FirstService Reports Strong First Quarter Results
Revenues Up 13% and Adjusted EBITDA Up 36%
Double-Digit Revenue Growth and Margin Expansion at both FirstService Residential and FirstService Brands
Operating highlights:
| Three months | |||||||||
| ended March 31 | |||||||||
| 2016 | 2015 | ||||||||
| Revenues (millions) | $ | 307.6 | $ | 272.2 | |||||
| Adjusted EBITDA (millions) (note 1) | 12.7 | 9.3 | |||||||
| Adjusted EPS (note 2) | 0.08 | 0.02 | |||||||
TORONTO, April 27, 2016 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV) (NASDAQ: FSV) today reported very strong results for its first quarter ended March 31, 2016. All amounts are in US dollars.
Revenues for the first quarter were $307.6 million, up 13% relative to the same quarter in the prior year, Adjusted EBITDA (note 1) increased 36% to $12.7 million, and Adjusted EPS (note 2) was $0.08, compared to $0.02 in the prior year quarter. GAAP EPS was a loss of $0.05 per share in the quarter, versus a loss of $0.09 in the same quarter a year ago.
“FirstService reported strong results for the seasonally slow first quarter, building upon the progress and momentum achieved in 2015 across our businesses,” said Scott Patterson, Chief Executive Officer of FirstService. “FirstService Residential saw continued revenue growth primarily from contract wins, while FirstService Brands recorded double-digit organic growth as it continues to benefit from a strong U.S. home improvement market. Both of our divisions also demonstrated excellent operating performance with significantly improved margins and profitability. Our results in the first quarter position us well to achieve the annual targets we have established for the current year.”
About FirstService CorporationFirstService 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$1.3 billion in annual revenues and has approximately 16,000 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 Subordinate Voting Shares of FirstService trade on the NASDAQ and the Toronto Stock Exchange under the symbol “FSV.” More information is available at www.firstservice.com.
Segmented Quarterly ResultsFirstService Residential revenues were $249.8 million for the first quarter, up 11% versus the prior year quarter. Revenue growth was comprised of 7% organic growth and 4% from recent acquisitions. Adjusted EBITDA for the quarter was $11.7 million, up from $9.3 million in the prior year period. Contract wins and continued margin expansion from operating efficiencies were the primary drivers of first quarter performance.
FirstService Brands revenues for the first quarter totalled $57.8 million, up 25% relative to the prior year period. Organic growth for the quarter was 12% (13% in local currency terms), with the balance coming from recent acquisitions, including two California Closets franchises and the Paul Davis operation in Central Pennsylvania. Adjusted EBITDA was $3.2 million, a significant increase over the $1.3 million in the prior year quarter. The strong year-over-year performance for the quarter was driven by robust growth and operating leverage across our service lines, particularly California Closets, Certa Pro Painters, Pillar To Post Home Inspection and Floor Coverings International, which continue to benefit from a buoyant U.S. home improvement market.
Corporate costs were $2.2 million in the first quarter, relative to $1.3 million in the prior year period. The current quarter reflects incremental public company and compensation costs.
Conference CallFirstService will be holding a conference call on Wednesday, April 27, 2016 at 11:00 a.m. Eastern Time to discuss results for the first quarter of 2016. 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 StatementsThis 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.
Notes1. Reconciliation of net earnings (loss) to Adjusted EBITDA:
Adjusted EBITDA is defined as net earnings, adjusted to exclude: (i) income tax; (ii) other (income) expense; (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, its ability to service debt, and 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 a measure is useful to investors as a reasonable indicator of operating performance, due to the low capital intensity of the Company’s 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 (loss) to adjusted EBITDA appears below.
| Three months ended | ||||||||||||||||
| (in thousands of US dollars) | March 31 | |||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Net earnings (loss) | $ | 1,517 | $ | (434 | ) | |||||||||||
| Income tax | 850 | (229 | ) | |||||||||||||
| Other (income) expense | (75 | ) | 202 | |||||||||||||
| Interest expense, net | 1,969 | 1,868 | ||||||||||||||
| Operating earnings | 4,261 | 1,407 | ||||||||||||||
| Depreciation and amortization | 7,414 | 6,998 | ||||||||||||||
| Acquisition-related items | 71 | 247 | ||||||||||||||
| Stock-based compensation expense | 970 | 669 | ||||||||||||||
| Adjusted EBITDA | $ | 12,716 | $ | 9,321 | ||||||||||||
2. Reconciliation of net earnings and net earnings per share to adjusted net earnings and adjusted EPS:
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 expense related to 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 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 net earnings to adjusted net earnings and of diluted net earnings per share to adjusted EPS appears below.
