GAAP Operating Earnings (268.5) (1)42.4  (255.5) (1)53.4
GAAP EPS (7.48) (1)0.63  (7.69) (1)0.80
             
(1) Includes $314.4 million settlement of long-term incentive arrangement with FirstService's Founder and Chairman.   


TORONTO, July 24, 2019 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported strong results for its second quarter ended June 30, 2019. All amounts are in US dollars.

Revenues for the second quarter were $573.9 million, a 16% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) increased 14% to $65.0 million, and Adjusted EPS (note 2) was $1.12, a 30% increase versus the prior year quarter. During the second quarter, FirstService reported a GAAP Operating Loss of $268.5 million, reflecting the settlement of the long-term incentive arrangement (“LTIA”) with its Founder and Chairman in the amount of $314.4 million. GAAP Operating Earnings were $42.4 million in the prior year period. The GAAP loss per share was $7.48 in the quarter, versus GAAP earnings per share of $0.63 for the same quarter a year ago.

For the six months ended June 30, 2019, revenues were $1.06 billion, a 15% increase relative to the comparable prior year period, Adjusted EBITDA was $94.2 million, up 14%, and Adjusted EPS was $1.45, a 32% increase versus the prior year period. The GAAP Operating Loss was $255.5 million in the current year period, relative to GAAP Operating Earnings of $53.4 million in the prior year period. The GAAP loss per share for the six months year-to-date was $7.69, compared to GAAP earnings per share of $0.80 in the prior year period.

“We delivered another quarter of very strong operating results, principally led by solid organic growth across our businesses,” said Scott Patterson, Chief Executive Officer of FirstService. “We are excited about our prospects for the balance of the year, supported by continued broad-based growth and significant contribution from our recently acquired Global Restoration business,” 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$2 billion in annual revenues and has approximately 22,000 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”. More information is available at www.firstservice.com.

Segmented Quarterly Results
FirstService Residential revenues were $370.4 million for the second quarter, up 13% versus the prior year quarter, with organic growth accounting for half of this increase. Adjusted EBITDA for the quarter was $39.2 million, versus $33.4 million in the prior year period. Top-line growth was primarily driven by contract wins in our property management business, as well as strong contribution from our seasonal pool and amenity management services. Margin improvement was largely attributable to the strength in these seasonal operations. GAAP Operating Earnings were $32.3 million, versus $27.5 million for the second quarter of last year.

FirstService Brands revenues during the second quarter grew to $203.5 million, up 21% relative to the prior year period and including 6% organic growth together with contribution from recent tuck-under acquisitions across our company-owned operations. Adjusted EBITDA for the second quarter was $28.4 million, up from $26.7 million in the prior year period. Organic growth during the quarter was strong at our California Closets and Century Fire Protection company-owned operations and within our franchised systems. Top-line growth and margins within the division were tempered by weaker performance at our Paul Davis company-owned operations relative to the prior year period. GAAP Operating Earnings were $20.7 million, versus $19.1 million in the prior year quarter.

Corporate costs, as presented in Adjusted EBITDA, were $2.6 million in the second quarter, relative to $3.0 million in the prior year period. On a GAAP basis, corporate costs for the quarter were $321.5 million, relative to $4.3 million in the prior year period, with the increase primarily attributable to the settlement of the LTIA with FirstService’s Founder and Chairman.

Conference Call
FirstService will be holding a conference call on Wednesday, July 24, 2019 at 11:00 a.m. Eastern Time to discuss the quarter’s results. The number to use for this call is toll-free 1) 1-888-241-0551 or 2) 647-427-3415 for international callers. 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, 2018 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.

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; (vi) stock-based compensation expense; and (vii) settlement of the LTIA. 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 Six months ended
(in thousands of US$)June 30 June 30
  2019  2018  2019  2018 
             
Net earnings (loss)$(275,680) $29,894  $(267,535) $38,829 
Income tax 8,569   9,285   9,778   8,613 
Other income, net (6,131)  (39)  (6,124)  (103)
Interest expense, net 4,772   3,210   8,341   6,084 
Operating earnings (loss) (268,470)  42,350   (255,540)  53,423 
Depreciation and amortization 14,165   12,903   26,852   24,686 
Settlement of long-term incentive arrangement 314,379   -   314,379   - 
Acquisition-related items 3,202   548   3,880   1,109 
Stock-based compensation expense 1,755   1,317   4,610   3,314 
Adjusted EBITDA$65,031  $57,118  $94,181  $82,532 


