FirstService Reports Strong Third Quarter Operating Results

Toronto, Ontario, CANADA

Revenue and Profitability Driven by 8% Organic Growth and Global Restoration Acquisition

Operating highlights:

 Three months ended Nine months ended
 September 30 September 30
 2019 2018 2019  2018
Revenues (millions)$672.3 $506.4 $1,731.8  $1,428.2
Adjusted EBITDA (millions) (note 1) 77.1  59.4  171.3   142.0
Adjusted EPS (note 2) 0.92  0.89  2.38   1.99
GAAP Operating Earnings 49.7  45.3  (205.8(1)  98.7
GAAP EPS 0.50  0.70  (6.93) (1)  1.49
(1) Includes $314.4 million settlement of long-term incentive arrangement with FirstService's Founder and Chairman.   

TORONTO, Oct. 23, 2019 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported strong results for its third quarter ended September 30, 2019. All amounts are in US dollars.

Revenues for the third quarter were $672.3 million, a 33% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) increased 30% to $77.1 million, and Adjusted EPS (note 2) was $0.92, versus $0.89 in the prior year quarter. During the third quarter, FirstService reported GAAP Operating Earnings of $49.7 million, versus $45.3 million in the prior year period. The GAAP earnings per share was $0.50 in the quarter, compared to $0.70 for the same quarter a year ago.

For the nine months ended September 30, 2019, revenues were $1.73 billion, a 21% increase relative to the comparable prior year period, Adjusted EBITDA was $171.3 million, up 21%, and Adjusted EPS was $2.38, a 20% increase versus the prior year period. FirstService’s GAAP Operating Loss was $205.8 million in the current year period, 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 $98.7 million in the prior year period. The GAAP loss per share for the nine months year-to-date was $6.93, compared to GAAP earnings per share of $1.49 in the prior year period.

“We are pleased to report another strong quarter, led by very robust organic growth in both of our divisions,” said Scott Patterson, Chief Executive Officer of FirstService. “The themes have remained consistent all year built upon broad top-line strength, notwithstanding softer weather-related activity levels in our restoration operations. We expect to close the year in similar fashion,” 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

Segmented Quarterly Results
FirstService Residential revenues were $375.2 million for the third quarter, up 13% versus the prior year quarter. The revenue increase included a very strong 8% organic growth, driven by broad-based new contract wins resulting from an active sales effort late last year and into this year. Adjusted EBITDA for the quarter was $39.8 million, versus $35.9 million in the prior year period. GAAP Operating Earnings were $33.0 million, versus $29.9 million for the third quarter of last year.

FirstService Brands revenues during the third quarter grew to $297.1 million, up 70% relative to the prior year period. Organic growth within the division was 8%, with the balance of the significant revenue increase driven by acquisition activity, including contribution from the large Global Restoration transaction which we closed in late June of this year. Organic growth was particularly strong within our home improvement-driven brands, including California Closets, CertaPro Painters, and Floor Coverings International, as well as our Century Fire Protection operations. Adjusted EBITDA for the third quarter was $40.8 million, up from $26.6 million in the prior year period. Margin decline was principally driven by the addition of Global Restoration, which has lower margins than the overall division, as well as the impact of lower weather-related activity levels within our overall restoration platform, which includes both Global Restoration and Paul Davis Restoration. GAAP Operating Earnings were $22.1 million, versus $19.7 million in the prior year quarter.

Corporate costs, as presented in Adjusted EBITDA, were $3.5 million in the third quarter, relative to $3.2 million in the prior year period. On a GAAP basis, corporate costs for the quarter were $5.4 million, relative to $4.4 million in the prior year period, with the increase primarily attributable to stock-based compensation.

