FSV
$124.59
Firstsrvce Sub VT Sh
$1.26
1.02%
Earnings Details
2nd Quarter June 2020
Thursday, July 23, 2020 7:30:00 AM
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Summary

Firstsrvce Sub VT Sh (FSV) Recent Earnings

Firstsrvce Sub VT Sh (FSV) reported 2nd Quarter June 2020 earnings of $0.64 per share on revenue of $621.6 million. The consensus estimate was a loss of $0.06 per share on revenue of $543.9 million. Revenue grew 8.3% on a year-over-year basis.

Results
Reported Earnings
$0.64
Earnings Whisper
-
Consensus Estimate
($0.06)
Reported Revenue
$621.6 Mil
Revenue Estimate
$543.9 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

FirstService Reports Solid Second Quarter Operating Results

Growth Tempered By COVID-19 Pandemic

Operating highlights:

  Three months ended Six months ended 
  June 30 June 30 
  2020 2019  2020 2019  
              
Revenues (millions)$621.6 $573.9  $1,255.4 $1,059.6  
Adjusted EBITDA (millions) (note 1) 71.2  65.0   115.1  94.2  
Adjusted EPS (note 2) 0.86  1.12   1.23  1.45  
              
GAAP Operating Earnings 44.9  (268.5)(1) 60.9  (255.5)(1)
GAAP EPS 0.64  (7.48)(1) 0.77  (7.69)(1)
              
(1) Includes $314.4 million settlement of long-term incentive arrangement with FirstService's Founder and Chairman.    

TORONTO, July 23, 2020 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported results for its second quarter ended June 30, 2020. All amounts are in US dollars.

Revenues for the second quarter were $621.6 million, an 8% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) increased 10% to $71.2 million, and Adjusted EPS (note 2) was $0.86, versus $1.12 in the prior year quarter. During the second quarter, FirstService reported GAAP Operating Earnings of $44.9 million, versus an operating loss of $268.5 million in the prior year period, reflecting the 2019 settlement of the long-term incentive arrangement (“LTIA”) with its Founder and Chairman in the amount of $314.4 million. The GAAP earnings per share was $0.64 in the quarter, compared to a loss per share of $7.48 for the same quarter a year ago.

For the six months ended June 30, 2020, revenues were $1.26 billion, an 18% increase relative to the comparable prior year period, Adjusted EBITDA was $115.1 million, up 22%, and Adjusted EPS was $1.23, versus $1.45 in the prior year period. FirstService’s GAAP Operating Earnings was $60.9 million in the current year period, versus an Operating Loss of $255.5 million in the prior year period. The GAAP earnings per share for the six months year-to-date was $0.77, compared to GAAP loss per share of $7.69 in the prior year period.

“We are pleased to report a solid quarter in the face of significant COVID-19 headwinds. Our financial results exceeded expectations and highlight the resiliency and diversification of our business model,” said Scott Patterson, Chief Executive Officer of FirstService. “We maintain a positive yet cautious outlook for the remainder of the year as we navigate around the ongoing pandemic uncertainty,” 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 US$2.4 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 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.?rstservice.com.

Segmented Quarterly Results
FirstService Residential revenues were $338.2 million for the second quarter, down 9% versus the prior year quarter. The revenue decline was primarily attributable to client facility closures that negatively impacted the delivery of our amenity management services, stemming from the COVID-19 pandemic. Adjusted EBITDA for the quarter was $37.2 million, versus $39.2 million in the prior year period. GAAP Operating Earnings were $32.0 million, versus $32.3 million for the second quarter of last year. Margins expanded during the quarter from a combination of aggressive cost reduction initiatives and lower than expected decline in higher margin ancillary revenue.

FirstService Brands revenues during the second quarter grew to $283.4 million, up 39% relative to the prior year period. The division recorded a 10% decline in revenues on an organic basis, which was more than offset by the contribution from the large Global Restoration transaction and other tuck-under acquisitions not reflected in last year’s second quarter. The decrease in organic revenue resulted from the various government-mandated “stay at home” measures which negatively impacted activity levels in our service lines tied to home improvement. Adjusted EBITDA for the second quarter was $35.8 million, versus $28.4 million in the prior year period. The year-over-year margin decline was principally driven by acquisition mix, with the addition of Global Restoration yielding lower margins than the overall division. GAAP Operating Earnings were $17.4 million, versus $20.7 million in the prior year quarter, with the decrease due to increased amortization of intangible assets arising from the Global Restoration transaction.

Corporate costs, as presented in Adjusted EBITDA, were $1.9 million in the second quarter, relative to $2.6 million in the prior year period. On a GAAP basis, corporate costs for the quarter were $4.4 million, relative to $321.5 million in the prior year period, with the decrease primarily attributable to the settlement of the LTIA.

