Operating highlights:

		Three months ended						Nine months ended
		September 30						September 30
		2017			2016			2017			2016
Revenues (millions)		$	456.5		$	409.1		$	1,267.3		$	1,101.8
Adjusted EBITDA (millions) (note 1)			53.1			46.7			121.5			99.7
Adjusted EPS (note 2)			0.74			0.62			1.52			1.22
GAAP Operating Earnings			34.5			36.6			79.9			71.6
GAAP EPS			0.42			0.43			1.05			0.74

TORONTO, Oct. 25, 2017 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV) (NASDAQ: FSV) today reported results for its third quarter ended September 30, 2017. All amounts are in US dollars.

Revenues for the third quarter were $456.5 million, a 12% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) increased 14% to $53.1 million, and Adjusted EPS (note 2) was $0.74, a 19% increase versus the prior year quarter. GAAP Operating Earnings were $34.5 million, relative to $36.6 million in the prior year period. GAAP diluted earnings per share was $0.42 in the quarter, versus $0.43 for the same quarter a year ago.

For the nine months ended September 30, 2017, revenues were $1.27 billion, a 15% increase relative to the comparable prior year period, Adjusted EBITDA was $121.5 million, up 22%, and Adjusted EPS was $1.52, a 25% increase versus the prior year period. GAAP Operating Earnings were $79.9 million, relative to $71.6 million in the prior year period. GAAP diluted EPS for the nine months year-to-date was $1.05, compared to $0.74 in the prior year period.

“We are pleased to report another solid quarter, reflecting a continuation of our strong financial performance during the first half of the year,” said Scott Patterson, Chief Executive Officer of FirstService. “The positive themes driving our businesses remain intact and we expect a strong finish to the year,” he concluded.

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$1.5 billion in annual revenues and has more than 17,000 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 www.firstservice.com.

Segmented Quarterly ResultsFirstService Residential revenues were $314.6 million for the third quarter, up 5% versus the prior year quarter, including 3% organic growth. Adjusted EBITDA for the quarter was $33.3 million, versus $28.9 million in the prior year period. Growth was relatively balanced geographically, reflecting contract wins across our business and new development in certain markets. Margin expansion resulted from continued broad-based initiatives driving operational efficiencies. GAAP Operating Earnings were $27.8 million, versus $23.5 million for the third quarter of last year.

FirstService Brands revenues during the third quarter grew to $141.9 million, up 30% relative to the prior year period and including 10% organic growth. Adjusted EBITDA for the third quarter was $23.2 million, up from $20.3 million in the prior year period. The third quarter was driven by strong double-digit organic growth across our company-owned operations at Paul Davis Restoration, California Closets and Century Fire Protection. Tuck-under acquisitions within each of these businesses further augmented top-line growth. The lower margin during the third quarter compared to the prior year period was due to increased mix from our faster growing, lower margin company-owned operations, as well as weak performance at Service America. GAAP Operating Earnings were $11.2 million, versus $16.2 million in the prior year quarter, with the decrease being attributable to a goodwill impairment charge at Service America, as described below.

Corporate costs, as presented in Adjusted EBITDA, were $3.4 million in the third quarter, relative to $2.4 million in the prior year period. On a GAAP basis, corporate costs for the quarter were $4.4 million, relative to $3.1 million in the prior year period. Foreign exchange accounted for a majority of the increase versus the prior year quarter.

Goodwill Impairment ChargeDuring the quarter, the Company concluded that it was necessary to take a non-cash goodwill impairment charge in its FirstService Brands segment as a result of weak operating performance within its Service America business. The amount of the charge is $6.2 million, and represents 5.5% of goodwill related to the FirstService Brands segment prior to the charge and 2% of the Company’s consolidated goodwill prior to the charge. This non-cash impairment does not affect the Company’s liquidity, cash flow or compliance with debt covenants.

Conference CallFirstService will be holding a conference call on Wednesday, October 25, 2017 at 11:00 a.m. Eastern Time to discuss the quarter’s results. The number to use for this call is 416-623-0333 for Toronto area callers or 1-855-353-9183 for all other callers, passcode 30080# for both. The call will be simultaneously webcast 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.

