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FirstService Reports Strong Fourth Quarter and Full Year Results
Globe Newswire
  • Revenue up 12%, Adjusted EBITDA up 37% and Adjusted EPS up 43% for the year
  • FirstService Residential Adjusted EBITDA up over 50% for 2015

Operating highlights:

  Three months ended Year ended
  December 31 December 31
  2015 2014 2015 2014
             
Revenues (millions)$316.1 $282.2 $1,264.1 $1,132.0
Adjusted EBITDA (millions) (note 1) 22.3  13.4  103.0  75.0
Adjusted EPS (note 2) 0.28  0.13  1.20  0.84
            

TORONTO, Feb. 10, 2016 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV) (NASDAQ:FSV) today announced strong fourth quarter and full year results for the year ended December 31, 2015. All amounts are in US dollars.

Revenues for the fourth quarter were $316.1 million, a 12% increase relative to the same quarter in the prior year. Adjusted EBITDA (note 1) was $22.3 million, up 67%, and Adjusted EPS (note 2) was $0.28, up 115% from the prior year quarter. GAAP diluted EPS was $0.09 per share in the quarter, compared to a loss of $0.10 for the same quarter a year ago.

For the year ended December 31, 2015, revenues were $1.26 billion, a 12% increase relative to the prior year. Adjusted EBITDA was $103.0 million, up 37%. Adjusted EPS was $1.20, up 43% versus the prior year of $0.84. GAAP diluted EPS for the year was $0.59, compared to $0.36 in the prior year. The prior year was negatively impacted by higher than expected employee medical benefits expenses in our FirstService Residential operations.

“We completed our inaugural year-end as an independent public company with very strong fourth quarter and annual financial performance for 2015. Both our FirstService Residential and FirstService Brands divisions delivered excellent results, each spurred by double digit top-line growth as well as significant operating margin expansion at FirstService Residential,” said Scott Patterson, Chief Executive Officer of FirstService. “We expect to continue to deliver mid-to-high single digit organic growth across our operations, benefiting from both the attractive macroeconomic fundamentals in our markets as well as our ability to capture market share by leveraging our strengths and competitive advantages.”

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 more than US$1.2 billion in annual revenues and has more than 15,000 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 $251.0 million for the fourth quarter, up 10% relative to $227.9 million in the prior year quarter. The revenue increase was comprised of 8% organic growth (9% on a local currency basis) and 2% growth from recent acquisitions. Adjusted EBITDA was $13.7 million, almost double the $6.9 million reported in the prior year period. Fourth quarter performance was driven by broad-based top-line growth across our entire service offering, as well as continuing operating efficiencies. Prior period results were impacted by $3.0 million of incremental employee medical benefits costs.

FirstService Brands revenues totalled $65.1 million, up 20% versus $54.3 million in the prior year period. The increase was comprised of 13% organic growth (14% on a local currency basis) and 7% from recent acquisitions. Organic growth was driven by very strong results at California Closets and our smaller, faster-growing systems. Adjusted EBITDA for the quarter was $11.3 million, up 25% versus the prior year quarter.

Corporate costs were $2.7 million in the fourth quarter, relative to $2.6 million in the prior year period.

Segmented Full Year Results

FirstService Residential revenues were $1.0 billion, up 11% relative to 2014, with the increase comprised of 8% organic growth (9% on a local currency basis) and 3% from acquisitions. Organic growth was primarily driven by competitive contract wins and strong new development business. Adjusted EBITDA was $68.9 million, up 51% versus the prior year, which reflected significant regional operating improvements. Prior year results were impacted by $9.0 million of incremental employee medical benefits costs and $1.9 million of non-recurring expenses related to the down-sizing of our homeowner collection business incurred during the year.

FirstService Brands revenues for the year totalled $246.6 million, up 16% versus the prior year, comprised of organic growth of 10% (11% on a local currency basis) and 6% from acquisitions. Adjusted EBITDA for the year was $43.0 million, up 14% relative to the prior year.  Most of the brands benefited from operating leverage on royalties relating to increasing system-wide sales, partially offset by weather-related flat performance at Paul Davis Restoration and investments incurred towards executing on our California Closets centralized manufacturing strategy.

Corporate costs were $8.8 million for the full year, relative to $8.4 million in the prior year.

Stock Repurchases

During the fourth quarter, the Company repurchased 511,594 Subordinate Voting Shares on the open market under its Normal Course Issuer Bid (“NCIB”) at an average price of $38.05 per share. All shares purchased under the NCIB were cancelled. The Company is authorized to repurchase up to an additional 2,628,406 Subordinate Voting Shares under its NCIB, which expires on August 23, 2016.