| Three months ended | ||||||||||||||||
| (in thousands of US dollars) | March 31 | |||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Net earnings (loss) | $ | 1,517 | $ | (434 | ) | |||||||||||
| Non-controlling interest share of earnings | (808 | ) | (1,119 | ) | ||||||||||||
| Acquisition-related items | 71 | 247 | ||||||||||||||
| Amortization of intangible assets | 2,392 | 2,550 | ||||||||||||||
| Stock-based compensation expense | 970 | 669 | ||||||||||||||
| Income tax on adjustments | (1,296 | ) | (1,255 | ) | ||||||||||||
| Non-controlling interest on adjustments | (33 | ) | (44 | ) | ||||||||||||
| Adjusted net earnings | $ | 2,813 | $ | 614 | ||||||||||||
| Three months ended | ||||||||||||||||
| (in US dollars) | March 31 | |||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Diluted net earnings (loss) per share | $ | (0.05 | ) | $ | (0.09 | ) | ||||||||||
| Non-controlling interest redemption increment | 0.07 | 0.05 | ||||||||||||||
| Acquisition-related items | - | 0.01 | ||||||||||||||
| Amortization of intangible assets, net of tax | 0.04 | 0.04 | ||||||||||||||
| Stock-based compensation expense, net of tax | 0.02 | 0.01 | ||||||||||||||
| Adjusted EPS | $ | 0.08 | $ | 0.02 | ||||||||||||
| FIRSTSERVICE CORPORATION | |||||||||||||||||
| Operating Results | |||||||||||||||||
| (in thousands of US dollars, except per share amounts) | |||||||||||||||||
| Three months | |||||||||||||||||
| ended March 31 | |||||||||||||||||
| (unaudited) | 2016 | 2015 | |||||||||||||||
| Revenues | $ | 307,586 | $ | 272,189 | |||||||||||||
| Cost of revenues | 222,506 | 197,307 | |||||||||||||||
| Selling, general and administrative expenses | 73,334 | 66,230 | |||||||||||||||
| Depreciation | 5,022 | 4,448 | |||||||||||||||
| Amortization of intangible assets | 2,392 | 2,550 | |||||||||||||||
| Acquisition-related items (1) | 71 | 247 | |||||||||||||||
| Operating earnings | 4,261 | 1,407 | |||||||||||||||
| Interest expense, net | 1,969 | 1,868 | |||||||||||||||
| Other (income) expense | (75 | ) | 202 | ||||||||||||||
| Earnings before income tax | 2,367 | (663 | ) | ||||||||||||||
| Income tax | 850 | (229 | ) | ||||||||||||||
| Net earnings (loss) | 1,517 | (434 | ) | ||||||||||||||
| Non-controlling interest share of earnings | 808 | 1,119 | |||||||||||||||
| Non-controlling interest redemption increment | 2,366 | 1,758 | |||||||||||||||
| Net earnings (loss) attributable to Company | (1,657 | ) | (3,311 | ) | |||||||||||||
| Net earnings (loss) per share | |||||||||||||||||
| Basic | $ | (0.05 | ) | $ | (0.09 | ) | |||||||||||
| Diluted | (0.05 | ) | (0.09 | ) | |||||||||||||
| Adjusted EPS (2) | $ | 0.08 | $ | 0.02 | |||||||||||||
| Weighted average common shares (thousands) | |||||||||||||||||
| Basic | 35,991 | 35,971 | |||||||||||||||
| Diluted | 36,368 | 36,363 | |||||||||||||||
(1) Acquisition-related items include contingent acquisition consideration fair value adjustments, and transaction costs. (2) See definition and reconciliation above.