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) goodwill impairment charges; (vi) acquisition-related items; and (vii) 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
		2017				2016				2017				2016
Net earnings		$	21,141			$	22,938			$	52,026			$	42,527
Income tax			12,221				11,427				22,018				22,539
Other income, net			(1,317	)			(71	)			(1,522	)			(172	)
Interest expense, net			2,499				2,284				7,378				6,739
Operating earnings			34,544				36,578				79,900				71,633
Depreciation and amortization			10,382				10,048				30,233				25,956
Goodwill impairment charge			6,150				-				6,150				-
Acquisition-related items			1,180				(541	)			1,951				(148	)
Stock-based compensation expense			893				618				3,237				2,223
Adjusted EBITDA		$	53,149			$	46,703			$	121,471			$	99,664

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) goodwill impairment charges; (v) stock-based compensation expense; and (vi) a stock-based compensation tax adjustment related to a US GAAP change. 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
		2017				2016				2017				2016
Net earnings		$	21,141			$	22,938			$	52,026			$	42,527
Non-controlling interest share of earnings			(2,582	)			(2,863	)			(6,741	)			(5,179	)
Acquisition-related items			1,180				(541	)			1,951				(148	)
Amortization of intangible assets			3,589				4,475				10,340				9,700
Goodwill impairment charge			6,150				-				6,150				-
Stock-based compensation expense			893				618				3,237				2,223
Stock-based compensation tax adjustment for US GAAP change			(1,307	)			-				(5,930	)			-
Income tax on adjustments			(1,748	)			(2,006	)			(5,269	)			(4,658	)
Non-controlling interest on adjustments			(112	)			(78	)			(274	)			(173	)
Adjusted net earnings		$	27,204			$	22,543			$	55,490			$	44,292
		Three months ended								Nine months ended
(in US$)		September 30								September 30
		2017				2016				2017				2016
Diluted net earnings per share		$	0.42			$	0.43			$	1.05			$	0.74
Non-controlling interest redemption increment			0.08				0.12				0.19				0.29
Acquisition-related items			0.03				(0.01	)			0.05				-
Amortization of intangible assets, net of tax			0.06				0.07				0.16				0.15
Goodwill impairment charge			0.17				-				0.17				-
Stock-based compensation expense, net of tax			0.02				0.01				0.06				0.04
Stock-based compensation tax adjustment for US GAAP change			(0.04	)			-				(0.16	)			-
Adjusted earnings per share		$	0.74			$	0.62			$	1.52			$	1.22

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
(unaudited)					2017				2016				2017				2016
Revenues				$	456,520			$	409,083			$	1,267,347			$	1,101,773
Cost of revenues					317,100				292,389				891,450				781,329
Selling, general and administrative expenses					87,164				70,609				257,663				223,003
Depreciation					6,793				5,573				19,893				16,256
Amortization of intangible assets					3,589				4,475				10,340				9,700
Goodwill impairment charge					6,150				-				6,150				-
Acquisition-related items (1)					1,180				(541	)			1,951				(148	)
Operating earnings					34,544				36,578				79,900				71,633
Interest expense, net					2,499				2,284				7,378				6,739
Other income					(1,317	)			(71	)			(1,522	)			(172	)
Earnings before income tax					33,362				34,365				74,044				65,066
Income tax					12,221				11,427				22,018				22,539
Net earnings					21,141				22,938				52,026				42,527
Non-controlling interest share of earnings					2,582				2,863				6,741				5,179
Non-controlling interest redemption increment					3,096				4,311				6,829				10,534
Net earnings attributable to Company				$	15,463			$	15,764			$	38,456			$	26,814
Net earnings per common share
	Basic			$	0.43			$	0.44			$	1.07			$	0.75
	Diluted				0.42				0.43				1.05				0.74
Adjusted earnings per share (2)				$	0.74			$	0.62			$	1.52			$	1.22
Weighted average common shares (thousands)
		Basic			35,926				35,989				35,909				35,986
		Diluted			36,587				36,449				36,566				36,393

