FirstService Reports Fourth Quarter and Full Year Results
FirstService Corporation (FSV) announced its fourth quarter and full-year results for the year ended December 31, 2023. Consolidated revenues for the fourth quarter were $1.08 billion, a 6% increase relative to the same quarter in the prior year. Adjusted EBITDA was $103.3 million, up 1%, and Adjusted EPS was $1.11. For the full year, consolidated revenues were $4.33 billion, a 16% increase relative to the prior year, including 10% organic growth. Adjusted EBITDA was $415.7 million, up 18%, and Adjusted EPS was $4.66. Operating Earnings for the year were $244.9 million, versus $219.0 million in the prior year period. Diluted earnings per share was $2.24, compared to $2.72 in the prior year.
Positive
Double-digit organic top-line growth and strong profitability
10% organic growth in consolidated revenues
18% increase in Adjusted EBITDA
16% increase in consolidated revenues for the full year
Negative
Decrease in Operating Earnings for the quarter
Decrease in Adjusted EPS for the fourth quarter
The reported double-digit annual revenue growth and increased Adjusted EBITDA by FirstService Corporation are indicators of the company's robust financial performance. The 16% year-over-year revenue increase, including 10% organic growth, is particularly noteworthy as it suggests the company is successfully expanding its operations and market share without solely relying on acquisitions. Organic growth is a key metric as it reflects the company's ability to increase sales and output through its existing operations.
However, the decline in Adjusted EPS from $1.22 to $1.11 in the fourth quarter and the decrease in GAAP Operating Earnings from $67.5 million to $48.1 million, raise questions about rising costs or potential one-time charges that may have impacted profitability. The significant drop in GAAP EPS from $0.86 to $0.14 also warrants a closer examination of non-operational factors that could have influenced these figures, such as the mentioned contingent acquisition consideration adjustments.
FirstService Corporation's performance reflects broader market trends where companies that show strong organic growth are often rewarded by investors. The firm's ability to achieve share gains in its respective markets is indicative of competitive strength and effective strategy execution. However, the market may react cautiously to the mixed signals sent by the decline in GAAP EPS , which could be interpreted as a potential red flag for underlying issues.
It's also important to consider the context of the industry in which FirstService operates. Depending on the competitive landscape and macroeconomic conditions, the reported financials could be seen as either outperforming, meeting, or underperforming relative to industry peers. The company's forward-looking statements and management's commentary on future expectations will also play a crucial role in shaping investor sentiment.
The reported financial results of FirstService Corporation must be analyzed in the context of the current economic environment. The 16% revenue increase is a strong signal of growth, especially when considering global economic challenges such as inflationary pressures and potential market volatility. The organic growth component of 10% is particularly commendable as it suggests resilience and adaptability in economic headwinds.
However, the discrepancy between the revenue growth and the decline in GAAP EPS could imply that the company's cost structure may be increasing, or it could reflect one-time expenses related to acquisitions. Such financial nuances are critical for stakeholders to understand the company's operating leverage and how it might perform in different economic scenarios.
02/06/2024 - 07:30 AM
Double-Digit Annual Revenue and Operating Earnings Growth
Operating highlights:
Three months ended Year ended December 31 December 31 2023 2022 2023 2022 Revenues (millions) $ 1,079.3 $ 1,020.1 $ 4,334.5 $ 3,745.8 Adjusted EBITDA (millions) (note 1) 103.3 102.5 415.7 351.7 Adjusted EPS (note 2) 1.11 1.22 4.66 4.24 GAAP Operating Earnings 48.1 67.5 244.9 219.0 GAAP EPS 0.14 0.86 2.24 2.72
TORONTO, Feb. 06, 2024 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today announced fourth quarter and full year results for the year ended December 31, 2023. All amounts are in US dollars.
Consolidated revenues for the fourth quarter were $1.08 billion , a 6% increase relative to the same quarter in the prior year. Adjusted EBITDA (note 1) was $103.3 million , up 1% , and Adjusted EPS (note 2) was $1.11 , versus $1.22 in the prior year quarter.
