FSV FirstService Corporation

FirstService Reports Fourth Quarter and Full Year Results

FirstService Reports Fourth Quarter and Full Year Results

Double-Digit Annual Revenue and Operating Earnings Growth

Operating highlights:

  Three months ended Year ended 
  December 31 December 31 
  2023 2022 2023 2022 
              
Revenues (millions)$1,079.3 $1,020.1 $4,334.5 $3,745.8 
Adjusted EBITDA (millions) (note 1) 103.3  102.5  415.7  351.7 
Adjusted EPS (note 2) 1.11  1.22  4.66  4.24 
              
GAAP Operating Earnings 48.1  67.5  244.9  219.0 
GAAP EPS 0.14  0.86  2.24  2.72 
              

TORONTO, Feb. 06, 2024 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today announced fourth quarter and full year results for the year ended December 31, 2023. All amounts are in US dollars.

Consolidated revenues for the fourth quarter were $1.08 billion, a 6% increase relative to the same quarter in the prior year. Adjusted EBITDA (note 1) was $103.3 million, up 1%, and Adjusted EPS (note 2) was $1.11, versus $1.22 in the prior year quarter.

Operating Earnings for the quarter were $48.1 million, relative to $67.5 million in the prior year period, with the decrease attributable to contingent acquisition consideration fair value adjustments on prior tuck-under acquisitions. Diluted EPS was $0.14 per share in the quarter, compared to $0.86 for the same quarter a year ago.

For the year ended December 31, 2023, consolidated revenues were $4.33 billion, a 16% increase relative to the prior year, including 10% organic growth. Adjusted EBITDA was $415.7 million, up 18%, and Adjusted EPS was $4.66, versus the prior year of $4.24. Operating Earnings were $244.9 million, versus $219.0 million in the prior year period. Diluted earnings per share was $2.24, compared to $2.72 in the prior year.

“We are pleased with our fourth quarter performance which lined up with our expectations,” said Scott Patterson, Chief Executive Officer of FirstService. “For the full year, we delivered double-digit organic top-line growth and strong profitability across both divisions, as our brands continued to realize share gains in their respective markets,” 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$4.3 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 under the symbol “FSV” and on the Toronto Stock Exchange under the symbol “FSV”, and are included in the S&P/TSX 60 Index. More information is available at .

Segmented Fourth Quarter Results

FirstService Residential generated revenues of $496.3 million for the fourth quarter, up 12% relative to the prior year quarter, including 9% organic growth. Growth was driven by new contract wins, with particularly strong performance at our sited labour communities. Adjusted EBITDA was $43.5 million, an increase of 14% compared to $38.1 million reported in the prior year period. Operating Earnings were $34.1 million, versus $30.6 million for the fourth quarter of last year. Operating margins were relatively in-line with the prior year quarter.

FirstService Brands recorded revenues of $583.0 million, up 1% versus $578.0 million in the prior year period. Revenues declined 7% on an organic basis due to milder weather patterns at our restoration operations, compared to the significant loss claims activity from hurricanes Ian and Fiona in the prior year quarter. The division top-line performance included very strong growth at Century Fire together with solid contribution from our home services brands, partially offsetting the restoration-driven headwinds. Adjusted EBITDA for the quarter was $61.1 million, compared to $67.4 million in the prior year quarter. Operating Earnings were $20.6 million, versus $44.0 million in the prior year quarter. The segment Adjusted EBITDA margin (note 1) decline was primarily attributable to lower profitability in our restoration operations due to the reduced weather-related activity during the period. The operating earnings margin was further impacted by contingent acquisition consideration fair value adjustments.

Corporate costs, as presented in Adjusted EBITDA (note 1), were $1.2 million in the fourth quarter, relative to $3.0 million in the prior year period. Corporate costs for the quarter were $6.7 million, relative to $7.1 million in the prior year period.

Segmented Full Year Results

FirstService Residential reported revenues of $2.0 billion, up 13% relative to 2022, including 10% organic growth and the balance from tuck-under acquisitions. The strong organic growth was primarily driven by new contract wins, together with contribution from increased labour-related and ancillary services with our existing clients. Adjusted EBITDA was $187.8 million, up 11% versus the prior year. Operating Earnings were $155.0 million, compared to $138.9 million in the prior year. Operating margins were in-line with the prior year.

