EX-99 2 newsrelease.htm PRESS RELEASE FirstService Reports Strong Third Quarter Results

EXHIBIT 99.1

FirstService Reports Strong Third Quarter Results

Double-Digit Revenue Growth at Both FirstService Residential and FirstService Brands

Adjusted EBITDA Up 38% Led by Operational Improvements at FirstService Residential

Operating highlights:
 
  Three months ended Nine months ended
  September 30 September 30
  2015 2014 2015 2014
         
Revenues (millions)  $ 349.5  $ 312.0  $ 948.0  $ 849.8
Adjusted EBITDA (millions) (note 1) 39.1 28.3 80.7 61.6
Adjusted EPS (note 2) 0.50 0.39 0.92 0.70

TORONTO, Oct. 28, 2015 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV) (Nasdaq:FSV) today reported results for its third quarter ended September 30, 2015. All amounts are in US dollars.

Revenues for the third quarter were $349.5 million, a 12% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) increased 38% to $39.1 million, and Adjusted EPS (note 2) was $0.50, a 28% increase versus the prior year quarter. GAAP diluted earnings per share was $0.39 in the quarter, versus $0.24 for the same quarter a year ago.

For the nine months ended September 30, 2015, revenues were $948.0 million, a 12% increase relative to the comparable prior year period, Adjusted EBITDA was $80.7 million, up 31%, and Adjusted EPS was $0.92, a 31% increase versus the prior year period. GAAP diluted EPS for the nine month period was $0.50, compared to $0.46 in the prior year period.

"FirstService performed very well across all of its operations for the quarter. At FirstService Residential, we continued to realize strong organic growth primarily driven by market share gains. The business also recorded a significant increase in profitability in line with our expectations," said Scott Patterson, Chief Executive Officer of FirstService. "FirstService Brands' franchised systems continued to capitalize on a buoyant home improvement sector and we made good progress in advancing the operational foundation for our corporate store strategies to position for future growth. We remain on track for delivering upon our original expectations for current year consolidated results," 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$1.1 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 Quarterly Results

FirstService Residential revenues were $277.9 million for the third quarter, up 11% versus the prior year quarter. Revenue growth was comprised of 8% organic growth (10% on a local currency basis) and 3% from recent acquisitions. Adjusted EBITDA for the quarter was $25.3 million, versus $16.5 million in the prior year period. Third quarter performance was driven by continued strong growth from new client wins and margin expansion from regional operational improvements. Prior period results were adversely affected by higher than expected employee medical benefits costs and non-recurring expenses related to the down-sizing of our homeowner collection business.

FirstService Brands revenues grew to $71.6 million, up 16% relative to the prior year period. Revenue growth was driven by organic growth of 9% (11% on a local currency basis) and augmented by 7% growth from recent acquisitions, the most significant being our first Paul Davis Restoration corporate store investment. Adjusted EBITDA for the third quarter was $16.6 million, up from $15.1 million in the prior year period. Most of our franchised operations contributed strong performance, partially offset by slower weather-related claims growth at Paul Davis and further investments in our corporate-owned strategies at both California Closets and Paul Davis which resulted in a modest margin decline for the division.

Corporate costs were $2.9 million in the second quarter, relative to $3.3 million in the prior year period.

Conference Call

FirstService will be holding a conference call on Wednesday, October 28, 2015 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 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. 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 from continuing operations 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 from continuing operations to adjusted EBITDA appears below.

  Three months ended Nine months ended
(in thousands of US$) September 30 September 30
  2015 2014 2015 2014
         
Net earnings  $ 18,917  $ 14,144  $ 30,291  $ 24,928
Income tax 10,057 4,096 19,316 10,719
Other income, net (10) 31 109 (97)
Interest expense, net 2,453 1,733 7,044 5,199
Operating earnings 31,417 20,004 56,760 40,749
Depreciation and amortization 6,979 7,049 21,112 18,365
Acquisition-related items 186 795 469 1,118
Stock-based compensation expense 495 462 1,629 1,374
Spin-off transaction costs -- -- 740 --
Adjusted EBITDA  $ 39,077  $ 28,310  $ 80,710  $ 61,606

2. Reconciliation of net earnings from continuing operations and diluted net earnings (loss) per share from continuing operations 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; (iv) stock-based compensation expense; (v) spin-off transaction costs and (vi) a spin-off tax charge. 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 from continuing operations, 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 from continuing operations to adjusted net earnings and of diluted net earnings (loss) per share from continuing operations to adjusted earnings per share appears below.