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; (iv) stock-based compensation expense; (v) a stock-based compensation tax adjustment related to a US GAAP change; and (vi) settlement of the LTIA. 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 Six months ended
(in thousands of US$)June 30 June 30
  2019  2018  2019  2018 
             
Net earnings (loss)$(275,680) $29,894  $(267,535) $38,829 
Non-controlling interest share of earnings (2,409)  (2,915)  (4,205)  (5,235)
Settlement of long-term incentive arrangement 314,379   -   314,379   - 
Acquisition-related items 3,202   548   3,880   1,109 
Amortization of intangible assets 4,899   4,736   9,206   8,650 
Stock-based compensation expense 1,755   1,317   4,610   3,314 
Stock-based compensation tax adjustment for US GAAP change (1,510)  (622)  (2,854)  (3,037)
Income tax on adjustments (2,439)  (1,574)  (4,301)  (3,111)
Non-controlling interest on adjustments (80)  (145)  (168)  (255)
Adjusted net earnings$42,117  $31,239  $53,012  $40,264 
             
  Three months ended Six months ended
(in US$)June 30 June 30
  2019  2018  2019  2018 
             
Diluted net earnings (loss) per share$(7.40) $0.62  $(7.59) $0.79 
Non-controlling interest redemption increment 0.03   0.12   0.14   0.13 
Settlement of long-term incentive arrangement 8.34   -   8.62   - 
Acquisition-related items 0.07   0.02   0.09   0.03 
Amortization of intangible assets, net of tax 0.09   0.09   0.18   0.17 
Stock-based compensation expense, net of tax 0.03   0.03   0.09   0.06 
Stock-based compensation tax adjustment for US GAAP change (0.04)  (0.02)  (0.08)  (0.08)
Adjusted earnings per share$1.12  $0.86  $1.45  $1.10 


 

FIRSTSERVICE CORPORATION
Condensed Consolidated Statements of Earnings
(in thousands of US dollars, except per share amounts)
     Three months  Six months
     ended June 30  ended June 30
(unaudited)  2019   2018   2019   2018 
               
Revenues $573,908  $495,348  $1,059,563  $921,804 
               
Cost of revenues  388,656   331,445   729,354   629,969 
Selling, general and administrative expenses  121,976   108,102   240,638   212,617 
Depreciation  9,266   8,167   17,646   16,036 
Amortization of intangible assets  4,899   4,736   9,206   8,650 
Settlement of long-term incentive arrangement  314,379   -   314,379   - 
Acquisition-related items (1)  3,202   548   3,880   1,109 
Operating earnings (loss)  (268,470)  42,350   (255,540)  53,423 
Interest expense, net  4,772   3,210   8,341   6,084 
Other expense (income)  (6,131)  (39)  (6,124)  (103)
Earnings (loss) before income tax  (267,111)  39,179   (257,757)  47,442 
Income tax  8,569   9,285   9,778   8,613 
Net earnings (loss)  (275,680)  29,894   (267,535)  38,829 
Non-controlling interest share of earnings  2,409   2,915   4,205   5,235 
Non-controlling interest redemption increment  947   4,373   4,967   4,905 
Net earnings (loss) attributable to Company  $(279,036) $22,606  $(276,707) $28,689 
               
Net earnings (loss) per common share             
 Basic $(7.48) $0.63  $(7.69) $0.80 
 Diluted  (7.48)  0.62   (7.69)  0.79 
              
               
Adjusted earnings per share (2) $1.12  $0.86  $1.45  $1.10 
               
Weighted average common shares (thousands)            
  Basic  37,284   35,936   36,002   35,929 
  Diluted  37,715   36,534   36,452   36,526 

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)June 30, 2019 December 31, 2018
       
Assets     
Cash and cash equivalents$89,829 $66,340
Restricted cash 18,001  13,504
Accounts receivable 383,707  239,925
Prepaid and other current assets 136,042  95,303
 Current assets 627,579  415,072
Other non-current assets 8,869  10,347
Fixed assets 119,914  98,102
Operating lease right-of-use assets 122,866  -
Goodwill and intangible assets 1,005,445  483,953
 Total assets$1,884,673 $1,007,474
       