Conference Call
FirstService will be holding a conference call on Wednesday, October 23, 2019 at 11:00 a.m. Eastern Time to discuss the quarter’s results. The numbers to use for this call are 1) toll-free 1-888-241-0551; or 2) for international callers, 647-427-3415. The call will be simultaneously webcast and can be accessed live or after the call at 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 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

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 Nine months ended
(in thousands of US$)September 30 September 30
 2019  2018 2019  2018 
Net earnings (loss)$26,336  $31,664 $(241,199) $70,493 
Income tax 10,872   10,508  20,650   19,121 
Other income, net (229)  25  (6,353)  (78)
Interest expense, net 12,719   3,101  21,060   9,185 
Operating earnings (loss) 49,698   45,298  (205,842)  98,721 
Depreciation and amortization 24,181   12,277  51,033   36,963 
Settlement of long-term incentive arrangement -   -  314,379   - 
Acquisition-related items 1,493   618  5,373   1,727 
Stock-based compensation expense 1,772   1,233  6,382   4,547 
Adjusted EBITDA$77,144  $59,426 $171,325  $141,958 

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 Nine months ended
(in thousands of US$)September 30 September 30
 2019  2018  2019  2018 
Net earnings (loss)$26,336  $31,664  $(241,199) $70,493 
Non-controlling interest share of earnings (2,057)  (3,653)  (6,262)  (8,888)
Settlement of long-term incentive arrangement -   -   314,379   - 
Acquisition-related items 1,493   618   5,373   1,727 
Amortization of intangible assets 13,029   4,343   22,235   12,993 
Stock-based compensation expense 1,772   1,233   6,382   4,547 
Stock-based compensation tax adjustment for US GAAP change -   (87)  (2,854)  (3,124)
Income tax on adjustments (3,848)  (1,450)  (8,149)  (4,560)
Non-controlling interest on adjustments (374)  (132)  (542)  (388)
Adjusted net earnings$36,351  $32,536  $89,363  $72,800 
 Three months ended Nine months ended
(in US$)September 30 September 30
 2019  2018  2019  2018 
Diluted net earnings (loss) per share$0.50  $0.70  $(6.84) $1.49 
Non-controlling interest redemption increment 0.11   0.06   0.25   0.19 
Settlement of long-term incentive arrangement -   -   8.37   - 
Acquisition-related items 0.04   0.02   0.12   0.05 
Amortization of intangible assets, net of tax 0.24   0.08   0.43   0.26 
Stock-based compensation expense, net of tax 0.03   0.03   0.13   0.09 
Stock-based compensation tax adjustment for US GAAP change -   -   (0.08)  (0.09)
Adjusted earnings per share$0.92  $0.89  $2.38  $1.99 

Condensed Consolidated Statements of Earnings
(in thousands of US dollars, except per share amounts)
  Three months   Nine months
  ended September 30   ended September 30
(unaudited) 2019   2018   2019   2018 
Revenues$672,253  $506,356  $1,731,816  $1,428,160 
Cost of revenues 451,671   343,026   1,181,025   972,995 
Selling, general and administrative expenses 145,210   105,137   385,848   317,754 
Depreciation 11,152   7,934   28,798   23,970 
Amortization of intangible assets 13,029   4,343   22,235   12,993 
Settlement of long-term incentive arrangement -   -   314,379   - 
Acquisition-related items (1) 1,493   618   5,373   1,727 
Operating earnings (loss) 49,698   45,298   (205,842)  98,721 
Interest expense, net 12,719   3,101   21,060   9,185 
Other expense (income) (229)  25   (6,353)  (78)
Earnings (loss) before income tax 37,208   42,172   (220,549)  89,614 
Income tax 10,872   10,508   20,650   19,121 
Net earnings (loss) 26,336   31,664   (241,199)  70,493 
Non-controlling interest share of earnings 2,057   3,653   6,262   8,888 
Non-controlling interest redemption increment 4,419   2,172   9,386   7,077 
Net earnings (loss) attributable to Company $19,860  $25,839  $(256,847) $54,528 
Net earnings (loss) per common share             
Basic$0.51  $0.72  $(6.93) $1.52 
Diluted 0.50   0.70   (6.93)  1.49 
Adjusted earnings per share (2)$0.92  $0.89  $2.38  $1.99 
Weighted average common shares (thousands)            
Basic 39,224   35,961   37,087   35,940 
Diluted 39,691   36,661   37,542   36,566 