Operating Earnings for the quarter were $48.1 million , relative to $67.5 million in the prior year period, with the decrease attributable to contingent acquisition consideration fair value adjustments on prior tuck-under acquisitions. Diluted EPS was $0.14 per share in the quarter, compared to $0.86 for the same quarter a year ago.
For the year ended December 31, 2023, consolidated revenues were $4.33 billion , a 16% increase relative to the prior year, including 10% organic growth. Adjusted EBITDA was $415.7 million , up 18% , and Adjusted EPS was $4.66 , versus the prior year of $4.24 . Operating Earnings were $244.9 million , versus $219.0 million in the prior year period. Diluted earnings per share was $2.24 , compared to $2.72 in the prior year.
“We are pleased with our fourth quarter performance which lined up with our expectations,” said Scott Patterson, Chief Executive Officer of FirstService. “For the full year, we delivered double-digit organic top-line growth and strong profitability across both divisions, as our brands continued to realize share gains in their respective markets,” he concluded.
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$4.3 billion in annual revenues and has approximately 29,000 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”, and are included in the S&P/TSX 60 Index. More information is available at www.firstservice.com .
Segmented Fourth Quarter Results FirstService Residential generated revenues of $496.3 million for the fourth quarter, up 12% relative to the prior year quarter, including 9% organic growth. Growth was driven by new contract wins, with particularly strong performance at our sited labour communities. Adjusted EBITDA was $43.5 million , an increase of 14% compared to $38.1 million reported in the prior year period. Operating Earnings were $34.1 million , versus $30.6 million for the fourth quarter of last year. Operating margins were relatively in-line with the prior year quarter.
FirstService Brands recorded revenues of $583.0 million , up 1% versus $578.0 million in the prior year period. Revenues declined 7% on an organic basis due to milder weather patterns at our restoration operations, compared to the significant loss claims activity from hurricanes Ian and Fiona in the prior year quarter. The division top-line performance included very strong growth at Century Fire together with solid contribution from our home services brands, partially offsetting the restoration-driven headwinds. Adjusted EBITDA for the quarter was $61.1 million , compared to $67.4 million in the prior year quarter. Operating Earnings were $20.6 million , versus $44.0 million in the prior year quarter. The segment Adjusted EBITDA margin (note 1) decline was primarily attributable to lower profitability in our restoration operations due to the reduced weather-related activity during the period. The operating earnings margin was further impacted by contingent acquisition consideration fair value adjustments.
Corporate costs, as presented in Adjusted EBITDA (note 1), were $1.2 million in the fourth quarter, relative to $3.0 million in the prior year period. Corporate costs for the quarter were $6.7 million , relative to $7.1 million in the prior year period.
Segmented Full Year Results FirstService Residential reported revenues of $2.0 billion , up 13% relative to 2022, including 10% organic growth and the balance from tuck-under acquisitions. The strong organic growth was primarily driven by new contract wins, together with contribution from increased labour-related and ancillary services with our existing clients. Adjusted EBITDA was $187.8 million , up 11% versus the prior year. Operating Earnings were $155.0 million , compared to $138.9 million in the prior year. Operating margins were in-line with the prior year.
FirstService Brands revenues were $2.34 billion , up 18% versus the prior year, and comprised of 11% organic growth with the balance from acquisitions. All service lines contributed to the division’s organic revenue growth, including an exceptionally strong increase over the prior year at our Century Fire Protection operations. Adjusted EBITDA for the year was $242.4 million , up 23% relative to the prior year. Operating Earnings were $126.5 million , versus $111.6 million a year ago. The segment Adjusted EBITDA margin was positively impacted by operating leverage realized from the strong top-line performance in our restoration and Century Fire businesses. The operating earnings margin was slightly down due to acquisition-related items, primarily contingent acquisition consideration fair value adjustments.
Corporate costs, as presented in Adjusted EBITDA, were $14.4 million for the full year, relative to $13.2 million in the prior year. Corporate costs were $36.6 million , relative to $31.5 million a year ago, with the increase driven primarily by stock-based compensation expense.
Conference Call & Presentation FirstService will be holding a conference call on Tuesday, February 6, 2024 at 11:00 a.m. Eastern Time to discuss the results for the fourth quarter and full year.