       
Liabilities and shareholders' equity     
Accounts payable and accrued liabilities$276,176 $174,281
Other current liabilities 62,009  48,751
Operating lease liabilities - current 31,967  -
Long-term debt - current 5,914  3,915
 Current liabilities 376,066  226,947
Long-term debt - non-current 918,570  330,608
Operating lease liabilities - non-current 99,027  -
Other liabilities 55,386  55,531
Deferred income tax 68,421  6,577
Redeemable non-controlling interests 153,390  151,585
Shareholders' equity 213,813  236,226
 Total liabilities and equity$1,884,673 $1,007,474
       
       
Supplemental balance sheet information     
Total debt$924,484 $334,523
Total debt, net of cash 834,655  268,183



Consolidated Statements of Cash Flows
(in thousands of US dollars)
    Three months ended  Six months ended
    June 30  June 30
(unaudited)  2019   2018   2019   2018 
              
Cash provided by (used in)            
              
Operating activities            
Net earnings (loss) $(275,680) $29,894  $(267,535) $38,829 
Items not affecting cash:            
 Depreciation and amortization  14,164   12,903   26,851   24,686 
 Non-cash settlement of long-term incentive arrangement  289,721   -   289,721   - 
 Deferred income tax  992   38   1,465   346 
 Other  (4,192)  1,629   (1,058)  4,031 
    25,005   44,464   49,444   67,892 
              
Changes in non-cash working capital            
 Accounts receivable  (27,828)  (16,259)  (19,228)  (12,181)
 Payables and accruals  11,439   2,366   (4,922)  (12,504)
 Other  10,212   8,701   19,092   4,367 
Net cash provided by operating activities  18,828   39,272   44,386   47,574 
              
Investing activities            
Acquisition of businesses, net of cash acquired  (519,758)  (13,577)  (545,531)  (43,179)
Disposition of business, net of cash disposed  13,030   -   13,030   - 
Purchases of fixed assets  (11,551)  (9,097)  (22,287)  (19,620)
Other investing activities  3,188   (1,306)  859   (1,984)
Net cash used in investing activities  (515,091)  (23,980)  (553,929)  (64,783)
              
Financing activities            
Increase in long-term debt, net  543,216   (8,128)  588,879   42,086 
Purchases of non-controlling interests, net  (14,223)  (511)  (33,210)  (2,132)
Financing fees paid  (3,428)  -   (3,696)  - 
Dividends paid to common shareholders  (5,418)  (4,849)  (10,275)  (9,249)
Distributions paid to non-controlling interests  (3,075)  (2,751)  (4,269)  (4,342)
Repurchases of common shares  -   -   -   (5,941)
Other financing activities  2,260   893   411   (771)
Net cash provided by (used in) financing activities  519,332   (15,346)  537,840   19,651 
              
Effect of exchange rate changes on cash  (508)  (206)  (311)  (343)
              
Increase (decrease) in cash, cash equivalents and restricted cash  22,561   (260)  27,986   2,099 
              
Cash, cash equivalents and restricted cash, beginning of period  85,269   69,253   79,844   66,894 
              
Cash, cash equivalents and restricted cash, end of period $107,830  $68,993  $107,830  $68,993 


 

Segmented Results
(in thousands of US dollars)
             
           
  FirstService FirstService    
(unaudited)Residential Brands Corporate Consolidated
             
Three months ended June 30           
             
2019           
 Revenues$370,405 $203,503 $-  $573,908 
 Adjusted EBITDA 39,177  28,431  (2,577)  65,031 
             
 Operating earnings 32,278  20,705  (321,453)  (268,470)
             
2018           
 Revenues$326,992 $168,356 $-  $495,348 
 Adjusted EBITDA 33,402  26,675  (2,959)  57,118 
             
 Operating earnings 27,498  19,145  (4,293)  42,350 
             
             
           
  FirstService FirstService    
  Residential Brands Corporate Consolidated
             
Six months ended June 30           
             
2019           
 Revenues$689,715 $369,848 $-  $1,059,563 
 Adjusted EBITDA 60,996  39,459  (6,274)  94,181 
             
 Operating earnings 47,926  24,597  (328,063)  (255,540)
             
2018           
 Revenues$611,127 $310,677 $-  $921,804 
 Adjusted EBITDA 50,878  37,838  (6,184)  82,532 
             
 Operating earnings 38,864  24,220  (9,661)  53,423 

 

COMPANY CONTACTS:

D. Scott Patterson
President & CEO

Jeremy Rakusin
Chief Financial Officer

(416) 960-9500

Primary Logo

Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. View delay times for all exchanges. Market Data powered by QuoteMedia. See the QuoteMedia Terms of Use.