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FirstService Reports Strong Fourth Quarter and Full Year Results

Operating highlights:

  Three months ended Year ended 
  December 31 December 31 
  2022 2021 2022 2021 
              
Revenues (millions)$1,020.1 $856.9 $3,745.8 $3,249.1 
Adjusted EBITDA (millions) (note 1) 102.5  83.5  351.7  327.4 
Adjusted EPS (note 2) 1.22  1.21* 4.24  4.57*
              
GAAP Operating Earnings 67.5  44.9  219.0  201.6 
GAAP EPS 0.86  0.70* 2.72  3.05*
              
* Adjusted EPS and GAAP EPS in the prior year three-month period includes a $0.12 after-tax gain from the sale of a building in South Florida. Adjusted EPS and GAAP EPS in the prior year 12-month period includes the aforementioned fourth quarter gain on the building sale and also includes a $0.21 after-tax gain from the divestiture of a small, non-core operation in the FirstService Residential segment (aggregating $0.33 per share).
 
 
 

TORONTO, Feb. 07, 2023 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today announced strong fourth quarter and full year results for the year ended December 31, 2022. All amounts are in US dollars.

Consolidated revenues for the fourth quarter were $1.02 billion, a 19% increase relative to the same quarter in the prior year, and driven by 15% organic growth. Adjusted EBITDA (note 1) was $102.5 million, up 23%, and Adjusted EPS (note 2) was $1.22, largely in-line with the prior year quarter. GAAP Operating Earnings were $67.5 million, relative to $44.9 million in the prior year period. GAAP diluted EPS was $0.86 per share in the quarter, compared to $0.70 for the same quarter a year ago.

For the year ended December 31, 2022, consolidated revenues were $3.75 billion, a 15% increase relative to the prior year, including 9% organic growth. Adjusted EBITDA was $351.7 million, up 7%, and Adjusted EPS was $4.24, versus the prior year of $4.57. GAAP Operating Earnings were $219.0 million, versus $201.6 million in the prior year period. GAAP earnings per share was $2.72, compared to $3.05 in the prior year.

“We are very pleased with how we finished the year,” said Scott Patterson, Chief Executive Officer of FirstService. “The strong fourth quarter provides momentum and confidence in our ability to drive continued healthy growth for the coming year,” 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$3.7 billion in annual revenues and has approximately 27,000 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 revenues totalled $442.1 million for the fourth quarter, up 9% relative to the prior year quarter, including 8% organic growth. Growth was driven by continued expansion of our sited labour revenue across most markets as well as new contract wins. Adjusted EBITDA was $38.1 million, an increase of 7% compared to $35.7 million reported in the prior year period. GAAP Operating Earnings were $30.6 million, versus $25.7 million for the fourth quarter of last year. The EBITDA margin was slightly below the prior year quarter, while the operating earnings margin increased year-over-year due to a decrease in amortization expense in connection with recent acquisitions during the current year quarter.

FirstService Brands revenues totalled $578.0 million, up 28% versus $451.3 million in the prior year period. The increase included 20% organic growth, with the balance from recent tuck-under acquisitions. Organic growth for the quarter was strong across our service lines, with particularly robust activity levels at Century Fire Protection and at our restoration operations, the latter of which benefited from the recent Hurricane Ian event. Adjusted EBITDA for the quarter was $67.4 million, up 27% versus the prior year quarter. GAAP Operating Earnings were $44.0 million, versus $28.3 million in the prior year quarter. The division EBITDA margin was in-line with the prior year quarter, while the operating earnings margin increased year-over-year due to lower acquisition-related items in the current year quarter.

Corporate costs, as presented in Adjusted EBITDA were $3.0 million in the fourth quarter, relative to $5.5 million in the prior year period. On a GAAP basis, corporate costs for the quarter were $7.1 million, relative to $9.1 million in the prior year period. The decrease in corporate costs was primarily due to lower incentive compensation expense during 2022.

Segmented Full Year Results
FirstService Residential revenues were $1.77 billion, up 12% relative to 2021, with the increase comprised of 8% organic growth and the balance from acquisitions. Organic growth was primarily due to increased labour-related services compared to the prior year. Adjusted EBITDA was $168.6 million, up 8% versus the prior year. GAAP Operating Earnings were $138.9 million, compared to $127.3 million in the prior year. Operating margins were impacted by wage inflation, as well as higher growth of labour-driven revenues relative to higher margin ancillaries.

FirstService Brands revenues for the year totalled $1.97 billion, up 19% versus the prior year, comprised of 11% organic growth and the balance from tuck-under acquisitions. Organic revenue growth was broad-based across the division and included significant double-digit increases in our home services and Century Fire brands. Adjusted EBITDA for the year was $196.3 million, up 4% relative to the prior year. GAAP Operating Earnings were $111.6 million, versus $106.6 million a year ago. The division margin decline was a result of cost inflationary pressures within some of our businesses, in addition to the combined impact of growth-related platform investments and more tempered weather activity within our restoration operations.