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)September 30, 2019 December 31, 2018
Cash and cash equivalents$106,276 $66,340
Restricted cash 16,126  13,504
Accounts receivable 384,465  239,925
Prepaid and other current assets 136,640  95,303
Current assets 643,507  415,072
Other non-current assets 9,099  10,347
Fixed assets 127,742  98,102
Operating lease right-of-use assets 113,437  -
Goodwill and intangible assets 998,079  483,953
Total assets$1,891,864 $1,007,474
Liabilities and shareholders' equity     
Accounts payable and accrued liabilities$246,101 $174,281
Other current liabilities 55,655  48,751
Operating lease liabilities - current 29,114  -
Long-term debt - current 6,130  3,915
Current liabilities 337,000  226,947
Long-term debt - non-current 943,610  330,608
Operating lease liabilities - non-current 93,334  -
Other liabilities 61,575  55,531
Deferred income tax 69,236  6,577
Redeemable non-controlling interests 157,321  151,585
Shareholders' equity 229,788  236,226
Total liabilities and equity$1,891,864 $1,007,474
Supplemental balance sheet information     
Total debt$949,740 $334,523
Total debt, net of cash 843,464  268,183

Consolidated Statements of Cash Flows       
(in thousands of US dollars)
  Three months ended  Nine months ended
  September 30  September 30
(unaudited) 2019   2018   2019   2018 
Cash provided by (used in)           
Operating activities           
Net earnings (loss)$26,336  $31,664  $(241,199) $70,493 
Items not affecting cash:           
Depreciation and amortization 24,182   12,277   51,033   36,963 
Non-cash settlement of long-term incentive arrangement -   -   289,721   - 
Deferred income tax (22)  40   1,443   386 
Other 2,058   1,509   1,000   5,540 
  52,554   45,490   101,998   113,382 
Changes in non-cash working capital           
Accounts receivable 3,010   (10,932)  (16,218)  (23,113)
Payables and accruals (36,540)  4,417   (41,462)  (8,087)
Other 1,211   (5,160)  20,303   (793)
Net cash provided by operating activities 20,235   33,815   64,621   81,389 
Investing activities           
Acquisition of businesses, net of cash acquired (9,585)  (9,349)  (555,116)  (52,528)
Disposition of business, net of cash disposed -   -   13,030   - 
Purchases of fixed assets (11,821)  (10,113)  (34,108)  (29,733)
Other investing activities (724)  (2,996)  135   (4,980)
Net cash used in investing activities (22,130)  (22,458)  (576,059)  (87,241)
Financing activities           
Increase in long-term debt, net 23,586   15,995   612,465   58,081 
Sale (purchases) of non-controlling interests, net (199)  200   (33,409)  (1,932)
Financing fees paid (167)  -   (3,863)  (575)
Dividends paid to common shareholders (5,883)  (4,675)  (16,158)  (13,924)
Distributions paid to non-controlling interests (1,995)  (1,466)  (6,264)  (5,808)
Repurchases of common shares -   -   -   (5,941)
Other financing activities 539   (2,128)  950   (2,324)
Net cash provided by financing activities 15,881   7,926   553,721   27,577 
Effect of exchange rate changes on cash 586   89   275   (254)
Increase in cash, cash equivalents and restricted cash 14,572   19,372   42,558   21,471 
Cash, cash equivalents and restricted cash, beginning of period 107,830   68,993   79,844   66,894 
Cash, cash equivalents and restricted cash, end of period$122,402  $88,365  $122,402  $88,365 

Segmented Results
(in thousands of US dollars)
 FirstService FirstService    
(unaudited)Residential Brands  Corporate   Consolidated 
Three months ended September 30           
Revenues$375,196 $297,057 $-  $672,253 
Adjusted EBITDA 39,787  40,838  (3,481)  77,144 
Operating earnings 33,036  22,062  (5,400)  49,698 
Revenues$331,712 $174,644 $-  $506,356 
Adjusted EBITDA 35,944  26,633  (3,151)  59,426 
Operating earnings 29,945  19,749  (4,396)  45,298 
 FirstService FirstService    
 Residential Brands  Corporate   Consolidated 
Nine months ended September 30           
Revenues$1,064,911 $666,905 $-  $1,731,816 
Adjusted EBITDA 100,783  80,297  (9,755)  171,325 
Operating earnings 81,397  46,659  (333,898)  (205,842)
Revenues$942,839 $485,321 $-  $1,428,160 
Adjusted EBITDA 86,822  64,471  (9,335)  141,958 
Operating earnings 68,809  43,969  (14,057)  98,721 


D. Scott Patterson
President & CEO

Jeremy Rakusin
Chief Financial Officer

(416) 960-9500