Conference Call & Presentation

FirstService will be holding a conference call on Wednesday, February 10, 2016 at 11:00 a.m. Eastern Time to discuss results for the fourth quarter and full year. 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.  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 consolidated financial statements and MD&A to be made available on SEDAR at www.sedar.com.

Notes

1. Reconciliation of net earnings from continuing operations 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) spin-off transaction costs. 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 from continuing operations 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 from continuing operations to adjusted EBITDA appears below.

     
  Three months ended Twelve months ended
(in thousands of US$)December 31 December 31
  2015 2014 2015 2014
             
Net earnings$ 7,907  $1,264 $38,198 $26,192
Income tax  4,096   1,523  23,412  12,242
Other expense (income)  (49)  352  60  255
Interest expense, net  2,033   1,733  9,077  6,932
Operating earnings  13,987   4,872  70,747  45,621
Depreciation and amortization  7,872   8,109  28,984  26,474
Acquisition-related items  (61)  65  408  1,183
Stock-based compensation expense  530   345  2,159  1,719
Spin-off transaction costs  -   -  740  -
Adjusted EBITDA$ 22,328  $13,391 $103,038 $74,997
              

2. Reconciliation of net earnings from continuing operations and net earnings (loss) per common share from continuing operations to adjusted net earnings and adjusted net earnings per share:

Adjusted EPS is defined as diluted net earnings (loss) 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) spin-off transaction costs; and (vi) a spin-off tax charge. 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 from continuing operations, 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 (loss) per common share from continuing operations to adjusted EPS appears below.

   
 Three months endedTwelve months ended
(in thousands of US$)December 31 December 31
  2015 2014 2015 2014
             
Net earnings$ 7,907  $ 1,264  $ 38,198  $ 26,192 
Non-controlling interest share of earnings  274    2,003    (4,560)   (3,105)
Acquisition-related items  (61)   65    408    1,183 
Amortization of intangible assets  2,873    2,231    10,148    8,744 
Stock-based compensation expense  530    345    2,159    1,719 
Spin-off transaction costs  -    -    740    - 
Spin-off tax charge  -    -    1,646    - 
Income tax on adjustments  (1,334)   (1,011)   (4,962)   (4,097)
Non-controlling interest on adjustments  (52)   (33)   (185)   (174)
Adjusted net earnings$ 10,137  $ 4,864  $ 43,592  $ 30,462 
             
  Three months ended Twelve months ended
(in US$)December 31 December 31
  2015 2014 2015 2014
             
Diluted net earnings (loss) per share$ 0.09  $ (0.10) $ 0.59  $ 0.36 
Non-controlling interest redemption increment  0.13    0.19    0.33    0.28 
Acquisition-related items  -    -    0.01    0.03 
Amortization of intangible assets, net of tax  0.05    0.03    0.16    0.14 
Stock-based compensation expense, net of tax  0.01    0.01    0.04    0.03 
Spin-off transaction costs, net of tax  -    -    0.02    - 
Spin-off tax charge  -    -    0.05    - 
Adjusted earnings per share$ 0.28  $ 0.13  $ 1.20  $ 0.84 
                    


FIRSTSERVICE CORPORATION
Operating Results
(in thousands of US$, except per share amounts)
     Three months  Twelve months
     ended December 31  ended December 31
(unaudited)   2015    2014   2015  2014
               
Revenues $ 316,112  $ 282,174  $1,264,077 $1,132,002
               
Cost of revenues   221,466    201,634   883,963  800,046
Selling, general and administrative expenses   72,848    67,494   279,235  258,678
Depreciation   4,999    5,878   18,836  17,730
Amortization of intangible assets   2,873    2,231   10,148  8,744
Acquisition-related items (1)   (61)   65   408  1,183
Spin-off transaction costs   -    -   740  -
Operating earnings   13,987    4,872   70,747  45,621
Interest expense, net   2,033    1,733   9,077  6,932
Other expense (income)   (49)   352   60  255
Earnings before income tax   12,003    2,787   61,610  38,434
Income tax   4,096    1,523   23,412  12,242
Net earnings   7,907    1,264   38,198  26,192
Non-controlling interest share of earnings   (274)   (2,003)  4,560  3,105
Non-controlling interest redemption increment   4,917    6,866   12,243  10,117
Net earnings (loss) attributable to Company $ 3,264  $ (3,599) $21,395 $12,970
               
Net earnings (loss) per common share             
               
  Basic $ 0.09  $ (0.10) $0.59 $0.36
  Diluted   0.09    (0.10)  0.59  0.36
               
Adjusted earnings per share (2) $ 0.28  $ 0.13  $1.20 $0.84
               
Weighted average common shares (thousands)            
  Basic   36,064    35,971   36,013  35,971
  Diluted   36,513    36,330   36,425  36,363
                   