Conference Call
FirstService will be holding a conference call on Thursday, July 23, 2020 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 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. 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 Six months ended
(in thousands of US$)June 30 June 30
  2020  2019  2020  2019 
             
Net earnings (loss)$29,917  $(275,680) $35,697  $(267,535)
Income tax 9,603   8,569   11,149   9,778 
Other income, net (147)  (6,131)  (376)  (6,124)
Interest expense, net 5,530   4,772   14,417   8,341 
Operating earnings (loss) 44,903   (268,470)  60,887   (255,540)
Depreciation and amortization 23,488   14,165   46,995   26,852 
Settlement of long-term incentive arrangement -   314,379   -   314,379 
Acquisition-related items 397   3,202   802   3,880 
Stock-based compensation expense 2,443   1,755   6,412   4,610 
Adjusted EBITDA$71,231  $65,031  $115,096  $94,181 

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 Six months ended
(in thousands of US$)June 30 June 30
  2020  2019  2020  2019 
             
Net earnings (loss)$29,917  $(275,680) $35,697  $(267,535)
Non-controlling interest share of earnings (3,326)  (2,409)  (5,081)  (4,205)
Settlement of long-term incentive arrangement -   314,379   -   314,379 
Acquisition-related items 397   3,202   802   3,880 
Amortization of intangible assets 10,864   4,899   22,225   9,206 
Stock-based compensation expense 2,443   1,755   6,412   4,610 
Stock-based compensation tax adjustment for US GAAP change -   (1,510)  -   (2,854)
Income tax on adjustments (3,460)  (2,439)  (7,446)  (4,301)
Non-controlling interest on adjustments (298)  (80)  (520)  (168)
Adjusted net earnings$36,537  $42,117  $52,089  $53,012 
             
  Three months ended Six months ended
(in US$)June 30 June 30
  2020  2019  2020  2019 
             
Diluted net earnings (loss) per share$0.64  $(7.40) $0.77  $(7.59)
Non-controlling interest redemption increment (decrement) (0.01)  0.03   (0.04)  0.14 
Settlement of long-term incentive arrangement -   8.34   -   8.62 
Acquisition-related items 0.01   0.07   0.02   0.09 
Amortization of intangible assets, net of tax 0.18   0.09   0.37   0.18 
Stock-based compensation expense, net of tax 0.04   0.03   0.11   0.09 
Stock-based compensation tax adjustment for US GAAP change -   (0.04)  -   (0.08)
Adjusted earnings per share$0.86  $1.12  $1.23  $1.45 
             


FIRSTSERVICE CORPORATION
Condensed Consolidated Statements of Earnings
(in thousands of US dollars, except per share amounts)
     Three months  Six months
     ended June 30  ended June 30
(unaudited)  2020   2019   2020   2019 
               
Revenues $621,597  $573,908  $1,255,428  $1,059,563 
               
Cost of revenues  412,010   388,656   847,159   729,354 
Selling, general and administrative expenses  140,799   121,976   299,585   240,638 
Depreciation  12,624   9,266   24,770   17,646 
Amortization of intangible assets  10,864   4,899   22,225   9,206 
Settlement of long-term incentive arrangement  -   314,379   -   314,379 
Acquisition-related items (1)  397   3,202   802   3,880 
Operating earnings (loss)  44,903   (268,470)  60,887   (255,540)
Interest expense, net  5,530   4,772   14,417   8,341 
Other expense (income)  (147)  (6,131)  (376)  (6,124)
Earnings (loss) before income tax  39,520   (267,111)  46,846   (257,757)
Income tax  9,603   8,569   11,149   9,778 
Net earnings (loss)  29,917   (275,680)  35,697   (267,535)
Non-controlling interest share of earnings  3,326   2,409   5,081   4,205 
Non-controlling interest redemption increment (decrement)  (531)  947   (1,791)  4,967 
Net earnings (loss) attributable to Company  $27,122  $(279,036) $32,407  $(276,707)
               
Net earnings (loss) per common share             
 Basic $0.64  $(7.48) $0.77  $(7.69)
 Diluted  0.64   (7.48)  0.77   (7.69)
              
               
Adjusted earnings per share (2) $0.86  $1.12  $1.23  $1.45 
               
Weighted average common shares (thousands)            
  Basic  42,397   37,284   41,977   36,002 
  Diluted  42,710   37,715   42,322   36,452 
                   

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)June 30, 2020 December 31, 2019
       
Assets     
Cash and cash equivalents$245,257 $121,198 
Restricted cash 20,028  13,093 
Accounts receivable 361,046  393,730 
Prepaid and other current assets 138,197  140,115 
Current assets 764,528  668,136 
Other non-current assets 11,884  11,824 
Fixed assets 128,684  131,545 
Operating lease right-of-use assets 139,580  132,893 
Goodwill and intangible assets 989,339  1,011,071 
Total assets$2,034,015 $1,955,469 
       
