FirstService Reports Very Strong Fourth Quarter Results

Toronto, Ontario, CANADA


Strong Organic Growth Supported by Robust Restoration Activity

Operating highlights:

  Three months ended Year ended 
  December 31 December 31 
  2020 2019 2020 2019  
              
Revenues (millions)$775.1 $675.6 $2,772.4 $2,407.4  
Adjusted EBITDA (millions) (note 1) 79.9  63.9  283.7  235.2  
Adjusted EPS (note 2) 1.02  0.66  3.46  3.00  
              
GAAP Operating Earnings 49.4  31.4  169.4  (174.4)(1)
GAAP EPS 0.50  0.13  2.02  (6.58)(1)
              
(1) Includes $314.4 million of expense associated with the settlement of the long-term incentive arrangement with FirstService's Founder and Chairman. 

TORONTO, Feb. 09, 2021 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today announced very strong fourth quarter and full year results for the year ended December 31, 2020. All amounts are in US dollars.

Revenues for the fourth quarter were $775.1 million, a 15% increase relative to the same quarter in the prior year. Adjusted EBITDA (note 1) was $79.9 million, up 25%, and Adjusted EPS (note 2) was $1.02, up 55% from the prior year quarter. GAAP Operating Earnings were $49.4 million, relative to $31.4 million in the prior year period. GAAP diluted EPS was $0.50 per share in the quarter, compared to $0.13 for the same quarter a year ago.

For the year ended December 31, 2020, revenues were $2.77 billion, a 15% increase relative to the prior year. Adjusted EBITDA was $283.7 million, up 21%, and Adjusted EPS was $3.46, up 15% versus the prior year of $3.00. GAAP Operating Earnings were $169.4 million, compared to a GAAP Operating Loss of $174.4 million in the prior year period, reflecting the settlement of the long-term incentive arrangement (“LTIA”) with FirstService’s Founder and Chairman in the amount of $314.4 million during the second quarter of 2019. GAAP earnings per share was $2.02 versus a GAAP loss per share of $6.58 in the prior year.

“We capped off the year with a very strong fourth quarter, largely driven by organic growth,” said Scott Patterson, Chief Executive Officer of FirstService. “We are proud of our performance throughout 2020, demonstrating strength and stability in the face of the pandemic, and we look forward to capitalizing on our growth opportunities as the environment improves,” 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 approximately US$2.8 billion in annual revenues and has approximately 24,000 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. 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 Fourth Quarter Results
FirstService Residential revenues totalled $362.5 million for the fourth quarter, up 4% relative to $347.1 million in the prior year quarter. This organic top-line growth was bolstered by strong ancillary services, particularly from robust home resales across North America and increased maintenance and project management activity in certain markets. Adjusted EBITDA was $35.5 million, compared to $29.8 million reported in the prior year period. GAAP Operating Earnings were $28.0 million, versus $23.3 million for the fourth quarter of last year. Margin improvement was due to higher margin ancillary revenue, primarily tied to home resales.

FirstService Brands revenues totalled $412.5 million, up 26% versus $328.5 million in the prior year period. The increase included 18% organic growth, with the balance from recent tuck-under acquisitions. Organic growth for the quarter was principally driven by Global Restoration, which continued to capitalize on weather-related and large loss claims arising from increased storm activity during the preceding third quarter. Adjusted EBITDA for the quarter was $48.6 million, up 28% versus the prior year quarter. GAAP Operating Earnings were $28.1 million, versus $13.9 million in the prior year quarter. The division EBITDA margin was relatively in line with the prior year quarter, while the operating earnings margin improved year-over-year due to accelerated intangible asset amortization in 2019 arising from the large Global Restoration acquisition.

Corporate costs, as presented in Adjusted EBITDA were $4.2 million in the fourth quarter, relative to $3.9 million in the prior year period. On a GAAP basis, corporate costs for the quarter were $6.6, relative to $5.8 million in the prior year period.

Segmented Full Year Results
FirstService Residential revenues were $1.42 billion for the full year, slightly higher than in 2019. Our top-line was adversely impacted by COVID-related client facility closures, which affected our delivery of amenity management services for most of 2020. Adjusted EBITDA was $138.4 million, up 6% versus the prior year. GAAP Operating Earnings were $112.6 million, compared to $104.7 million in the prior year. Margin improvement was largely due to an increase in higher margin ancillary revenue, principally tied to strong home resale activity levels.

FirstService Brands revenues for the year totalled $1.36 billion, up 36% versus the prior year, comprised of 8% organic growth and the balance from recent acquisitions, including full-year contribution from the significant Global Restoration transaction, which closed in mid-2019. Organic revenue growth was strong at Global Restoration, which capitalized on increased storm-related activity relative to the prior year. Top-line growth within the division was tempered by a decline in our home improvement service lines, which were negatively impacted by COVID-related, government-mandated “stay at home” measures for a significant portion of the year. Adjusted EBITDA for the year was $155.1 million, up 31% relative to the prior year. GAAP Operating Earnings were $78.8 million, versus $60.6 million a year ago. The earnings margins in the division modestly declined due to the full-year contribution of lower margin Global Restoration operations in 2020.