This call is being webcast live at the Company’s website at www.firstservice.com . Participants may register for the call here https://register.vevent.com/register/BI3a29ed98b6cc4f77b35613631b9849bb to receive the dial-in number and their unique PIN. To join the webcast in listen only mode, use this link: https://edge.media-server.com/mmc/p/d4d3hvrj . It is recommended that you join 10 minutes prior to the event start (although you may register and dial in at any time during the call).
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, 2022 under the heading “Risk factors” (a copy of which may be obtained at www.sedarplus.ca) 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.sedarplus.ca .
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. 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 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 to Adjusted EBITDA appears below.
Three months ended Twelve months ended (in thousands of US$) December 31 December 31 2023 2022 2023 2022 Net earnings $ 23,783 $ 44,339 $ 147,021 $ 145,007 Income tax 12,051 14,806 56,317 48,974 Other income, net (595 ) (712 ) (5,810 ) (146 ) Interest expense, net 12,823 9,025 47,364 25,191 Operating earnings 48,062 67,458 244,892 219,026 Depreciation and amortization 33,872 30,417 127,934 110,140 Acquisition-related items 16,485 599 21,517 4,520 Stock-based compensation expense 4,924 4,073 21,385 18,046 Adjusted EBITDA $ 103,343 $ 102,547 $ 415,728 $ 351,732
A reconciliation of segment operating earnings to segment Adjusted EBITDA appears below. (in thousands of US$) Three months ended December 31, 2023 FirstService FirstService Residential Brands Corporate (1) Operating earnings (loss) $ 34,136 $ 20,603 $ (6,677 ) Depreciation and amortization 8,373 25,477 22 Acquisition-related items 1,002 14,992 491 Stock-based compensation expense - - 4,924 Adjusted EBITDA $ 43,511 $ 61,072 $ (1,240 ) Three months ended December 31, 2022 FirstService FirstService Residential Brands Corporate(1) Operating earnings (loss) $ 30,562 $ 44,040 $ (7,144 ) Depreciation and amortization 7,591 22,804 22 Acquisition-related items (38 ) 594 43 Stock-based compensation expense - - 4,073 Adjusted EBITDA $ 38,115 $ 67,438 $ (3,006 ) Year ended December 31, 2023 FirstService FirstService Residential Brands Corporate (1) Operating earnings (loss) $ 155,044 $ 126,468 $ (36,620 ) Depreciation and amortization 33,114 94,729 91 Acquisition-related items (366 ) 21,159 724 Stock-based compensation expense - - 21,385 Adjusted EBITDA $ 187,792 $ 242,356 $ (14,420 ) Year ended December 31, 2022 FirstService FirstService Residential Brands Corporate(1) Operating earnings (loss) $ 138,873 $ 111,638 $ (31,485 ) Depreciation and amortization 28,611 81,439 90 Acquisition-related items 1,153 3,200 167 Stock-based compensation expense - - 18,046 Adjusted EBITDA $ 168,637 $ 196,277 $ (13,182 ) Segment Adjusted EBITDA margin is defined as segment Adjusted EBITDA divided by segment revenues. (1) Corporate costs represent corporate overhead expenses not directly attributable to reportable segments and are therefore unallocated within segment operating earnings (loss) and Adjusted EBITDA.
2. Reconciliation of net earnings and net earnings (loss) per common share to adjusted net earnings and adjusted net earnings per share:
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 of 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 common 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 diluted net earnings per common share to Adjusted EPS appears below.
