EX-99.1 2 exh_991.htm PRESS RELEASE EdgarFiling

EXHIBIT 99.1

FirstService Reports Strong Second Quarter Results

Double-digit revenue growth at both FirstService Residential and FirstService Brands drives significant increases in Adjusted EBITDA for each division

Operating highlights:

    
  Three months ended Six months ended
  June 30 June 30
  2016 2015 2016 2015
             
Revenues (millions)$385.1 $326.3 $692.7 $598.4
Adjusted EBITDA (millions) (note 1)     40.2  32.3  53.0  41.6
Adjusted EPS (note 2) 0.52  0.40  0.60  0.41
            
GAAP Operating Earnings 30.8  23.9  35.1  25.3
GAAP EPS 0.35  0.20  0.30  0.11
            

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.

     
  Three months ended Six months ended
(in thousands of US$)June 30 June 30
  2016 2015 2016 2015
             
Net earnings$ 18,072  $ 11,808  $ 19,589  $11,374
Income tax  10,262    9,488    11,112   9,259
Other income, net  (26)   (83)   (101)  119
Interest expense, net  2,486    2,723    4,455   4,591
Operating earnings  30,794    23,936    35,055   25,343
Depreciation and amortization  8,494    7,135    15,908   14,133
Acquisition-related items  322    36    393   283
Stock-based compensation expense      635    465    1,605   1,134
Spin-off transaction costs  -    740    -   740
Adjusted EBITDA$ 40,245  $ 32,312  $ 52,961  $41,633
 

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.

     
  Three months ended Six months ended
(in thousands of US$)June 30 June 30
  2016 2015 2016 2015
             
Net earnings$ 18,072  $ 11,808  $ 19,589  $ 11,374 
Non-controlling interest share of earnings  (1,508)   (1,294)   (2,316)   (2,413)
Acquisition-related items  322    36    393    283 
Amortization of intangible assets  2,833    2,391    5,225    4,941 
Stock-based compensation expense  635    465    1,605    1,134 
Spin-off transaction costs  -    740    -    740 
Spin-off tax charge  -    1,646    -    1,646 
Income tax on adjustments  (1,355)   (1,266)   (2,651)   (2,520)
Non-controlling interest on adjustments  (62)   (45)   (95)   (90)
Adjusted net earnings$ 18,937  $ 14,481  $ 21,750  $ 15,095 
             
  Three months ended Six months ended
(in US$)June 30 June 30
  2016 2015 2016 2015
             
Diluted net earnings per share$ 0.35  $ 0.20  $ 0.30  $ 0.11 
Non-controlling interest redemption increment  0.10    0.08    0.17    0.13 
Acquisition-related items  0.01    -    0.01    0.01 
Amortization of intangible assets, net of tax  0.05    0.04    0.09    0.07 
Stock-based compensation expense, net of tax        0.01    0.01    0.03    0.02 
Spin-off transaction costs, net of tax  -    0.02    -    0.02 
Spin-off tax charge  -    0.05    -    0.05 
Adjusted earnings per share$ 0.52  $ 0.40  $ 0.60  $ 0.41 
             


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)   2016    2015    2016   2015
               
Revenues $ 385,104  $ 326,251  $ 692,690  $598,440
               
Cost of revenues   266,434    224,142    488,940   421,449
Selling, general and administrative expenses   79,060    70,262    152,394   136,492
Depreciation   5,661    4,744    10,683   9,192
Amortization of intangible assets   2,833    2,391    5,225   4,941
Acquisition-related items (1)   322    36    393   283
Spin-off transaction costs   -    740    -   740
Operating earnings   30,794    23,936    35,055   25,343
Interest expense, net   2,486    2,723    4,455   4,591
Other expense (income)   (26)   (83)   (101)  119
Earnings before income tax   28,334    21,296    30,701   20,633
Income tax   10,262    9,488    11,112   9,259
Net earnings   18,072    11,808    19,589   11,374
Non-controlling interest share of earnings   1,508    1,294    2,316   2,413
Non-controlling interest redemption increment   3,857    3,137    6,223   4,895
Net earnings attributable to Company  $ 12,707  $ 7,377  $ 11,050  $4,066
               
Net earnings per common share             
 Basic $ 0.35  $ 0.21  $ 0.31  $0.11
 Diluted   0.35    0.20    0.30   0.11
              
               
Adjusted earnings per share (2) $ 0.52  $ 0.40  $ 0.60  $0.41
               
Weighted average common shares (thousands)              
  Basic   36,000    35,971    35,984   35,971
  Diluted   36,423    36,601    36,380   36,619
                     

