FirstService Reports Third Quarter 2024 Results

Rhea-AI Summary

FirstService (FSV) reported strong Q3 2024 results with consolidated revenues of $1.40 billion, up 25% year-over-year. Adjusted EBITDA increased 43% to $160.0 million, while Adjusted EPS rose 30% to $1.63. The FirstService Residential segment saw 4% revenue growth to $559.6 million, while FirstService Brands segment revenues grew 44% to $836.5 million, driven by robust restoration operations and the addition of Roofing Corp of America. The company's nine-month consolidated revenues reached $3.85 billion, an 18% increase from the prior year period.

Positive

• Q3 revenue increased 25% YoY to $1.40 billion
• Adjusted EBITDA grew 43% to $160.0 million
• Adjusted EPS up 30% to $1.63
• FirstService Brands segment revenue grew 44% to $836.5 million
• Strong organic revenue growth of 10% in Brands division

Negative

• Moderated growth in Residential segment due to budgetary pressures
• Reduced service scope in certain markets affecting community association clients

Insights

Financial Analyst

Strong financial performance in Q3 2024 with significant growth metrics: $1.40B in consolidated revenues (25% increase), $160.0M Adjusted EBITDA (43% increase) and Adjusted EPS of $1.63 (30% increase). The FirstService Brands division was particularly impressive, showing 44% revenue growth to $836.5M, driven by robust restoration operations and the Roofing Corp of America acquisition.

The residential segment showed modest growth of 4%, with some headwinds from budgetary pressures in certain markets. Notably, the company's operating margins expanded significantly, particularly in the Brands division, due to operating leverage and improved efficiencies in home services. The strong Q3 results and management's positive outlook for year-end indicate sustained momentum in core business segments.

Strong Growth Across Brands Division Drives Financial Performance

Operating highlights:

		Three months ended						Nine months ended
		September 30						September 30
		2024			2023			2024			2023
Revenues (millions)		$	1,396.0		$	1,117.1		$	3,851.5		$	3,255.3
Adjusted EBITDA (millions) (note 1)			160.0			111.9			375.8			312.4
Adjusted EPS (note 2)			1.63			1.25			3.66			3.56
GAAP Operating Earnings			125.9			73.6			247.9			196.8
GAAP EPS			1.34			0.73			2.26			2.10

TORONTO, Oct. 24, 2024 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported strong results for its third quarter ended September 30, 2024. All amounts are in US dollars.

Consolidated revenues for the third quarter were $1.40 billion, a 25% increase relative to the same quarter in the prior year. Adjusted EBITDA (note 1) increased 43% to $160.0 million, and Adjusted EPS (note 2) was $1.63, up 30% versus the prior year quarter. During the third quarter, FirstService reported Operating Earnings of $125.9 million, up from $73.6 million in the prior year period. Diluted earnings per share was $1.34 in the quarter, compared to $0.73 for the same quarter a year ago.

For the nine months ended September 30, 2024, consolidated revenues were $3.85 billion, an 18% increase relative to the comparable prior year period, Adjusted EBITDA was $375.8 million, up 20%, and Adjusted EPS was $3.66, versus $3.56 in the prior year period. FirstService’s Operating Earnings were $247.9 million in the current year period, versus $196.8 million in the prior year. Diluted earnings per share for the nine months year-to-date was $2.26, compared to $2.10 in the prior year period.

“We are very pleased with our third quarter consolidated financial results which exceeded our internal expectations,” said Scott Patterson, Chief Executive Officer of FirstService. “Our strong top and bottom line performance was buoyed by robust and broad-based activity within our restoration operations, and supported by healthy profitability across our other brands. Our continued momentum reinforces our outlook for a strong finish to the year,” 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 company-owned operations and franchise systems.

FirstService generates more than US$4.9 billion in annual revenues and has approximately 30,000 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 www.firstservice.com.

Segmented Quarterly Results
FirstService Residential revenues were $559.6 million for the third quarter, up 4% compared to the prior year quarter, including organic growth of 3%. Top-line growth moderated compared to recent quarters due to tempered fees and reduced service scope in the face of budgetary pressures impacting our community association clients in certain markets. Adjusted EBITDA for the quarter was $58.6 million, versus $56.6 million in the prior year period. Operating Earnings were $49.1 million, versus $49.0 million for the third quarter of last year. The operating margins for the division were relatively in-line with the prior year.