Corporate costs, as presented in Adjusted EBITDA, were $9.8 million for the full year, relative to $13.7 million in the prior year, with the decrease primarily attributable to foreign exchange. On a GAAP basis, corporate costs were $21.9 million, relative to $339.7 million a year ago, with the decrease primarily attributable to the settlement of the LTIA in the second quarter of 2019.

Conference Call & Presentation
FirstService will be holding a conference call on Tuesday, February 9, 2021 at 11:00 a.m. Eastern Time to discuss the results for the fourth quarter and full year. 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 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. 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, 2019 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. 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
  2020 2019 2020  2019 
             
Net earnings (loss)$32,927 $13,568 $109,590  $(227,631)
Income tax 11,747  6,497  35,865   27,147 
Other expense (income) 284  338  (361)  (6,015)
Interest expense, net 4,437  11,020  24,318   32,080 
Operating earnings (loss) 49,395  31,423  169,412   (174,419)
Depreciation and amortization 25,203  28,524  98,382   79,557 
Settlement of long-term incentive arrangement -  -  -   314,379 
Acquisition-related items 2,548  2,166  4,300   7,539 
Stock-based compensation expense 2,748  1,744  11,628   8,126 
Adjusted EBITDA$79,894 $63,857 $283,722  $235,182 

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; (iv) stock-based compensation expense; (v) a stock-based compensation tax adjustment related to a US GAAP change; and (vi) settlement of the LTIA. 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
  2020  2019  2020  2019 
             
Net earnings (loss)$32,927  $13,568  $109,590  $(227,631)
Non-controlling interest share of earnings (513)  (1,612)  (6,354)  (7,874)
Settlement of long-term incentive arrangement -   -   -   314,379 
Acquisition-related items 2,548   2,166   4,300   7,539 
Amortization of intangible assets 11,048   16,463   46,464   38,698 
Stock-based compensation expense 2,748   1,744   11,628   8,126 
Stock-based compensation tax adjustment for US GAAP change -   -   -   (2,854)
Income tax on adjustments (3,587)  (5,321)  (15,104)  (13,470)
Non-controlling interest on adjustments (304)  (492)  (1,127)  (1,034)
Adjusted net earnings$44,867  $26,516  $149,397  $115,879 
             
  Three months ended Twelve months ended
(in US$)December 31 December 31
  2020  2019  2020  2019 
             
Diluted net earnings (loss) per share$0.50  $0.13  $2.02  $(6.51)
Non-controlling interest redemption increment 0.24   0.17   0.37   0.42 
Settlement of long-term incentive arrangement -   -   -   8.13 
Acquisition-related items 0.05   0.04   0.10   0.16 
Amortization of intangible assets, net of tax 0.18   0.29   0.77   0.72 
Stock-based compensation expense, net of tax 0.05   0.03   0.20   0.15 
Stock-based compensation tax adjustment for US GAAP change -   -   -   (0.07)
Adjusted earnings per share$1.02  $0.66  $3.46  $3.00 


FIRSTSERVICE CORPORATION
Operating Results
(in thousands of US$, except per share amounts)
     Three months  Twelve months
     ended December 31  ended December 31
   2020  2019  2020   2019 
               
Revenues $775,055 $675,594 $2,772,415  $2,407,410 
               
Cost of revenues  528,272  453,072  1,871,798   1,634,097 
Selling, general and administrative expenses  169,637  160,409  628,523   546,257 
Depreciation  14,155  12,061  51,918   40,859 
Amortization of intangible assets  11,048  16,463  46,464   38,698 
Settlement of long-term incentive arrangement  -  -  -   314,379 
Acquisition-related items (1)  2,548  2,166  4,300   7,539 
Operating earnings (loss)  49,395  31,423  169,412   (174,419)
Interest expense, net  4,437  11,020  24,318   32,080 
Other expense (income)  284  338  (361)  (6,015)
Earnings (loss) before income tax  44,674  20,065  145,455   (200,484)
Income tax  11,747  6,497  35,865   27,147 
Net earnings (loss)  32,927  13,568  109,590   (227,631)
Non-controlling interest share of earnings  513  1,612  6,354   7,874 
Non-controlling interest redemption increment  10,389  6,719  15,977   16,105 
Net earnings (loss) attributable to Company $22,025 $5,237 $87,259  $(251,610)
               
Net earnings (loss) per common share             
               
  Basic $0.51 $0.13 $2.04  $(6.58)
  Diluted  0.50  0.13  2.02   (6.58)
               
Adjusted earnings per share (2) $1.02 $0.66 $3.46  $3.00 
               
Weighted average common shares (thousands)            
  Basic  43,577  39,750  42,756   38,225 
  Diluted  44,091  40,141  43,184   38,662 