  Three months ended Nine months ended
(in thousands of US$) September 30 September 30
  2015 2014 2015 2014
         
Net earnings  $ 18,917  $ 14,144  $ 30,291  $ 24,928
Non-controlling interest share of earnings (2,421) (2,676) (4,834) (5,108)
Acquisition-related items 186 795 469 1,118
Amortization of intangible assets 2,334 3,091 7,275 6,513
Stock-based compensation expense 495 462 1,629 1,374
Spin-off transaction costs -- -- 740 --
Spin-off tax charge -- -- 1,646 --
Income tax on adjustments (1,107) (1,398) (3,628) (3,086)
Non-controlling interest on adjustments (44) (74) (133) (141)
Adjusted net earnings  $ 18,360  $ 14,344  $ 33,455  $ 25,598
         
  Three months ended Nine months ended
(in US$) September 30 September 30
  2015 2014 2015 2014
         
Diluted net earnings per share  $ 0.39  $ 0.24  $ 0.50  $ 0.46
Non-controlling interest redemption increment 0.07 0.08 0.20 0.09
Acquisition-related items -- 0.02 0.01 0.03
Amortization of intangible assets, net of tax 0.03 0.05 0.11 0.10
Stock-based compensation expense, net of tax 0.01 -- 0.03 0.02
Spin-off transaction costs, net of tax -- -- 0.02 --
Spin-off tax charge -- -- 0.05 --
Adjusted earnings per share  $ 0.50  $ 0.39  $ 0.92  $ 0.70
         
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) 2015 2014 2015 2014
         
Revenues  $ 349,525  $ 312,029  $ 947,965  $ 849,828
         
Cost of revenues 241,048 215,906 662,497 598,412
Selling, general and administrative expenses 69,895 68,275 206,387 191,184
Depreciation 4,645 3,958 13,837 11,852
Amortization of intangible assets 2,334 3,091 7,275 6,513
Acquisition-related items (1) 186 795 469 1,118
Spin-off transaction costs -- -- 740 --
Operating earnings 31,417 20,004 56,760 40,749
Interest expense, net 2,453 1,733 7,044 5,199
Other expense (income) (10) 31 109 (97)
Earnings before income tax 28,974 18,240 49,607 35,647
Income tax 10,057 4,096 19,316 10,719
Net earnings 18,917 14,144 30,291 24,928
Non-controlling interest share of earnings 2,421 2,676 4,834 5,108
Non-controlling interest redemption increment 2,431 2,870 7,326 3,251
Net earnings attributable to Company  $ 14,065  $ 8,598  $ 18,131  $ 16,569
         
Net earnings per common share        
Basic  $ 0.39  $ 0.24  $ 0.50  $ 0.46
Diluted  $ 0.39  $ 0.24  $ 0.50  $ 0.46
         
         
Adjusted earnings per share (2)  $ 0.50  $ 0.39  $ 0.92  $ 0.70
         
Weighted average common shares (thousands)        
Basic 35,974 35,971 35,973 35,971
Diluted 36,457 36,365 36,581 36,371
         
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, 2015 December 31, 2014
     
Assets    
Cash and cash equivalents  $ 49,606  $ 66,790
Accounts receivable 116,926 115,143
Inventories 14,493 9,489
Prepaid expenses and other current assets 55,398 59,301
Current assets 236,423 250,723
Other non-current assets 5,776 4,736
Fixed assets 57,232 55,203
Deferred income tax 8,348 4,572
Goodwill and intangible assets 301,951 300,310
Total assets  $ 609,730  $ 615,544
     