FirstService Brands revenues during the third quarter grew to $836.5 million, up 44% relative to the prior year period. Strong organic revenue growth of 10% was primarily due to robust activity levels at our restoration operations arising from local weather events and large-loss claims across North America. The recent addition of our Roofing Corp of America operations contributed to the balance of growth in the division. Adjusted EBITDA for the third quarter was $105.8 million, up from $60.7 million in the prior year period. Operating Earnings were $87.1 million, versus $33.9 million in the prior year quarter. Adjusted EBITDA margin expansion was driven by operating leverage from the strong top-line restoration growth, as well as improved margins at our home services brands which benefited from both reduced promotional initiatives and realized operating efficiencies. The further increase in the Operating Earnings margin performance resulted from fair value adjustments to contingent upside earn-out structures related to certain recently completed acquisitions.

Corporate costs, as presented in Adjusted EBITDA (note 1), were $4.4 million in the third quarter, relative to $5.3 million in the prior year period. Corporate costs for the quarter were $10.2 million, relative to $9.4 million in the prior year period.

Conference Call
FirstService will be holding a conference call on Thursday, October 24, 2024 at 11:00 a.m. Eastern Time to discuss the quarter’s results. 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/BI4fa84b993e5545c3ad11aa7ddb7c3035 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/aecuddsv . 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, 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. 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.sedarplus.ca.

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, net; (iv) depreciation and amortization; (v) acquisition-related items; and (vi) stock-based compensation expense. 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								Nine months ended
(in thousands of US$)		September 30								September 30
		2024				2023				2024				2023
Net earnings		$	77,761			$	45,858			$	137,595			$	123,238
Income tax			26,372				16,447				50,971				44,266
Other income, net			(381	)			(702	)			(2,376	)			(5,215	)
Interest expense, net			22,150				11,956				61,707				34,541
Operating earnings			125,902				73,559				247,897				196,830
Depreciation and amortization			41,409				33,146				117,441				94,062
Acquisition-related items			(13,036	)			1,274				(9,130	)			5,032
Stock-based compensation expense			5,699				3,957				19,626				16,461
Adjusted EBITDA		$	159,974			$	111,936			$	375,834			$	312,385

A reconciliation of segment operating earnings to segment Adjusted EBITDA appears below.
(in thousands of US$)
Three months ended, September 30, 2024				FirstService				FirstService
				Residential				Brands				Corporate(1)
Operating earnings (loss)			$	49,059			$	87,064			$	(10,221	)
Depreciation and amortization				8,871				32,516				22
Acquisition-related items				660				(13,814	)			118
Stock-based compensation expense				-				-				5,699
Adjusted EBITDA			$	58,590			$	105,766			$	(4,382	)
Three months ended, September 30, 2023				FirstService				FirstService
				Residential				Brands				Corporate(1)
Operating earnings (loss)			$	49,001			$	33,935			$	(9,377	)
Depreciation and amortization				9,919				23,204				23
Acquisition-related items				(2,345	)			3,553				66
Stock-based compensation expense				-				-				3,957
Adjusted EBITDA			$	56,575			$	60,692			$	(5,331	)
Nine months ended, September 30, 2024				FirstService				FirstService
				Residential				Brands				Corporate(1)
Operating earnings (loss)			$	124,824			$	160,171			$	(37,098	)
Depreciation and amortization				27,067				90,306				68
Acquisition-related items				1,385				(11,685	)			1,170
Stock-based compensation expense				-				-				19,626
Adjusted EBITDA			$	153,276			$	238,792			$	(16,234	)
Nine months ended, September 30, 2023				FirstService				FirstService
				Residential				Brands				Corporate(1)
Operating earnings (loss)			$	120,908			$	105,865			$	(29,943	)
Depreciation and amortization				24,741				69,252				69
Acquisition-related items				(1,368	)			6,167				233
Stock-based compensation expense				-				-				16,461
Adjusted EBITDA			$	144,281			$	181,284			$	(13,180	)
(1) Corporate is not an operating segment, but rather 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 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; and (iv) stock-based compensation expense. 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								Nine months ended
(in thousands of US$)		September 30								September 30
		2024				2023				2024				2023
Net earnings		$	77,761			$	45,858			$	137,595			$	123,238
Non-controlling interest share of earnings			(7,756	)			(4,406	)			(11,985	)			(10,215	)
Acquisition-related items			(13,036	)			1,274				(9,130	)			5,032
Amortization of intangible assets			17,825				14,454				50,065				40,296
Stock-based compensation expense			5,699				3,957				19,626				16,461
Income tax on adjustments			(6,821	)			(4,787	)			(20,210	)			(14,757	)
Non-controlling interest on adjustments			97				(321	)			(487	)			(852	)
Adjusted net earnings		$	73,769			$	56,029			$	165,474			$	159,203
		Three months ended								Nine months ended
(in US$)		September 30								September 30
		2024				2023				2024				2023
Diluted net earnings per share		$	1.34			$	0.73			$	2.26			$	2.10
Non-controlling interest redemption increment			0.21				0.20				0.52				0.42
Acquisition-related items			(0.28	)			0.03				(0.20	)			0.11
Amortization of intangible assets, net of tax			0.27				0.23				0.77				0.66
Stock-based compensation expense, net of tax			0.09				0.06				0.31				0.27
Adjusted earnings per share		$	1.63			$	1.25			$	3.66			$	3.56

