Colliers International leads growth with revenues up 16% and adjusted EBITDA up 29%
Operating highlights:
Three months ended | Nine months ended | |||
September 30 | September 30 | |||
2014 | 2013 | 2014 | 2013 | |
Revenues (millions) | $ 684.6 | $ 603.0 | $ 1,890.4 | $ 1,652.8 |
Adjusted EBITDA (millions) (note 1) | 59.3 | 55.6 | 141.3 | 111.0 |
Adjusted EPS (note 2) | 0.75 | 0.69 | 1.57 | 1.11 |
TORONTO, Oct. 28, 2014 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV) (Nasdaq:FSRV) today reported results for its third quarter ended September 30, 2014. All amounts are in US dollars and all percentage revenue variances are calculated on a local currency basis.
Revenues for the third quarter were $684.6 million, a 14% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) was $59.3 million, up 7% and Adjusted EPS (note 2) was $0.75, a 9% increase versus the prior year quarter. GAAP EPS from continuing operations was $0.38 per share in the quarter, versus $0.09 for the same quarter a year ago.
For the nine months ended September 30, 2014, revenues were $1.89 billion, a 16% increase relative to the comparable prior year period, Adjusted EBITDA was $141.3 million, up 27%, and Adjusted EPS was $1.57, up 41% versus the prior year period. GAAP EPS from continuing operations for the nine month period was $0.49 per share, compared to a loss of $0.62 in the prior year period.
"FirstService delivered solid results in the third quarter, continuing the momentum from the first half of the year," said Jay S. Hennick, Founder and Chief Executive Officer of FirstService. "FirstService Residential completed three smaller but important acquisitions in California, Texas and Minnesota during the quarter. Just after quarter-end, Colliers International completed a major acquisition, establishing significant operations in France and Belgium while augmenting operations in several other countries in Europe. With the strong results reported today, multiple growth opportunities, the addition of several strategic acquisitions and deep financial strength, FirstService is better positioned than ever to deliver strong results for the balance of 2014 and beyond," he concluded.
About FirstService Corporation
FirstService Corporation is a global leader in the rapidly growing real estate services sector, one of the largest markets in the world. FirstService manages more than 2.5 billion square feet of residential and commercial properties through its three industry-leading service platforms: Colliers International - one of the largest global players in commercial real estate services; 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$2.5 billion in annual revenues and has more than 24,000 employees world-wide. With significant insider ownership and an experienced management team, FirstService has a long-term track record of creating value and superior returns for shareholders since becoming a publically listed company in 1993. The common shares of FirstService trade on the NASDAQ under the symbol "FSRV" and on the Toronto Stock Exchange under the symbol "FSV". More information is available at www.firstservice.com.
Segmented Quarterly Results
Colliers International revenues totalled $372.5 million for the third quarter compared to $320.2 million in the prior year quarter, up 16%. Revenue growth was comprised of 12% internal growth and 4% growth from recent acquisitions. Internal growth was driven by strong investment sales and leasing activity in all three global regions. Adjusted EBITDA was $33.9 million, up 29% from the prior year quarter, with a significant portion of the increase attributable to operating leverage.
FirstService Residential revenues were $250.2 million for the third quarter, up 10% versus the prior year quarter. Revenue growth was comprised of 8% internal growth and 2% from recent acquisitions. Adjusted EBITDA for the quarter was $16.5 million, versus $19.3 million in the prior year period. Current period operating results were negatively impacted by (i) a continuation of elevated employee medical benefits costs in the US amounting to approximately $3.0 million; these elevated costs also impacted results for the second quarter and are expected to persist for the fourth quarter and (ii) costs and a write-off of accounts receivable totalling $1.4 million related to homeowner fee collection operations as a result of recent legislation changes.
FirstService Brands revenues grew to $61.8 million, up 12% versus the prior year period. Internal growth was 10% on the strength of revenue gains at company-owned stores, and recent acquisitions contributed 2%. Adjusted EBITDA for the third quarter was $15.1 million, up 2% over the prior year period.
Corporate costs were $6.1 million in the third quarter, relative to $4.7 million in the prior year period.
Stock Repurchases
During the quarter, the Company repurchased 185,427 Subordinate Voting Shares on the open market under its Normal Course Issuer Bid ("NCIB") at an average price of $55.27 per share. All shares purchased under the NCIB were cancelled. The Company is authorized to repurchase up to an additional 2,789,373 Subordinate Voting Shares under its NCIB, which expires on June 8, 2015.
Conference Call
FirstService will be holding a conference call on Tuesday, October 28, 2014 at 11:00 a.m. Eastern Time to discuss the quarter's results. 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 Statements
This 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.