Corporate costs, as presented in Adjusted EBITDA, were $13.2 million for the full year, relative to $17.2 million in the prior year. On a GAAP basis, corporate costs were $31.5 million, relative to $32.2 million a year ago.

Conference Call & Presentation
FirstService will be holding a conference call on Tuesday, February 7, 2023 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/BIcf694f8bff6748f6a2b035a63e119a25 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/yq9rksk2. 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, 2021 under the heading “Risk factors” (a copy of which may be obtained at www.sedar.com) 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.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. 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
  2022  2021  2022  2021 
             
Net earnings$44,339  $35,395  $145,007  $156,130 
Income tax 14,806   13,554   48,974   52,875 
Other income, net (712)  (8,104)  (146)  (23,399)
Interest expense, net 9,025   4,005   25,191   16,036 
Operating earnings 67,458   44,850   219,026   201,642 
Depreciation and amortization 30,417   28,089   110,140   98,965 
Acquisition-related items 599   7,077   4,520   12,023 
Stock-based compensation expense 4,073   3,516   18,046   14,746 
Adjusted EBITDA$102,547  $83,532  $351,732  $327,376 


A reconciliation of segment operating earnings to segment Adjusted EBITDA appears below.   
            
(in thousands of US$)          
            
            
Three months ended December 31, 2022   FirstService  FirstService    
     Residential  Brands  Corporate
            
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)
            
            
Three months ended December 31, 2021   FirstService  FirstService   
     Residential  Brands  Corporate
            
Operating earnings (loss)  $25,651  $28,250 $(9,051)
Depreciation and amortization   9,172   18,893  24 
Acquisition-related items   911   6,152  14 
Stock-based compensation expense   -   -  3,516 
Adjusted EBITDA  $35,734  $53,295 $(5,497)
            
            
            
Year ended December 31, 2022   FirstService  FirstService    
     Residential  Brands  Corporate
            
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)
            
            
Year ended December 31, 2021   FirstService  FirstService   
     Residential  Brands  Corporate
            
Operating earnings (loss)  $127,297  $106,579 $(32,234)
Depreciation and amortization   28,470   70,404  91 
Acquisition-related items   951   10,899  173 
Stock-based compensation expense   -   -  14,746 
Adjusted EBITDA  $156,718  $187,882 $(17,224)

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
  2022  2021  2022  2021 
             
Net earnings$44,339  $35,395  $145,007  $156,130 
Non-controlling interest share of earnings (3,462)  (495)  (9,381)  (7,422)
Acquisition-related items 599   7,077   4,520   12,023 
Amortization of intangible assets 13,659   12,904   48,725   43,891 
Stock-based compensation expense 4,073   3,516   18,046   14,746 
Income tax on adjustments (4,611)  (4,269)  (17,361)  (15,246)
Non-controlling interest on adjustments (254)  (369)  (968)  (1,125)
Adjusted net earnings$54,343  $53,759  $188,588  $202,997 
             
  Three months ended Twelve months ended
(in US$)December 31 December 31
  2022  2021  2022  2021 
             
Diluted net earnings per share$0.86  $0.70  $2.72  $3.05 
Non-controlling interest redemption increment 0.06   0.09   0.33   0.30 
Acquisition-related items 0.01   0.15   0.10   0.26 
Amortization of intangible assets, net of tax 0.22   0.21   0.79   0.71 
Stock-based compensation expense, net of tax 0.07   0.06   0.30   0.25 
Adjusted earnings per share$1.22  $1.21  $4.24  $4.57 


FIRSTSERVICE CORPORATION
Operating Results
(in thousands of US$, except per share amounts)
     Three months  Twelve months
     ended December 31  ended December 31
   2022   2021   2022   2021 
               
Revenues $1,020,101  $856,945  $3,745,835  $3,249,072 
               
Cost of revenues  690,314   578,043   2,565,720   2,202,840 
Selling, general and administrative expenses  231,313   198,886   846,429   733,602 
Depreciation  16,758   15,185   61,415   55,074 
Amortization of intangible assets  13,659   12,904   48,725   43,891 
Acquisition-related items (1)  599   7,077   4,520   12,023 
Operating earnings  67,458   44,850   219,026   201,642 
Interest expense, net  9,025   4,005   25,191   16,036 
Other income, net (2)  (712)  (8,104)  (146)  (23,399)
Earnings before income tax  59,145   48,949   193,981   209,005 
Income tax  14,806   13,554   48,974   52,875 
Net earnings   44,339   35,395   145,007   156,130 
Non-controlling interest share of earnings  3,462   495   9,381   7,422 
Non-controlling interest redemption increment  2,631   3,893   14,552   13,496 
Net earnings attributable to Company $38,246  $31,007  $121,074  $135,212 
               