| Condensed Consolidated Balance Sheets | ||||||
| (in thousands of US dollars) | ||||||
| (unaudited) | March 31, 2016 | December 31, 2015 | ||||
| Assets | ||||||
| Cash and cash equivalents | $ | 37,075 | $ | 45,560 | ||
| Restricted cash | 8,140 | 3,769 | ||||
| Accounts receivable | 118,222 | 114,521 | ||||
| Prepaid and other current assets | 49,682 | 47,532 | ||||
| Deferred income tax | 18,662 | 18,840 | ||||
| Current assets | 231,781 | 230,222 | ||||
| Other non-current assets | 5,210 | 6,009 | ||||
| Fixed assets | 60,848 | 57,575 | ||||
| Deferred income tax | 6,963 | 6,553 | ||||
| Goodwill and intangible assets | 308,058 | 300,124 | ||||
| Total assets | $ | 612,860 | $ | 600,483 | ||
| Liabilities and shareholders' equity | ||||||
| Accounts payable and accrued liabilities | $ | 102,290 | $ | 102,043 | ||
| Other current liabilities | 25,627 | 24,015 | ||||
| Long-term debt - current | 1,769 | 4,041 | ||||
| Current liabilities | 129,686 | 130,099 | ||||
| Long-term debt - non-current | 209,505 | 197,158 | ||||
| Other liabilities | 15,079 | 14,670 | ||||
| Deferred income tax | 13,936 | 13,971 | ||||
| Non-controlling interests | 80,216 | 77,559 | ||||
| Shareholders' equity | 164,438 | 167,026 | ||||
| Total liabilities and equity | $ | 612,860 | $ | 600,483 | ||
| Supplemental balance sheet information | ||||||
| Total debt | $ | 211,274 | $ | 201,199 | ||
| Total debt, net of cash | 174,199 | 155,639 | ||||
| Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
| (in thousands of US dollars) | ||||||||||||||||
| Three months ended | ||||||||||||||||
| March 31 | ||||||||||||||||
| (unaudited) | 2016 | 2015 | ||||||||||||||
| Cash provided by (used in) | ||||||||||||||||
| Operating activities | ||||||||||||||||
| Net earnings | $ | 1,517 | $ | (434 | ) | |||||||||||
| Items not affecting cash: | ||||||||||||||||
| Depreciation and amortization | 7,414 | 6,998 | ||||||||||||||
| Deferred income tax | (536 | ) | 880 | |||||||||||||
| Other | (94 | ) | 666 | |||||||||||||
| 8,301 | 8,110 | |||||||||||||||
| Changes in non cash working capital | ||||||||||||||||
| Accounts receivable | (3,389 | ) | 9,695 | |||||||||||||
| Payables and accruals | (3,427 | ) | (3,162 | ) | ||||||||||||
| Other | 353 | 4,027 | ||||||||||||||
| Net cash provided by operating activities | 1,838 | 18,670 | ||||||||||||||
| Investing activities | ||||||||||||||||
| Acquisition of businesses, net of cash acquired | (5,038 | ) | (4,202 | ) | ||||||||||||
| Purchases of fixed assets | (6,900 | ) | (3,586 | ) | ||||||||||||
| Other investing activities | (4,581 | ) | 941 | |||||||||||||
| Net cash used in investing activities | (16,519 | ) | (6,847 | ) | ||||||||||||
| Financing activities | ||||||||||||||||
| Increase in long-term debt, net | 10,076 | 7,617 | ||||||||||||||
| Net distributions to Old FSV | - | (29,911 | ) | |||||||||||||
| Sale (purchases) of non-controlling interests, net | 246 | (7,636 | ) | |||||||||||||
| Dividends paid to common shareholders | (3,461 | ) | - | |||||||||||||
| Other financing activities | (789 | ) | (3,168 | ) | ||||||||||||
| Net cash provided by (used in) financing activities | 6,072 | (33,098 | ) | |||||||||||||
| Effect of exchange rate changes on cash | 124 | (373 | ) | |||||||||||||
| Decrease in cash and cash equivalents | (8,485 | ) | (21,648 | ) | ||||||||||||
| Cash and cash equivalents, beginning of period | 45,560 | 66,790 | ||||||||||||||
| Cash and cash equivalents, end of period | $ | 37,075 | $ | 45,142 | ||||||||||||
| Segmented Results | ||||||||||||||||
| (in thousands of US dollars) | ||||||||||||||||
| FirstService | FirstService | |||||||||||||||
| (unaudited) | Residential | Brands | Corporate | Consolidated | ||||||||||||
| Three months ended March 31 | ||||||||||||||||
| 2016 | ||||||||||||||||
| Revenues | $ | 249,806 | $ | 57,780 | $ | - | $ | 307,586 | ||||||||
| Adjusted EBITDA | 11,738 | 3,195 | (2,217 | ) | 12,716 | |||||||||||
| Operating earnings | 6,357 | 1,391 | (3,487 | ) | 4,261 | |||||||||||
| 2015 | ||||||||||||||||
| Revenues | $ | 225,802 | $ | 46,387 | $ | - | $ | 272,189 | ||||||||
| Adjusted EBITDA | 9,329 | 1,275 | (1,283 | ) | 9,321 | |||||||||||
| Operating earnings | 3,977 | (471 | ) | (2,099 | ) | 1,407 | ||||||||||
COMPANY CONTACTS: D. Scott Patterson Chief Executive Officer Jeremy Rakusin Chief Financial Officer (416) 960-9500Source: FirstService Corporation