Notes
1. Reconciliation of net earnings from continuing operations to adjusted EBITDA:
Adjusted EBITDA is defined as net earnings from continuing operations, 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. 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 from continuing operations 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 from continuing operations to adjusted EBITDA appears below.
Three months ended | Nine months ended | |||
(in thousands of US$) | September 30 | September 30 | ||
2014 | 2013 | 2014 | 2013 | |
Net earnings from continuing operations | $ 24,552 | $ 22,177 | $ 51,601 | $ 18,547 |
Income tax | 10,024 | 6,720 | 21,139 | 6,150 |
Other income, net | (186) | (1,150) | (1,033) | (1,836) |
Interest expense, net | 3,440 | 6,225 | 9,834 | 17,278 |
Operating earnings | 37,830 | 33,972 | 81,541 | 40,139 |
Depreciation and amortization | 14,407 | 16,124 | 44,161 | 57,290 |
Acquisition-related items | 4,732 | 2,433 | 5,955 | 8,380 |
Stock-based compensation expense | 2,363 | 3,081 | 9,668 | 5,209 |
Adjusted EBITDA | $ 59,332 | $ 55,610 | $ 141,325 | $ 111,018 |
2. Reconciliation of net earnings from continuing operations and diluted net earnings (loss) per share from continuing operations to adjusted net earnings and adjusted net earnings per share:
Adjusted earnings per share is defined as diluted net earnings (loss) per share from continuing operations, 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 from continuing operations, 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 from continuing operations to adjusted net earnings and of diluted net earnings (loss) per share from continuing operations to adjusted earnings per share appears below.
Three months ended | Nine months ended | |||
(in thousands of US$) | September 30 | September 30 | ||
2014 | 2013 | 2014 | 2013 | |
Net earnings from continuing operations | $ 24,552 | $ 22,177 | $ 51,601 | $ 18,547 |
Non-controlling interest share of earnings | (7,196) | (7,852) | (19,763) | (12,278) |
Preferred share dividends | -- | -- | -- | (3,146) |
Acquisition-related items | 4,732 | 2,433 | 5,955 | 8,380 |
Amortization of intangible assets | 5,706 | 7,003 | 17,990 | 31,152 |
Stock-based compensation expense | 2,363 | 3,081 | 9,668 | 5,209 |
Income tax on adjustments | (2,282) | (2,286) | (7,192) | (8,729) |
Non-controlling interest on adjustments | (434) | (1,028) | (1,096) | (3,166) |
Adjusted net earnings | $ 27,441 | $ 23,528 | $ 57,163 | $ 35,969 |
Three months ended | Nine months ended | |||
(in US$) | September 30 | September 30 | ||
2014 | 2013 | 2014 | 2013 | |
Diluted net earnings (loss) per share from continuing operations | $ 0.38 | $ 0.09 | $ 0.49 | $ (0.62) |
Non-controlling interest redemption increment | 0.10 | 0.33 | 0.39 | 0.71 |
Acquisition-related items | 0.12 | 0.07 | 0.16 | 0.25 |
Amortization of intangible assets, net of tax | 0.10 | 0.12 | 0.31 | 0.64 |
Stock-based compensation expense, net of tax | 0.05 | 0.08 | 0.22 | 0.13 |
Adjusted earnings per share | $ 0.75 | $ 0.69 | $ 1.57 | $ 1.11 |
FIRSTSERVICE CORPORATION | ||||
Condensed Consolidated Statements of Earnings (Loss) | ||||
(in thousands of US dollars, except per share amounts) | ||||
Three months | Nine months | |||
ended September 30 | ended September 30 | |||
(unaudited) | 2014 | 2013 | 2014 | 2013 |
Revenues | $ 684,606 | $ 603,035 | $ 1,890,447 | $ 1,652,768 |
Cost of revenues | 445,408 | 396,179 | 1,225,800 | 1,094,968 |
Selling, general and administrative expenses | 182,229 | 154,327 | 532,990 | 451,991 |
Depreciation | 8,701 | 9,121 | 26,171 | 26,138 |
Amortization of intangible assets (1) | 5,706 | 7,003 | 17,990 | 31,152 |
Acquisition-related items (2) | 4,732 | 2,433 | 5,955 | 8,380 |
Operating earnings | 37,830 | 33,972 | 81,541 | 40,139 |
Interest expense, net | 3,440 | 6,225 | 9,834 | 17,278 |
Other expense (income) | (186) | (1,150) | (1,033) | (1,836) |