(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, 2020 December 31, 2019
       
Assets     
Cash and cash equivalents$184,295 $121,198
Restricted cash 24,643  13,093
Accounts receivable 418,890  393,730
Other current assets 191,488  140,115
 Current assets 819,316  668,136
Other non-current assets 14,970  11,824
Fixed assets 126,569  131,545
Operating lease right-of-use assets 153,185  132,893
Goodwill and intangible assets 1,082,500  1,011,071
 Total assets$2,196,540 $1,955,469
       
       
Liabilities and shareholders' equity     
Accounts payable and accrued liabilities$349,692 $241,670
Other current liabilities 102,266  80,369
Operating lease liabilities - current 35,315  30,622
Long-term debt - current 56,478  5,545
 Current liabilities 543,751  358,206
Long-term debt - non-current 533,126  761,078
Operating lease liabilities - non-current 128,793  111,247
Other liabilities 96,093  66,150
Deferred income tax 41,345  58,239
Redeemable non-controlling interests 193,034  174,662
Shareholders' equity 660,398  425,887
 Total liabilities and equity$2,196,540 $1,955,469
       
       
Supplemental balance sheet information     
Total debt$589,604 $766,623
Total debt, net of cash 405,309  645,425


Condensed Consolidated Statements of Cash Flows       
(in thousands of US$)
    Three months ended  Twelve months ended
    December 31  December 31
   2020   2019   2020   2019 
              
Cash provided by (used in)            
              
Operating activities            
Net earnings $32,927  $13,568  $109,590  $(227,631)
Items not affecting cash:            
 Depreciation and amortization  25,203   28,524   98,382   79,557 
 Settlement of long-term incentive arrangement  -   (38,218)  -   251,503 
 Deferred income tax  (11,715)  (10,431)  (18,054)  (8,988)
 Other  4,152   1,258   12,307   2,258 
    50,567   (5,299)  202,225   96,699 
              
Changes in operating assets and liabilities  46,238   48,486   89,540   11,109 
Net cash provided by operating activities  96,805   43,187   291,765   107,808 
              
Investing activities            
Acquisition of businesses, net of cash acquired  (34,052)  (24,747)  (98,559)  (579,863)
Disposal of business, net of cash disposed  -   -   -   13,030 
Purchases of fixed assets  (8,514)  (12,520)  (39,415)  (46,628)
Other investing activities  (2,958)  (1,639)  (4,288)  (1,504)
Net cash used in investing activities  (45,524)  (38,906)  (142,262)  (614,965)
              
Financing activities            
Increase (decrease) in long-term debt, net  (15,500)  (182,606)  (179,287)  429,859 
Proceeds received on common share issuance  -   191,737   150,008   191,737 
Sale (purchases) of non-controlling interests, net  (1,441)  2,761   (20,231)  (30,648)
Dividends paid to common shareholders  (7,189)  (5,886)  (27,448)  (22,044)
Distributions paid to non-controlling interests  -   -   (5,084)  (5,725)
Other financing activities  (1,303)  1,415   6,846   (2,037)
Net cash provided by (used in) financing activities  (25,433)  7,421   (75,196)  561,142 
              
Effect of exchange rate changes on cash  725   187   340   462 
              
Increase in cash, cash equivalents and restricted cash  26,573   11,889   74,647   54,447 
              
Cash, cash equivalents and restricted cash, start of period  182,365   122,402   134,291   79,844 
              
Cash, cash equivalents and restricted cash, end of period $208,938  $134,291  $208,938  $134,291 
              


Segmented Results
(in thousands of US$)
           
  FirstService FirstService    
 Residential Brands Corporate Consolidated
             
Three months ended December 31           
             
2020           
 Revenues$362,549 $412,506 $-  $775,055 
 Adjusted EBITDA 35,484  48,632  (4,222)  79,894 
 Operating earnings 27,951  28,064  (6,620)  49,395 
             
2019           
 Revenues$347,087 $328,507 $-  $675,594 
 Adjusted EBITDA 29,800  38,001  (3,944)  63,857 
 Operating earnings 23,309  13,927  (5,813)  31,423 
             
             
           
  FirstService FirstService    
  Residential Brands Corporate Consolidated
             
Year ended December 31           
             
2020           
 Revenues$1,415,121 $1,357,294 $-  $2,772,415 
 Adjusted EBITDA 138,424  155,100  (9,802)  283,722 
 Operating earnings 112,555  78,786  (21,929)  169,412 
             
2019           
 Revenues$1,411,998 $995,412 $-  $2,407,410 
 Adjusted EBITDA 130,583  118,298  (13,699)  235,182 
 Operating earnings (loss) 104,706  60,586  (339,711)  (174,419)

COMPANY CONTACTS:

D. Scott Patterson
President & CEO

Jeremy Rakusin
Chief Financial Officer

(416) 960-9566



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