FirstService Brands revenues were $2.34 billion, up 18% versus the prior year, and comprised of 11% organic growth with the balance from acquisitions. All service lines contributed to the division’s organic revenue growth, including an exceptionally strong increase over the prior year at our Century Fire Protection operations. Adjusted EBITDA for the year was $242.4 million, up 23% relative to the prior year. Operating Earnings were $126.5 million, versus $111.6 million a year ago. The segment Adjusted EBITDA margin was positively impacted by operating leverage realized from the strong top-line performance in our restoration and Century Fire businesses. The operating earnings margin was slightly down due to acquisition-related items, primarily contingent acquisition consideration fair value adjustments.

Corporate costs, as presented in Adjusted EBITDA, were $14.4 million for the full year, relative to $13.2 million in the prior year. Corporate costs were $36.6 million, relative to $31.5 million a year ago, with the increase driven primarily by stock-based compensation expense.

Conference Call & Presentation

FirstService will be holding a conference call on Tuesday, February 6, 2024 at 11:00 a.m. Eastern Time to discuss the results for the fourth quarter and full year.

This call is being webcast live at the Company’s website at . Participants may register for the call here to receive the dial-in number and their unique PIN. To join the webcast in listen only mode, use this link: . It is recommended that you join 10 minutes prior to the event start (although you may register and dial in at any time during the call).

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 ) and Annual Report on Form 40-F filed with the United States Securities and Exchange Commission (a copy of which may be obtained at ), 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 . 

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; and (vi) stock-based compensation expense. The Company uses Adjusted EBITDA to evaluate its own operating performance and its ability to service debt, as well 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 measure is useful to investors as a reasonable indicator of operating performance because of the low capital intensity of its 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 Twelve months ended
(in thousands of US$)December 31 December 31
 2023  2022  2023  2022 
            
Net earnings$23,783  $44,339  $147,021  $145,007 
Income tax 12,051   14,806   56,317   48,974 
Other income, net (595)  (712)  (5,810)  (146)
Interest expense, net 12,823   9,025   47,364   25,191 
Operating earnings 48,062   67,458   244,892   219,026 
Depreciation and amortization 33,872   30,417   127,934   110,140 
Acquisition-related items 16,485   599   21,517   4,520 
Stock-based compensation expense 4,924   4,073   21,385   18,046 
Adjusted EBITDA$103,343  $102,547  $415,728  $351,732 



A reconciliation of segment operating earnings to segment Adjusted EBITDA appears below.    
             
(in thousands of US$)           
             
             
Three months ended December 31, 2023   FirstService FirstService   
     Residential Brands  Corporate(1)
             
Operating earnings (loss)  $34,136  $20,603 $(6,677) 
Depreciation and amortization   8,373   25,477  22  
Acquisition-related items   1,002   14,992  491  
Stock-based compensation expense   -   -  4,924  
Adjusted EBITDA  $43,511  $61,072 $(1,240) 
             
             
Three months ended December 31, 2022   FirstService FirstService   
     Residential  Brands  Corporate(1)
             
Operating earnings (loss)  $30,562  $44,040 $(7,144) 
Depreciation and amortization   7,591   22,804  22  
Acquisition-related items   (38)  594  43  
Stock-based compensation expense   -   -  4,073  
Adjusted EBITDA  $38,115  $67,438 $(3,006) 
             
             
             
Year ended December 31, 2023   FirstService FirstService   
     Residential Brands  Corporate(1)
             
Operating earnings (loss)  $155,044  $126,468 $(36,620) 
Depreciation and amortization   33,114   94,729  91  
Acquisition-related items   (366)  21,159  724  
Stock-based compensation expense   -   -  21,385  
Adjusted EBITDA  $187,792  $242,356 $(14,420) 
             
             
Year ended December 31, 2022   FirstService FirstService   
     Residential  Brands  Corporate(1)
             
Operating earnings (loss)  $138,873  $111,638 $(31,485) 
Depreciation and amortization   28,611   81,439  90  
Acquisition-related items   1,153   3,200  167  
Stock-based compensation expense   -   -  18,046  
Adjusted EBITDA  $168,637  $196,277 $(13,182) 
             
             
Segment Adjusted EBITDA margin is defined as segment Adjusted EBITDA divided by segment revenues. 
             