Earnings before income tax | 34,576 | 28,897 | 72,740 | 24,697 |
Income tax | 10,024 | 6,720 | 21,139 | 6,150 |
Net earnings from continuing operations | 24,552 | 22,177 | 51,601 | 18,547 |
Discontinued operations, net of income tax (3) | 3,104 | (2,259) | 944 | (2,468) |
Net earnings | 27,656 | 19,918 | 52,545 | 16,079 |
Non-controlling interest share of earnings | 7,196 | 7,852 | 19,763 | 12,278 |
Non-controlling interest redemption increment | 3,559 | 11,209 | 14,102 | 23,057 |
Net earnings (loss) attributable to Company | 16,901 | 857 | 18,680 | (19,256) |
Preferred share dividends | -- | -- | -- | 3,146 |
Net earnings (loss) attributable to common shareholders | $ 16,901 | $ 857 | $ 18,680 | $ (22,402) |
Net earnings (loss) per common share | ||||
Basic | ||||
Continuing operations | $ 0.38 | $ 0.09 | $ 0.49 | $ (0.62) |
Discontinued operations | 0.09 | (0.06) | 0.03 | (0.08) |
$ 0.47 | $ 0.03 | $ 0.52 | $ (0.70) | |
Diluted | ||||
Continuing operations | $ 0.38 | $ 0.09 | $ 0.49 | $ (0.62) |
Discontinued operations | 0.08 | (0.06) | 0.02 | (0.08) |
$ 0.46 | $ 0.03 | $ 0.51 | $ (0.70) | |
Adjusted earnings per share (4) | $ 0.75 | $ 0.69 | $ 1.57 | $ 1.11 |
Weighted average common shares (thousands) | ||||
Basic | 35,975 | 33,712 | 35,946 | 31,990 |
Diluted | 36,369 | 34,055 | 36,346 | 32,316 |
Notes to Condensed Consolidated Statements of Earnings (Loss) | ||||
(1) Amortization of intangible assets for the nine month period ended September 30, 2013 includes $11,184 of accelerated amortization related to legacy regional trademarks and trade names in connection with Residential Real Estate Services re-branding. | ||||
(2) Acquisition-related items include transaction costs, contingent acquisition consideration fair value adjustments, and contingent acquisition consideration-related compensation expense. | ||||
(3) Discontinued operations include a commercial real estate consulting business which was sold in July 2014, the REO rental operation which was sold in April 2014 and Field Asset Services which was sold in September 2013. | ||||
(4) See definition and reconciliation above. |
Condensed Consolidated Balance Sheets | |||
(in thousands of US dollars) | |||
(unaudited) | September 30, 2014 | December 31, 2013 | September 30, 2013 |
Assets | |||
Cash and cash equivalents | $ 130,005 | $ 142,704 | $ 167,121 |
Accounts receivable | 346,427 | 371,423 | 325,967 |
Inventories | 15,754 | 15,804 | 17,129 |
Prepaid expenses and other current assets | 86,625 | 85,329 | 60,451 |
Current assets | 578,811 | 615,260 | 570,668 |
Other non-current assets | 22,040 | 19,711 | 22,170 |
Fixed assets | 111,374 | 101,554 | 97,849 |
Deferred income tax | 100,327 | 102,629 | 111,234 |
Goodwill and intangible assets | 655,972 | 604,357 | 601,775 |
Total assets | $ 1,468,524 | $ 1,443,511 | $ 1,403,696 |
Liabilities and shareholders' equity | |||
Accounts payable and accrued liabilities | $ 417,207 | $ 485,436 | $ 377,778 |
Other current liabilities | 34,491 | 39,943 | 39,860 |
Long-term debt - current | 37,368 | 44,785 | 36,670 |
Current liabilities | 489,066 | 570,164 | 454,308 |
Long-term debt - non-current | 441,441 | 328,009 | 430,805 |
Other liabilities | 42,549 | 43,051 | 34,939 |
Deferred income tax | 34,180 | 31,165 | 33,345 |
Redeemable non-controlling interests | 228,308 | 222,073 | 211,914 |
Shareholders' equity | 232,980 | 249,049 | 238,385 |
Total liabilities and equity | $ 1,468,524 | $ 1,443,511 | $ 1,403,696 |
Supplemental balance sheet information | |||
Total debt | $ 478,809 | $ 372,794 | $ 467,475 |
Total debt, net of cash | 348,804 | 230,090 | 300,354 |
Consolidated Statements of Cash Flows | ||||
(in thousands of US dollars) | ||||
Three months ended | Nine months ended | |||
September 30 | September 30 | |||
(unaudited) | 2014 | 2013 | 2014 | 2013 |
Cash provided by (used in) | ||||
Operating activities | ||||
Net earnings | $ 27,656 | $ 19,918 | $ 52,545 | $ 16,079 |