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, 2016 December 31, 2015
       
Assets     
Cash and cash equivalents$36,285 $45,560
Accounts receivable 155,608  114,521
Inventories 26,089  16,155
Prepaid expenses and other current assets   61,406  53,986
 Current assets 279,388  230,222
Other non-current assets 5,333  6,009
Fixed assets 68,825  57,575
Deferred income tax 7,142  6,553
Goodwill and intangible assets 377,141  300,124
 Total assets$737,829 $600,483
       
       
Liabilities and shareholders' equity     
Accounts payable and accrued liabilities$131,977 $102,043
Other current liabilities 38,018  24,015
Long-term debt - current 1,178  4,041
 Current liabilities 171,173  130,099
Long-term debt - non-current 259,485  197,158
Other liabilities 15,443  14,670
Deferred income tax 29,841  13,971
Redeemable non-controlling interests 88,783  77,559
Shareholders' equity 173,104  167,026
 Total liabilities and equity$737,829 $600,483
       
       
Supplemental balance sheet information     
Total debt$260,663 $201,199
Total debt, net of cash 224,378  155,639
      


Consolidated Statements of Cash Flows       
(in thousands of US dollars)
    Three months ended  Six months ended
    June 30  June 30
(unaudited)   2016    2015    2016    2015 
              
Cash provided by (used in)            
              
Operating activities            
Net earnings $ 18,072  $ 11,808  $ 19,589  $ 11,374 
Items not affecting cash:            
 Depreciation and amortization   8,493    7,135    15,907    14,133 
 Deferred income tax   (558)   (657)   (1,094)   223 
 Other   630    (486)   536    180 
     26,637    17,800    34,938    25,910 
              
Changes in non-cash working capital            
 Accounts receivable   (17,462)   (9,076)   (20,851)   619 
 Payables and accruals   22,993    3,504    19,566    342 
 Other   6,288    10,980    6,641    15,007 
Net cash provided by operating activities   38,456    23,208    40,294    41,878 
              
Investing activities            
Acquisition of businesses, net of cash acquired   (72,043)   (4,298)   (77,081)   (8,500)
Purchases of fixed assets   (7,078)   (6,821)   (13,978)   (10,407)
Other investing activities   (2,867)   (2,414)   (7,448)   (1,473)
Net cash used in investing activities   (81,988)   (13,533)   (98,507)   (20,380)
              
Financing activities            
Increase in long-term debt, net   49,298    (24,880)   59,374    (17,263)
Net contributions from Old FSV   -    31,906    -    1,995 
Sale (purchases) of non-controlling interests, net   13    (9,750)   259    (17,386)
Financing fees paid   -    (1,086)   -    (1,086)
Dividends paid to common shareholders   (3,960)   -    (7,421)   - 
Distributions paid to non-controlling interests   (1,832)   (737)   (3,064)   (2,287)
Repurchases of Subordinate Voting Shares   (1,349)   -    (1,349)   - 
Other financing activities   399    (151)   842    (1,769)
Net cash (used in) provided by financing activities     42,569    (4,698)   48,641    (37,796)
              
Effect of exchange rate changes on cash   173    1,719    297    1,346 
              
Increase (decrease) in cash and cash equivalents   (790)   6,696    (9,275)   (14,952)
              
Cash and cash equivalents, beginning of period   37,075    45,142    45,560    66,790 
              
Cash and cash equivalents, end of period $ 36,285  $ 51,838  $ 36,285  $ 51,838 
              


Segmented Results
(in thousands of US dollars)
             
           
  FirstSevice FirstService    
(unaudited)Residential Brands Corporate Consolidated
             
Three months ended June 30               
             
2016           
 Revenues$288,658 $96,446 $ -  $385,104
 Adjusted EBITDA 26,376  16,730   (2,861)  40,245
             
 Operating earnings 21,380  13,056   (3,642)  30,794
             
2015           
 Revenues$262,794 $63,457 $ -  $326,251
 Adjusted EBITDA 20,502  13,734   (1,924)  32,312
             
 Operating earnings 15,122  11,844   (3,030)  23,936
             
             
           
  FirstService FirstService    
  Residential Brands Corporate Consolidated
             
Six months ended June 30           
             
2016           
 Revenues$538,464 $154,226 $ -  $692,690
 Adjusted EBITDA 38,113  19,925   (5,077)  52,961
             
 Operating earnings 27,737  14,447   (7,129)  35,055
             
2015           
 Revenues$488,596 $109,844 $ -  $598,440
 Adjusted EBITDA 29,831  15,009   (3,207)  41,633
             
 Operating earnings 19,099  11,373   (5,129)  25,343
               

COMPANY CONTACTS:

Scott Patterson
President & CEO

Jeremy Rakusin
Chief Financial Officer

(416) 960-9500