(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 (loss) per common share to adjusted net earnings and adjusted net earnings per share:

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 of 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 common 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 diluted net earnings per common share to Adjusted EPS appears below.

  Three months ended Twelve months ended
(in thousands of US$)December 31 December 31
  2023  2022  2023  2022 
             
Net earnings$23,783  $44,339  $147,021  $145,007 
Non-controlling interest share of earnings (3,925)  (3,462)  (14,140)  (9,381)
Acquisition-related items 16,485   599   21,517   4,520 
Amortization of intangible assets 13,942   13,659   54,238   48,725 
Stock-based compensation expense 4,924   4,073   21,385   18,046 
Income tax on adjustments (4,905)  (4,611)  (19,662)  (17,361)
Non-controlling interest on adjustments (665)  (254)  (1,517)  (968)
Adjusted net earnings$49,639  $54,343  $208,842  $188,588 
             
  Three months ended Twelve months ended
(in US$)December 31 December 31
  2023  2022  2023  2022 
             
Diluted net earnings per share$0.14  $0.86  $2.24  $2.72 
Non-controlling interest redemption increment 0.30   0.06   0.72   0.33 
Acquisition-related items 0.36   0.01   0.47   0.10 
Amortization of intangible assets, net of tax 0.23   0.22   0.88   0.79 
Stock-based compensation expense, net of tax 0.08   0.07   0.35   0.30 
Adjusted earnings per share$1.11  $1.22  $4.66  $4.24 



FIRSTSERVICE CORPORATION
Operating Results
(in thousands of US$, except per share amounts)
     Three months  Twelve months
     ended December 31  ended December 31
   2023   2022   2023   2022 
               
Revenues $1,079,260  $1,020,101  $4,334,548  $3,745,835 
               
Cost of revenues  735,920   690,314   2,947,008   2,565,720 
Selling, general and administrative expenses  244,921   231,313   993,197   846,429 
Depreciation  19,930   16,758   73,696   61,415 
Amortization of intangible assets  13,942   13,659   54,238   48,725 
Acquisition-related items (1)  16,485   599   21,517   4,520 
Operating earnings  48,062   67,458   244,892   219,026 
Interest expense, net  12,823   9,025   47,364   25,191 
Other income, net  (595)  (712)  (5,810)  (146)
Earnings before income tax  35,834   59,145   203,338   193,981 
Income tax  12,051   14,806   56,317   48,974 
Net earnings  23,783   44,339   147,021   145,007 
Non-controlling interest share of earnings  3,925   3,462   14,140   9,381 
Non-controlling interest redemption increment  13,596   2,631   32,490   14,552 
Net earnings attributable to Company $6,262  $38,246  $100,391  $121,074 
               
Net earnings per common share            
               
  Basic $0.14  $0.86  $2.25  $2.74 
  Diluted  0.14   0.86   2.24   2.72 
               
Adjusted earnings per share (2) $1.11  $1.22  $4.66  $4.24 
               
Weighted average common shares (thousands)            
  Basic  44,639   44,420   44,556   44,175 
  Diluted  44,874   44,499   44,795   44,494 

(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$)
      
       
 December 31, 2023 December 31, 2022
       
Assets     
Cash and cash equivalents$187,617 $136,219
Restricted cash 19,260  23,129
Accounts receivable 848,230  635,942
Other current assets 311,889  313,582
 Current assets 1,366,996  1,108,872
Other non-current assets 34,418  38,549
Fixed assets 204,188  167,012
Operating lease right-of-use assets 218,299  205,544
Goodwill and intangible assets 1,807,836  1,254,537
 Total assets$3,631,737 $2,774,514
       