Items not affecting cash: | ||||
Depreciation and amortization | 14,404 | 17,583 | 44,264 | 60,675 |
Deferred income tax | 1,295 | (8,050) | (440) | (24,351) |
Other | (4,454) | 5,524 | (2,990) | 7,043 |
38,901 | 34,975 | 93,379 | 59,446 | |
Changes in non-cash working capital | ||||
Accounts receivable | 19,863 | 7,280 | 25,435 | 10,249 |
Payables and accruals | 6,683 | 32,111 | (52,138) | (56,837) |
Other | (3,510) | (9,464) | (14,850) | 3,047 |
Contingent acquisition consideration | -- | -- | (20,064) | -- |
Net cash provided by operating activities | 61,937 | 64,902 | 31,762 | 15,905 |
Investing activities | ||||
Acquisition of businesses, net of cash acquired | (12,699) | (573) | (60,475) | (35,261) |
Disposition of business, net of cash disposed | 10,781 | 49,460 | 8,694 | 49,460 |
Purchases of fixed assets | (7,171) | (9,648) | (35,944) | (21,754) |
Other investing activities | 721 | 1,250 | (702) | (2,386) |
Net cash used in investing activities | (8,368) | 40,489 | (88,427) | (9,941) |
Financing activities | ||||
Increase in long-term debt, net | (40,127) | (8,292) | 102,262 | 130,143 |
Redemption of Preferred Shares | -- | -- | -- | (39,232) |
Purchases of non-controlling interests | (1,311) | 633 | (12,926) | (1,896) |
Dividends paid to preferred shareholders | -- | -- | -- | (2,537) |
Dividends paid to common shareholders | (3,597) | (3,326) | (10,775) | (3,326) |
Distributions paid to non-controlling interests | (5,902) | (4,131) | (19,316) | (17,171) |
Repurchases of Subordinate Voting Shares | (10,249) | (14,554) | (20,355) | (14,554) |
Other financing activities | 2,620 | (661) | 6,369 | 6,540 |
Net cash (used in) provided by financing activities | (58,566) | (30,331) | 45,259 | 57,967 |
Effect of exchange rate changes on cash | 59 | 1,221 | (1,293) | (5,494) |
(Decrease) increase in cash and cash equivalents | (4,938) | 76,281 | (12,699) | 58,437 |
Cash and cash equivalents, beginning of period | 134,943 | 90,840 | 142,704 | 108,684 |
Cash and cash equivalents, end of period | $ 130,005 | $ 167,121 | $ 130,005 | $ 167,121 |
Segmented Results | |||||
(in thousands of US dollars) | |||||
Commercial | Residential | ||||
Real Estate | Real Estate | Property | |||
(unaudited) | Services | Services | Services (1) | Corporate | Consolidated |
Three months ended September 30 | |||||
2014 | |||||
Revenues | $ 372,515 | $ 250,209 | $ 61,820 | $ 62 | $ 684,606 |
Adjusted EBITDA | 33,889 | 16,518 | 15,065 | (6,140) | 59,332 |
Operating earnings | 17,378 | 15,166 | 13,302 | (8,016) | 37,830 |
2013 | |||||
Revenues | $ 320,243 | $ 227,611 | $ 55,150 | $ 31 | $ 603,035 |
Adjusted EBITDA | 26,234 | 19,333 | 14,773 | (4,730) | 55,610 |
Operating earnings | 12,312 | 14,102 | 13,016 | (5,458) | 33,972 |
Commercial | Residential | ||||
Real Estate | Real Estate | Property | |||
Services | Services | Services (1) | Corporate | Consolidated | |
Nine months ended September 30 | |||||
2014 | |||||
Revenues | $ 1,040,463 | $ 691,675 | $ 158,153 | $ 156 | $ 1,890,447 |
Adjusted EBITDA | 84,992 | 38,702 | 28,722 | (11,091) | 141,325 |
Operating earnings | 42,175 | 30,904 | 23,587 | (15,125) | 81,541 |
2013 | |||||
Revenues | $ 873,023 | $ 636,956 | $ 142,658 | $ 131 | $ 1,652,768 |
Adjusted EBITDA | 53,163 | 42,739 | 25,059 | (9,943) | 111,018 |
Operating earnings (2) | 14,940 | 20,301 | 17,869 | (12,971) | 40,139 |
(1) The segmented results have been revised to present the Service America operations in Property Services for all periods presented. Prior to June 30, 2014, the Service America operations were reported in the Residential Real Estate Services segment. | |||||
(2) Operating earnings for the Residential Real Estate Services segment for the nine month period ended September 30, 2013 were impacted by $11,184 of accelerated amortization related to legacy regional trademarks and trade names in connection with re-branding. |