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
					2024				2023				2024				2023
Revenues				$	1,396,041			$	1,117,109			$	3,851,545			$	3,255,288
Cost of revenues					936,573				756,561				2,587,613				2,211,088
Selling, general and administrative expenses					305,193				252,569				907,724				748,276
Depreciation					23,584				18,692				67,376				53,766
Amortization of intangible assets					17,825				14,454				50,065				40,296
Acquisition-related items (1)					(13,036	)			1,274				(9,130	)			5,032
Operating earnings					125,902				73,559				247,897				196,830
Interest expense, net					22,150				11,956				61,707				34,541
Other income, net					(381	)			(702	)			(2,376	)			(5,215	)
Earnings before income tax					104,133				62,305				188,566				167,504
Income tax					26,372				16,447				50,971				44,266
Net earnings					77,761				45,858				137,595				123,238
Non-controlling interest share of earnings					7,756				4,406				11,985				10,215
Non-controlling interest redemption increment					9,472				8,801				23,711				18,894
Net earnings attributable to Company				$	60,533			$	32,651			$	101,899			$	94,129
Net earnings per common share
	Basic			$	1.34			$	0.73			$	2.27			$	2.11
	Diluted				1.34				0.73				2.26				2.10
Adjusted earnings per share (2)				$	1.63			$	1.25			$	3.66			$	3.56
Weighted average common shares (thousands)
		Basic			45,047				44,613				44,961				44,529
		Diluted			45,336				44,853				45,163				44,772

Notes to Condensed Consolidated Statements of Earnings
(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)
																September 30, 2024										December 31, 2023
Assets
Cash and cash equivalents																$	217,679									$					187,617
Restricted cash																	18,369														19,260
Accounts receivable																	913,451														842,236
Prepaid and other current assets																	373,265														311,889
			Current assets														1,522,764														1,361,002
Other non-current assets																	28,801														34,418
Fixed assets																	246,314														204,188
Operating lease right-of-use assets																	249,470														218,299
Goodwill and intangible assets																	2,070,215														1,807,836
			Total assets													$	4,117,564									$					3,625,743
Liabilities and shareholders' equity
Accounts payable and accrued liabilities																$	522,003									$					471,083
Other current liabilities																	224,625														211,661
Operating lease liabilities - current																	52,298														50,898
Long-term debt - current																	41,983														37,132
			Current liabilities														840,909														770,774
Long-term debt - non-current																	1,252,670														1,144,975
Operating lease liabilities - non-current																	221,328														183,923
Other liabilities																	133,544														115,938
Deferred income tax																	93,567														53,024
Redeemable non-controlling interests																	426,998														332,963
Shareholders' equity																	1,148,548														1,024,146
			Total liabilities and equity													$	4,117,564									$					3,625,743
Supplemental balance sheet information
Total debt																$	1,294,653									$					1,182,107
Total debt, net of cash																	1,076,974														994,490