       
Liabilities and shareholders' equity     
Accounts payable and accrued liabilities$477,077 $398,313
Other current liabilities 211,661  153,866
Operating lease liabilities - current 50,898  49,145
Long-term debt - current 37,132  35,665
 Current liabilities 776,768  636,989
Long-term debt - non-current 1,144,975  698,798
Operating lease liabilities - non-current 183,923  168,557
Other liabilities 115,938  78,178
Deferred income tax 53,024  51,097
Redeemable non-controlling interests 332,963  233,429
Shareholders' equity 1,024,146  907,466
 Total liabilities and equity$3,631,737 $2,774,514
       
       
Supplemental balance sheet information     
Total debt$1,182,107 $734,463
Total debt, net of cash 994,490  598,244



Condensed Consolidated Statements of Cash Flows       
(in thousands of US$)
  Three months ended Twelve months ended
  December 31 December 31
  2023   2022   2023   2022 
                 
Cash provided by (used in)               
                 
Operating activities               
Net earnings$23,783  $44,339  $147,021  $145,007 
Items not affecting cash:               
Depreciation and amortization  33,872   30,417   127,934   110,140 
Deferred income tax  (18,413)  9,249   (19,049)  7,436 
Other  18,384   2,076   34,416   18,371 
   57,626   86,081   290,322   280,954 
                 
Changes in non-cash working capital               
Accounts receivable  (23,039)  (68,445)  (99,816)  (69,671)
Payables and accruals  44,153   28,729   25,656   (11,118)
Other  36,040   7,653   68,532   (94,272)
                 
Contingent acquisition consideration paid (4,334)  -   (4,334)  - 
Net cash provided by operating activities 110,446   54,018   280,360   105,893 
                 
Investing activities               
Acquisition of businesses, net of cash acquired (434,366)  (44,464)  (547,182)  (51,994)
Purchases of fixed assets (25,065)  (22,155)  (92,734)  (77,609)
Other investing activities (6,173)  (15,196)  (6,413)  (31,197)
Net cash used in investing activities (465,604)  (81,815)  (646,329)  (160,800)
                 
Financing activities               
Increase in long-term debt, net 390,998   14,338   446,847   80,156 
Purchases of non-controlling interests, net (111)  (114)  (4,285)  (21,451)
Dividends paid to common shareholders (10,042)  (8,954)  (39,055)  (34,884)
Distributions paid to non-controlling interests (454)  -   (7,376)  (8,061)
Other financing activities 4,178   (2,960)  17,814   3,022 
Net cash provided by financing activities 384,569   2,310   413,945   18,782 
                 
Effect of exchange rate changes on cash (420)  (347)  (447)  1,202 
                 
Increase (decrease) in cash, cash equivalents and restricted cash 28,991   (25,834)  47,529   (34,923)
                 
Cash, cash equivalents and restricted cash, start of period 177,886   185,182   159,348   194,271 
                 
Cash, cash equivalents and restricted cash, end of period$206,877  $159,348  $206,877  $159,348 
                 
                 



Segmented Results
(in thousands of US$)
             
           
  FirstService FirstService    
 Residential Brands Corporate Consolidated
             
Three months ended December 31           
             
2023           
 Revenues$496,281 $582,979 $-  $1,079,260
 Adjusted EBITDA (1) 43,511  61,072  (1,240)  103,343
 Operating earnings 34,136  20,603  (6,677)  48,062
             
2022           
 Revenues$442,124 $577,977 $-  $1,020,101
 Adjusted EBITDA 38,115  67,438  (3,006)  102,547
 Operating earnings 30,562  44,040  (7,144)  67,458
             
             
           
  FirstService FirstService    
  Residential Brands Corporate Consolidated
             
Year ended December 31           
             
2023           
 Revenues$1,996,823 $2,337,725 $-  $4,334,548
 Adjusted EBITDA 187,792  242,356  (14,420)  415,728
 Operating earnings 155,044  126,468  (36,620)  244,892
             
2022           
 Revenues$1,772,258 $1,973,577 $-  $3,745,835
 Adjusted EBITDA 168,637  196,277  (13,182)  351,732
 Operating earnings 138,873  111,638  (31,485)  219,026
             
             
 (1) See definition and reconciliation on pages 5 and 6.      

COMPANY CONTACTS:

D. Scott Patterson

Chief Executive Officer

Jeremy Rakusin

Chief Financial Officer

(416) 960-9566



EN
06/02/2024

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