Three months ended Twelve months ended (in thousands of US$) December 31 December 31 2023 2022 2023 2022 Net earnings $ 23,783 $ 44,339 $ 147,021 $ 145,007 Non-controlling interest share of earnings (3,925 ) (3,462 ) (14,140 ) (9,381 ) Acquisition-related items 16,485 599 21,517 4,520 Amortization of intangible assets 13,942 13,659 54,238 48,725 Stock-based compensation expense 4,924 4,073 21,385 18,046 Income tax on adjustments (4,905 ) (4,611 ) (19,662 ) (17,361 ) Non-controlling interest on adjustments (665 ) (254 ) (1,517 ) (968 ) Adjusted net earnings $ 49,639 $ 54,343 $ 208,842 $ 188,588 Three months ended Twelve months ended (in US$) December 31 December 31 2023 2022 2023 2022 Diluted net earnings per share $ 0.14 $ 0.86 $ 2.24 $ 2.72 Non-controlling interest redemption increment 0.30 0.06 0.72 0.33 Acquisition-related items 0.36 0.01 0.47 0.10 Amortization of intangible assets, net of tax 0.23 0.22 0.88 0.79 Stock-based compensation expense, net of tax 0.08 0.07 0.35 0.30 Adjusted earnings per share $ 1.11 $ 1.22 $ 4.66 $ 4.24
FIRSTSERVICE CORPORATION Operating Results (in thousands of US$, except per share amounts) Three months Twelve months ended December 31 ended December 31 2023 2022 2023 2022 Revenues $ 1,079,260 $ 1,020,101 $ 4,334,548 $ 3,745,835 Cost of revenues 735,920 690,314 2,947,008 2,565,720 Selling, general and administrative expenses 244,921 231,313 993,197 846,429 Depreciation 19,930 16,758 73,696 61,415 Amortization of intangible assets 13,942 13,659 54,238 48,725 Acquisition-related items (1) 16,485 599 21,517 4,520 Operating earnings 48,062 67,458 244,892 219,026 Interest expense, net 12,823 9,025 47,364 25,191 Other income, net (595 ) (712 ) (5,810 ) (146 ) Earnings before income tax 35,834 59,145 203,338 193,981 Income tax 12,051 14,806 56,317 48,974 Net earnings 23,783 44,339 147,021 145,007 Non-controlling interest share of earnings 3,925 3,462 14,140 9,381 Non-controlling interest redemption increment 13,596 2,631 32,490 14,552 Net earnings attributable to Company $ 6,262 $ 38,246 $ 100,391 $ 121,074 Net earnings per common share Basic $ 0.14 $ 0.86 $ 2.25 $ 2.74 Diluted 0.14 0.86 2.24 2.72 Adjusted earnings per share (2) $ 1.11 $ 1.22 $ 4.66 $ 4.24 Weighted average common shares (thousands) Basic 44,639 44,420 44,556 44,175 Diluted 44,874 44,499 44,795 44,494
(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$) December 31, 2023 December 31, 2022 Assets Cash and cash equivalents $ 187,617 $ 136,219 Restricted cash 19,260 23,129 Accounts receivable 848,230 635,942 Other current assets 311,889 313,582 Current assets 1,366,996 1,108,872 Other non-current assets 34,418 38,549 Fixed assets 204,188 167,012 Operating lease right-of-use assets 218,299 205,544 Goodwill and intangible assets 1,807,836 1,254,537 Total assets $ 3,631,737 $ 2,774,514 Liabilities and shareholders' equity Accounts payable and accrued liabilities $ 477,077 $ 398,313 Other current liabilities 211,661 153,866 Operating lease liabilities - current 50,898 49,145 Long-term debt - current 37,132 35,665 Current liabilities 776,768 636,989 Long-term debt - non-current 1,144,975 698,798 Operating lease liabilities - non-current 183,923 168,557 Other liabilities 115,938 78,178 Deferred income tax 53,024 51,097 Redeemable non-controlling interests 332,963 233,429 Shareholders' equity 1,024,146 907,466 Total liabilities and equity $ 3,631,737 $ 2,774,514 Supplemental balance sheet information Total debt $ 1,182,107 $ 734,463 Total debt, net of cash 994,490 598,244