Liabilities and shareholders' equity    
Accounts payable and accrued liabilities  $ 109,323  $ 80,250
Other current liabilities 30,584 28,119
Long-term debt - current 1,133 17,725
Current liabilities 141,040 126,094
Long-term debt - non-current 197,464 221,632
Other liabilities 14,677 13,907
Deferred income tax 13,412 14,236
Redeemable non-controlling interests 74,240 80,926
Shareholders' equity 168,897 158,749
Total liabilities and equity  $ 609,730  $ 615,544
     
Supplemental balance sheet information    
Total debt  $ 198,597  $ 239,357
Total debt, net of cash 148,991 172,567
     
Consolidated Statements of Cash Flows
(in thousands of US dollars)
  Three months ended Nine months ended
  September 30 September 30
(unaudited) 2015 2014 2015 2014
         
Cash provided by (used in)        
         
Operating activities        
Net earnings  $ 18,917  $ 14,144  $ 30,291  $ 24,928
Items not affecting cash:        
Depreciation and amortization 6,980 7,049 21,113 18,365
Deferred income tax (4,535) (186) (4,312) (1,339)
Other (1,345) 630 (1,165) 1,532
  20,017 21,637 45,927 43,486
         
Changes in non-cash working capital        
Accounts receivable (150) 7,114 469 289
Payables and accruals 28,469 3,623 28,811 4,641
Other (14,326) (8,860) 681 (3,848)
Net cash provided by operating activities 34,010 23,514 75,888 44,568
         
Investing activities        
Acquisition of businesses, net of cash acquired (3,502) (7,724) (12,002) (16,509)
Purchases of fixed assets (3,884) (4,069) (14,291) (15,963)
Other investing activities (1,262) (48) (2,735) (835)
Net cash used in investing activities (8,648) (11,841) (29,028) (33,307)
         
Financing activities        
Increase in long-term debt, net (23,497) (28,493) (40,760) 29,880
Net contributions (distributions) from/to Old FSV -- 13,774 1,995 (17,177)
Purchases of non-controlling interests (29) (365) (17,415) (8,857)
Financing fees paid (4) -- (1,090) --
Dividends paid to common shareholders (3,597) -- (3,597) --
Distributions paid to non-controlling interests (412) (422) (2,699) (2,806)
Other financing activities 1,523 -- (246) (1,774)
Net cash (used in) provided by financing activities (26,016) (15,506) (63,812) (734)
         
Effect of exchange rate changes on cash (1,578) (206) (232) (231)
         
(Decrease) increase in cash and cash equivalents (2,232) (4,039) (17,184) 10,296
         
Cash and cash equivalents, beginning of period 51,838 100,701 66,790 86,366
         
Cash and cash equivalents, end of period  $ 49,606  $ 96,662  $ 49,606  $ 96,662
         
Segmented Results
(in thousands of US dollars)
 
  FirstService FirstService    
(unaudited) Residential Brands Corporate Consolidated
         
Three months ended September 30        
2015        
Revenues  $ 277,938  $ 71,587 $ --   $ 349,525
Adjusted EBITDA 25,310 16,648 (2,881) 39,077
         
Operating earnings 20,298 14,524 (3,405) 31,417
2014        
Revenues  $ 250,209  $ 61,820 $ --   $ 312,029
Adjusted EBITDA 16,518 15,065 (3,273) 28,310
         
Operating earnings 10,460 13,302 (3,758) 20,004
         
  FirstService FirstService    
  Residential Brands Corporate Consolidated
         
Nine months ended September 30        
2015        
Revenues  $ 766,535  $ 181,430 $ --   $ 947,965
Adjusted EBITDA 55,141 31,657 (6,088) 80,710
         
Operating earnings 38,655 25,897 (7,792) 56,760
         
2014        
Revenues  $ 691,675  $ 158,153 $ --   $ 849,828
Adjusted EBITDA 38,702 28,722 (5,818) 61,606
         
Operating earnings 24,427 23,587 (7,265) 40,749
CONTACT: Scott Patterson
         President & CEO

         Jeremy Rakusin
         Chief Financial Officer

         (416) 960-9500