Consolidated Statements of Cash Flows
(in thousands of US dollars)
					Three months ended										Nine months ended
					September 30										September 30
					2024				2023						2024							2023
Cash provided by (used in)
Operating activities
Net earnings				$	77,761			$	45,858					$	137,595						$	123,238
Items not affecting cash:
	Depreciation and amortization				41,409				33,146						117,441							94,062
	Deferred income tax				(2,265	)			55						(6,814			)				(636	)
	Stock-based compensation				5,699				3,957						19,626							16,461
	Other				(12,854	)			1,077						(12,397			)				(429	)
					109,750				84,093						255,451							232,696
Changes in non-cash working capital
	Accounts receivable				(17,343	)			45,576						(19,983			)				(76,777	)
	Payables and accruals				30,635				(29,489			)			7,353							(18,497	)
	Other				(46,031	)			(16,215			)			(43,866			)				32,492
Net cash provided by operating activities					77,011				83,965						198,955							169,914
Investing activities
Acquisition of businesses, net of cash acquired					(4,016	)			(19,366			)			(158,665			)				(112,816	)
Purchases of fixed assets					(26,560	)			(23,465			)			(80,882			)				(67,669	)
Other investing activities					3,715				(1,496			)			2,715							(240	)
Net cash used in investing activities					(26,861	)			(44,327			)			(236,832			)				(180,725	)
Financing activities
Increase (decrease) in long-term debt, net					(36,764	)			(29,196			)			99,964							55,849
Purchases of non-controlling interests, net					(3,963	)			(564			)			(25,405			)				(4,174	)
Dividends paid to common shareholders					(11,253	)			(10,033			)			(32,551			)				(29,013	)
Distributions paid to non-controlling interests					(3,267	)			(2,450			)			(7,737			)				(6,922	)
Other financing activities					9,787				(3,508			)			32,577							13,636
Net cash provided by (used in) financing activities					(45,460	)			(45,751			)			66,848							29,376
Effect of exchange rate changes on cash					(151	)			577						200							(27	)
Increase in cash, cash equivalents and restricted cash					4,539				(5,536			)			29,171							18,538
Cash, cash equivalents and restricted cash, beginning of period					231,509				183,422						206,877							159,348
Cash, cash equivalents and restricted cash, end of period				$	236,048			$	177,886					$	236,048						$	177,886

Segmented Results
(in thousands of US dollars)
						FirstService					FirstService
						Residential					Brands					Corporate							Consolidated
Three months ended September 30
2024
	Revenues					$	559,585				$		836,456			$			-				$		1,396,041
	Adjusted EBITDA						58,590						105,766						(4,382		)				159,974
	Operating earnings						49,059						87,064						(10,221		)				125,902
2023
	Revenues					$	537,828				$		579,281			$			-				$		1,117,109
	Adjusted EBITDA						56,575						60,692						(5,331		)				111,936
	Operating earnings						49,001						33,935						(9,377		)				73,559
						FirstService					FirstService
						Residential					Brands					Corporate							Consolidated
Nine months ended September 30
2024
	Revenues					$	1,613,213				$		2,238,332			$			-				$		3,851,545
	Adjusted EBITDA						153,276						238,792						(16,234		)				375,834
	Operating earnings						124,824						160,171						(37,098		)				247,897
2023
	Revenues					$	1,500,542				$		1,754,746			$			-				$		3,255,288
	Adjusted EBITDA						144,281						181,284						(13,180		)				312,385
	Operating earnings						120,908						105,865						(29,943		)				196,830

COMPANY CONTACTS:

D. Scott Patterson
Chief Executive Officer

Jeremy Rakusin
Chief Financial Officer

(416) 960-9566

FAQ

What was FirstService (FSV) revenue in Q3 2024?

FirstService reported Q3 2024 consolidated revenues of $1.40 billion, representing a 25% increase from the same quarter in 2023.

How much did FirstService (FSV) Adjusted EPS grow in Q3 2024?

FirstService's Adjusted EPS grew 30% to $1.63 in Q3 2024, compared to $1.25 in Q3 2023.

What drove FirstService (FSV) Brands division growth in Q3 2024?

The Brands division growth was driven by robust restoration operations from local weather events, large-loss claims across North America, and the addition of Roofing Corp of America operations.