FirstService Reports Strong Second Quarter Results

Operating highlights:

TORONTO, July 27, 2016 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV) (NASDAQ:FSV) today reported strong results for its second quarter ended June 30, 2016. All amounts are in US dollars.

Revenues for the second quarter were $385.1 million, an 18% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) increased 25% to $40.2 million, and Adjusted EPS (note 2) was $0.52, a 30% increase versus the prior year quarter. GAAP Operating Earnings were $30.8 million, relative to $23.9 million in the prior year period. GAAP diluted earnings per share was $0.35 in the quarter, versus $0.20 for the same quarter a year ago.

For the six months ended June 30, 2016, revenues were $692.7 million, a 16% increase relative to the comparable prior year period, Adjusted EBITDA was $53.0 million, up 27%, and Adjusted EPS was $0.60, a 46% increase versus the prior year period. GAAP Operating Earnings were $35.1 million, relative to $25.3 million in the prior year period. GAAP diluted EPS for the six month period was $0.30, compared to $0.11 in the prior year period.

“FirstService continued its consistent quarterly performance, with both of our FirstService Residential and FirstService Brands divisions recording double-digit top-line growth,” said Scott Patterson, Chief Executive Officer of FirstService. “Each business delivered in line with our previously established long-term revenue targets through a combination of mid-to-high single digit organic growth and further contribution from tuck-under acquisitions.  Our largest acquisition this year, Century Fire, has also been successfully integrated during this quarter, and we view the fire protection market as another important area of future growth for FirstService,” 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$1.3 billion in annual revenues and has more than 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 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 Results
FirstService Residential revenues were $288.7 million for the second quarter, up 10% versus the prior year quarter. Revenue growth was comprised of 7% organic growth and the balance from recent acquisitions. Adjusted EBITDA for the quarter was $26.4 million, versus $20.5 million in the prior year period.  Second quarter performance was driven by strong and diversified growth across most regions, and further margin expansion from ongoing operating efficiencies. GAAP Operating Earnings were $21.4 million, up 41%.

FirstService Brands revenues grew to $96.4 million, up 52% relative to the prior year period. Revenue growth was comprised of 8% organic growth and the balance from recent acquisitions, including our larger Century Fire Protection transaction. Adjusted EBITDA for the second quarter was $16.7 million, up from $13.7 million in the prior year period.  The second quarter included strong performance from CertaPro Painters, California Closets and Pillar to Post Home Inspectors, which continue to benefit from the home improvement environment, as well as margin improvement at our California Closets company-owned operations.  The overall margin for the division declined versus the prior year period due to a significant increase in recently acquired company-owned operations, including Century Fire. GAAP Operating Earnings were $13.1 million, versus $11.8 million in the prior year quarter.

Corporate costs, as presented in Adjusted EBITDA, were $2.9 million in the second quarter, relative to $1.9 million in the prior year period. The increase in corporate costs reflects accrued incentive compensation based on year-to-date results. The prior year period was based upon pre-spin-off cost allocations. On a GAAP basis, corporate costs for the quarter were $3.6 million, relative to $3.0 million in the prior period.

Conference Call
FirstService will be holding a conference call on Wednesday, July 27, 2016 at 11:00 a.m. Eastern Time to discuss the quarter’s results. 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.  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) acquisition-related items; and (vi) 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.

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 (loss) 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. 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 (loss) per share to adjusted earnings per share appears below.

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.