Condensed Consolidated Statements of Cash Flows (in thousands of US$) Three months ended Twelve months ended December 31 December 31 2023 2022 2023 2022 Cash provided by (used in) Operating activities Net earnings $ 23,783 $ 44,339 $ 147,021 $ 145,007 Items not affecting cash: Depreciation and amortization 33,872 30,417 127,934 110,140 Deferred income tax (18,413 ) 9,249 (19,049 ) 7,436 Other 18,384 2,076 34,416 18,371 57,626 86,081 290,322 280,954 Changes in non-cash working capital Accounts receivable (23,039 ) (68,445 ) (99,816 ) (69,671 ) Payables and accruals 44,153 28,729 25,656 (11,118 ) Other 36,040 7,653 68,532 (94,272 ) Contingent acquisition consideration paid (4,334 ) - (4,334 ) - Net cash provided by operating activities 110,446 54,018 280,360 105,893 Investing activities Acquisition of businesses, net of cash acquired (434,366 ) (44,464 ) (547,182 ) (51,994 ) Purchases of fixed assets (25,065 ) (22,155 ) (92,734 ) (77,609 ) Other investing activities (6,173 ) (15,196 ) (6,413 ) (31,197 ) Net cash used in investing activities (465,604 ) (81,815 ) (646,329 ) (160,800 ) Financing activities Increase in long-term debt, net 390,998 14,338 446,847 80,156 Purchases of non-controlling interests, net (111 ) (114 ) (4,285 ) (21,451 ) Dividends paid to common shareholders (10,042 ) (8,954 ) (39,055 ) (34,884 ) Distributions paid to non-controlling interests (454 ) - (7,376 ) (8,061 ) Other financing activities 4,178 (2,960 ) 17,814 3,022 Net cash provided by financing activities 384,569 2,310 413,945 18,782 Effect of exchange rate changes on cash (420 ) (347 ) (447 ) 1,202 Increase (decrease) in cash, cash equivalents and restricted cash 28,991 (25,834 ) 47,529 (34,923 ) Cash, cash equivalents and restricted cash, start of period 177,886 185,182 159,348 194,271 Cash, cash equivalents and restricted cash, end of period $ 206,877 $ 159,348 $ 206,877 $ 159,348
Segmented Results (in thousands of US$) FirstService FirstService Residential Brands Corporate Consolidated Three months ended December 31 2023 Revenues $ 496,281 $ 582,979 $ - $ 1,079,260 Adjusted EBITDA (1) 43,511 61,072 (1,240 ) 103,343 Operating earnings 34,136 20,603 (6,677 ) 48,062 2022 Revenues $ 442,124 $ 577,977 $ - $ 1,020,101 Adjusted EBITDA 38,115 67,438 (3,006 ) 102,547 Operating earnings 30,562 44,040 (7,144 ) 67,458 FirstService FirstService Residential Brands Corporate Consolidated Year ended December 31 2023 Revenues $ 1,996,823 $ 2,337,725 $ - $ 4,334,548 Adjusted EBITDA 187,792 242,356 (14,420 ) 415,728 Operating earnings 155,044 126,468 (36,620 ) 244,892 2022 Revenues $ 1,772,258 $ 1,973,577 $ - $ 3,745,835 Adjusted EBITDA 168,637 196,277 (13,182 ) 351,732 Operating earnings 138,873 111,638 (31,485 ) 219,026 (1) See definition and reconciliation on pages 5 and 6.
COMPANY CONTACTS:
D. Scott Patterson Chief Executive Officer
Jeremy Rakusin Chief Financial Officer
(416) 960-9566
What were FirstService Corporation's (FSV) consolidated revenues for the fourth quarter?
FirstService Corporation's consolidated revenues for the fourth quarter were $1.08 billion, a 6% increase relative to the same quarter in the prior year.
What was the percentage increase in Adjusted EBITDA for FirstService Corporation (FSV)?
Adjusted EBITDA for FirstService Corporation (FSV) was up 1%.
What was the percentage increase in consolidated revenues for FirstService Corporation (FSV) for the full year?
Consolidated revenues for FirstService Corporation (FSV) for the full year were up 16%, including 10% organic growth.
What was the percentage increase in Adjusted EBITDA for FirstService Corporation (FSV) for the full year?
Adjusted EBITDA for FirstService Corporation (FSV) was up 18%.
What were the Operating Earnings for FirstService Corporation (FSV) for the year ended December 31, 2023?
Operating Earnings for FirstService Corporation (FSV) for the year ended December 31, 2023, were $244.9 million, versus $219.0 million in the prior year period.
What was the Diluted EPS for FirstService Corporation (FSV) for the year ended December 31, 2023?
Diluted earnings per share for FirstService Corporation (FSV) was $2.24, compared to $2.72 in the prior year.