(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$)
      
        
(unaudited)December 31, 2015 December 31, 2014
        
Assets     
Cash and cash equivalents$45,560 $66,790
Restricted cash 3,769  3,657
Accounts receivable 114,521  115,143
Other current assets 47,532  46,466
Deferred income tax 18,840  18,667
  Current assets 230,222  250,723
Other non-current assets 6,009  4,736
Deferred income tax 6,553  4,572
Fixed assets 57,575  55,203
Goodwill and intangible assets 300,124  300,310
  Total assets$600,483 $615,544
        
        
Liabilities and shareholders' equity     
Accounts payable and accrued liabilities$102,043 $80,250
Other current liabilities 24,015  28,119
Long-term debt - current 4,041  17,725
  Current liabilities 130,099  126,094
Long-term debt - non-current 197,158  221,632
Other liabilities 14,670  13,907
Deferred income tax 13,971  14,236
Redeemable non-controlling interests 77,559  80,926
Shareholders' equity 167,026  158,749
  Total liabilities and equity$600,483 $615,544
        
        
Supplemental balance sheet information     
Total debt$201,199 $239,357
Total debt, net of cash 155,639  172,567
      


Condensed Consolidated Statements of Cash Flows       
(in thousands of US$)
    Three months ended  Twelve months ended
    December 31  December 31
(unaudited)   2015    2014    2015    2014 
              
Cash provided by (used in)            
              
Operating activities            
Net earnings $ 7,907  $ 1,264  $ 38,198  $ 26,192 
Items not affecting cash:            
 Depreciation and amortization   7,871    8,109    28,984    26,474 
 Deferred income tax   777    (1,140)   (3,535)   (2,479)
 Other   (7,552)   524    (8,717)   2,056 
     9,003    8,757    54,930    52,243 
              
Changes in operating assets and liabilities   2,199    (8,148)   32,160    (7,066)
Net cash provided by operating activities   11,202    609    87,090    45,177 
              
Investing activities            
Acquisition of businesses, net of cash acquired   (338)   (177)   (12,340)   (16,686)
Purchases of fixed assets   (5,403)   (6,476)   (19,694)   (22,439)
Other investing activities   2,491    59    (244)   (776)
Net cash used in investing activities   (3,250)   (6,594)   (32,278)   (39,901)
              
Financing activities            
Increase (decrease) in long-term debt, net   2,598    (16,388)   (38,162)   13,492 
Net contributions (distributions) from/to Old FSV   -    (4,095)   1,995    (21,272)
Purchases of non-controlling interests, net   (402)   (2,207)   (17,817)   (11,064)
Dividends paid to common shareholders   (3,599)   -    (7,196)   - 
Repurchases of subordinate voting shares   (19,467)   -    (19,467)   - 
Distributions paid to non-controlling interests   (903)   (1,202)   (3,602)   (4,008)
Other financing activities   10,448    -    9,112    (1,774)
Net cash used in financing activities   (11,325)   (23,892)   (75,137)   (24,626)
              
Effect of exchange rate changes on cash   (673)   5    (905)   (226)
              
Decrease in cash and cash equivalents   (4,046)   (29,872)   (21,230)   (19,576)
              
Cash and cash equivalents, beginning of period   49,606    96,662    66,790    86,366 
              
Cash and cash equivalents, end of period $ 45,560  $ 66,790  $ 45,560  $ 66,790 
              


Segmented Results
(in thousands of US$)
             
           
  FirstService FirstService    
(unaudited)Residential Brands Corporate Consolidated
             
Three months ended December 31           
             
2015           
 Revenues$250,972 $65,140 $ -  $316,112
 Adjusted EBITDA 13,712  11,304   (2,688)  22,328
 Operating earnings 8,895  9,182   (4,090)  13,987
             
2014           
 Revenues$227,870 $54,304 $ -  $282,174
 Adjusted EBITDA 6,909  9,037   (2,554)  13,392
 Operating earnings 1,285  6,972   (3,385)  4,872
             
             
           
  FirstService FirstService    
  Residential Brands Corporate Consolidated
             
Year ended December 31           
             
2015           
 Revenues$1,017,506 $246,571 $ -  $1,264,077
 Adjusted EBITDA 68,853  42,961   (8,776)  103,038
 Operating earnings 47,550  35,079   (11,882)  70,747
             
2014           
 Revenues$919,545 $212,457 $ -  $1,132,002
 Adjusted EBITDA 45,611  37,759   (8,373)  74,997
 Operating earnings 25,712  30,559   (10,650)  45,621

 

COMPANY CONTACTS:
D. Scott Patterson
President & CEO
            
Jeremy Rakusin
Chief Financial Officer
(416) 960-9500

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