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, 2017			December 31, 2016
Assets
Cash and cash equivalents		$	62,212		$	43,384
Restricted cash			16,577			13,450
Accounts receivable			184,451			164,074
Prepaid and other current assets			72,935			58,146
Deferred income tax			-			24,738
	Current assets		336,175			303,792
Other non-current assets			4,493			5,115
Fixed assets			80,985			73,083
Deferred income tax			569			1,693
Goodwill and intangible assets			421,296			387,281
	Total assets	$	843,518		$	770,964
Liabilities and shareholders' equity
Accounts payable and accrued liabilities		$	153,751		$	142,966
Other current liabilities			43,085			38,813
Long-term debt - current			2,575			1,043
	Current liabilities		199,411			182,822
Long-term debt - non-current			292,180			249,866
Other liabilities			40,119			23,729
Deferred income tax			8,370			31,167
Redeemable non-controlling interests			108,319			102,352
Shareholders' equity			195,119			181,028
	Total liabilities and equity	$	843,518		$	770,964
Supplemental balance sheet information
Total debt		$	294,755		$	250,909
Total debt, net of cash			232,543			207,525

Consolidated Statements of Cash Flows
(in thousands of US dollars)
				Three months ended								Nine months ended
				September 30								September 30
(unaudited)				2017				2016				2017				2016
Cash provided by (used in)
Operating activities
Net earnings			$	21,141			$	22,938			$	52,026			$	42,527
Items not affecting cash:
	Depreciation and amortization			10,383				10,048				30,234				25,955
	Goodwill impairment charge			6,150				-				6,150				-
	Deferred income tax			(103	)			4,473				260				3,379
	Other			434				49				(1,668	)			585
				38,005				37,508				87,002				72,446
Changes in non-cash working capital
	Accounts receivable			(13,905	)			7,768				(19,491	)			(13,083	)
	Payables and accruals			(2,284	)			12,845				(7,559	)			32,411
	Other			5,249				(9,415	)			16,314				(2,774	)
Net cash provided by operating activities				27,065				48,706				76,266				89,000
Investing activities
Acquisition of businesses, net of cash acquired				(22,504	)			(3,353	)			(35,049	)			(80,434	)
Purchases of fixed assets				(7,185	)			(6,101	)			(26,075	)			(20,079	)
Other investing activities				(143	)			(2,656	)			(5,831	)			(10,104	)
Net cash used in investing activities				(29,832	)			(12,110	)			(66,955	)			(110,617	)
Financing activities
Increase in long-term debt, net				12,082				(17,156	)			42,552				42,218
Sale (purchases) of non-controlling interests, net				-				(218	)			(5,468	)			41
Dividends paid to common shareholders				(4,403	)			(4,092	)			(12,743	)			(11,513	)
Distributions paid to non-controlling interests				(700	)			(1,180	)			(3,049	)			(4,244	)
Repurchases of Subordinate Voting Shares				(6,114	)			-				(13,530	)			(1,349	)
Other financing activities				665				(933	)			1,274				(91	)
Net cash (used in) provided by financing activities				1,530				(23,579	)			9,036				25,062
Effect of exchange rate changes on cash				355				(122	)			481				175
Increase (decrease) in cash and cash equivalents				(882	)			12,895				18,828				3,620
Cash and cash equivalents, beginning of period				63,094				36,285				43,384				45,560
Cash and cash equivalents, end of period			$	62,212			$	49,180			$	62,212			$	49,180

Segmented Results
(in thousands of US dollars)
		FirstService			FirstService
(unaudited)		Residential			Brands			Corporate				Consolidated
Three months ended September 30
2017
	Revenues	$	314,631		$	141,889		$	-			$	456,520
	Adjusted EBITDA		33,320			23,188			(3,359	)			53,149
	Operating earnings		27,786			11,201			(4,443	)			34,544
2016
	Revenues	$	299,920		$	109,163		$	-			$	409,083
	Adjusted EBITDA		28,873			20,272			(2,442	)			46,703
	Operating earnings		23,484			16,219			(3,125	)			36,578
		FirstService			FirstService
		Residential			Brands			Corporate				Consolidated
Nine months ended September 30
2017
	Revenues	$	883,384		$	383,963		$	-			$	1,267,347
	Adjusted EBITDA		76,449			54,186			(9,164	)			121,471
	Operating earnings		60,104			32,487			(12,691	)			79,900
2016
	Revenues	$	838,384		$	263,389		$	-			$	1,101,773
	Adjusted EBITDA		66,986			40,197			(7,519	)			99,664
	Operating earnings		50,973			30,666			(10,006	)			71,633

COMPANY CONTACTS:

D. Scott PattersonPresident & CEO Jeremy RakusinChief Financial Officer (416) 960-9500

Source: FirstService Corporation

Press Releases

FirstService (FSV) Tops Q3 EPS by 2cOctober 25, 2017 7:35 AM