       
Liabilities and shareholders' equity     
Accounts payable and accrued liabilities$250,515 $241,670 
Other current liabilities 100,346  80,369 
Operating lease liabilities - current 33,045  30,622 
Long-term debt - current 56,669  5,545 
Current liabilities 440,575  358,206 
Long-term debt - non-current 588,525  761,078 
Operating lease liabilities - non-current 117,024  111,247 
Other liabilities 68,898  66,150 
Deferred income tax 54,063  58,239 
Redeemable non-controlling interests 162,613  174,662 
Shareholders' equity 602,317  425,887 
Total liabilities and equity$2,034,015 $1,955,469 
       
       
Supplemental balance sheet information     
Total debt$645,194 $766,623 
Total debt, net of cash 399,937  645,425 
        
        
Consolidated Statements of Cash Flows       
(in thousands of US dollars)
    Three months ended  Six months ended
    June 30  June 30
(unaudited)  2020   2019   2020   2019 
              
Cash provided by (used in)            
              
Operating activities            
Net earnings (loss) $29,917  $(275,680) $35,697  $(267,535)
Items not affecting cash:            
 Depreciation and amortization  23,488   14,164   46,995   26,851 
 Non-cash settlement of long-term incentive arrangement  -   289,721   -   289,721 
 Deferred income tax  (2,149)  992   (4,205)  1,465 
 Other  1,845   (4,192)  5,669   (1,058)
    53,101   25,005   84,156   49,444 
              
Changes in non-cash working capital            
 Accounts receivable  11,911   (27,828)  32,893   (19,228)
 Payables and accruals  28,814   11,439   18,335   (4,922)
 Other  19,396   10,212   17,657   19,092 
Net cash provided by operating activities  113,222   18,828   153,041   44,386 
              
Investing activities            
Acquisition of businesses, net of cash acquired  -   (519,758)  -   (545,531)
Disposition of business, net of cash disposed  -   13,030   -   13,030 
Purchases of fixed assets  (6,733)  (11,551)  (22,081)  (22,287)
Other investing activities  (603)  3,188   (786)  859 
Net cash used in investing activities  (7,336)  (515,091)  (22,867)  (553,929)
              
Financing activities            
Increase in long-term debt, net  (105,072)  543,216   (121,924)  588,879 
Proceeds received on common share issuance  150,008   -   150,008   - 
Purchases of non-controlling interests, net  (11,316)  (14,223)  (15,067)  (33,210)
Financing fees paid  -   (3,428)  -   (3,696)
Dividends paid to common shareholders  (6,867)  (5,418)  (13,091)  (10,275)
Distributions paid to non-controlling interests  -   (3,075)  (50)  (4,269)
Other financing activities  (1,164)  2,260   1,228   411 
Net cash provided by financing activities  25,589   519,332   1,104   537,840 
              
Effect of exchange rate changes on cash  626   (508)  (284)  (311)
              
Increase in cash, cash equivalents and restricted cash  132,101   22,561   130,994   27,986 
              
Cash, cash equivalents and restricted cash, beginning of period  133,184   85,269   134,291   79,844 
              
Cash, cash equivalents and restricted cash, end of period $265,285  $107,830  $265,285  $107,830 
              
      
Segmented Results
(in thousands of US dollars)
             
           
  FirstService FirstService    
(unaudited)Residential Brands Corporate Consolidated
             
Three months ended June 30           
             
2020           
 Revenues$338,153 $283,444 $-  $621,597 
 Adjusted EBITDA 37,245  35,844  (1,858)  71,231 
             
 Operating earnings 31,980  17,364  (4,441)  44,903 
             
2019           
 Revenues$370,405 $203,503 $-  $573,908 
 Adjusted EBITDA 39,177  28,431  (2,577)  65,031 
             
 Operating earnings 32,278  20,705  (321,453)  (268,470)
             
             
           
  FirstService FirstService    
  Residential Brands Corporate Consolidated
             
Six months ended June 30           
             
2020           
 Revenues$677,816 $577,612 $-  $1,255,428 
 Adjusted EBITDA 61,135  57,790  (3,829)  115,096 
             
 Operating earnings 49,404  22,271  (10,788)  60,887 
             
2019           
 Revenues$689,715 $369,848 $-  $1,059,563 
 Adjusted EBITDA 60,996  39,459  (6,274)  94,181 
             
 Operating earnings 47,926  24,597  (328,063)  (255,540)
               

COMPANY CONTACTS:

D. Scott Patterson
President & CEO
           
Jeremy Rakusin
Chief Financial Officer

(416) 960-9566


FirstService logo

Source: FirstService Corporation