Net earnings per common share             
               
  Basic $0.86  $0.71  $2.74  $3.08 
  Diluted  0.86   0.70   2.72   3.05 
               
Adjusted earnings per share (3) $1.22  $1.21  $4.24  $4.57 
               
Weighted average common shares (thousands)            
  Basic  44,220   43,969   44,175   43,841 
  Diluted  44,499   44,576   44,494   44,401 


(1)Acquisition-related items include transaction costs, and contingent acquisition consideration fair value adjustments.
(2)Other income in the prior year three-month period includes a pre-tax gain of $7.3 million from the sale of a building in South Florida. Other income in the prior year 12-month period includes the aforementioned fourth quarter gain on the building sale and also includes a $12.5 million pre-tax gain from the divestiture of a small, non-core operation in the FirstService Residential segment.
(3)See definition and reconciliation above.


Condensed Consolidated Balance Sheets     
(in thousands of US$)
      
       
 December 31, 2022 December 31, 2021
       
Assets     
Cash and cash equivalents$136,219 $165,665
Restricted cash 23,129  28,606
Accounts receivable 635,942  551,564
Other current assets 313,582  218,825
 Current assets 1,108,872  964,660
Other non-current assets 38,549  21,098
Fixed assets 167,012  138,066
Operating lease right-of-use assets 205,544  159,730
Goodwill and intangible assets 1,254,537  1,225,469
 Total assets$2,774,514 $2,509,023
       
       
Liabilities and shareholders' equity     
Accounts payable and accrued liabilities$398,313 $386,529
Other current liabilities 153,866  126,460
Operating lease liabilities - current 49,145  48,047
Long-term debt - current 35,665  57,436
 Current liabilities 636,989  618,472
Long-term debt - non-current 698,798  595,368
Operating lease liabilities - non-current 168,557  122,337
Other liabilities 78,178  111,919
Deferred income tax 51,097  42,070
Redeemable non-controlling interests 233,429  219,135
Shareholders' equity 907,466  799,722
 Total liabilities and equity$2,774,514 $2,509,023
       
       
Supplemental balance sheet information     
Total debt$734,463 $652,804
Total debt, net of cash 598,244  487,139


 

Condensed Consolidated Statements of Cash Flows       
(in thousands of US$)
    Three months ended  Twelve months ended
    December 31  December 31
   2022   2021   2022   2021 
              
Cash provided by (used in)            
              
Operating activities            
Net earnings $44,339  $35,395  $145,007  $156,130 
Items not affecting cash:            
 Depreciation and amortization  30,417   28,089   110,140   98,965 
 Deferred income tax  9,249   109   7,436   (2,616)
 Other  2,076   2,182   18,371   6,182 
    86,081   65,775   280,954   258,661 
              
Changes in non-cash working capital            
 Accounts receivable  (68,445)  (7,122)  (69,671)  (86,943)
 Payables and accruals  28,729   (16,522)  (11,118)  (2,817)
 Other  7,653   3,147   (94,272)  11,641 
              
Contingent acquisition consideration paid  -   (13,273)  -   (13,273)
Net cash provided by operating activities  54,018   32,005   105,893   167,269 
              
Investing activities            
Acquisition of businesses, net of cash acquired  (44,464)  (77,210)  (51,994)  (163,221)
Disposal of business, net of cash disposed  -   -   -   15,780 
Purchases of fixed assets  (22,155)  (15,856)  (77,609)  (58,204)
Other investing activities  (15,196)  5,437   (31,197)  (675)
Net cash used in investing activities  (81,815)  (87,629)  (160,800)  (206,320)
              
Financing activities            
Increase in long-term debt, net  14,338   86,885   80,156   62,058 
Purchases of non-controlling interests, net  (114)  (834)  (21,451)  (6,510)
Dividends paid to common shareholders  (8,954)  (8,017)  (34,884)  (31,207)
Distributions paid to non-controlling interests  -   -   (8,061)  (9,241)
Other financing activities  (2,960)  (213)  3,022   9,331 
Net cash provided by financing activities  2,310   77,821   18,782   24,431 
              
Effect of exchange rate changes on cash  (347)  (49)  1,202   (47)
              
Increase (decrease) in cash, cash equivalents and restricted cash  (25,834)  22,148   (34,923)  (14,667)
              
Cash, cash equivalents and restricted cash, start of period  185,182   172,123   194,271   208,938 
              
Cash, cash equivalents and restricted cash, end of period $159,348  $194,271  $159,348  $194,271 
              
              
              
Segmented Results    
(in thousands of US$)    
                 
               
  FirstService FirstService        
 Residential Brands Corporate Consolidated    
                 
Three months ended December 31               
                 
2022               
 Revenues$442,124 $577,977 $-  $1,020,101    
 Adjusted EBITDA (1) 38,115  67,438  (3,006)  102,547    
 Operating earnings 30,562  44,040  (7,144)  67,458    
                 
2021               
 Revenues$405,661 $451,284 $-  $856,945    
 Adjusted EBITDA 35,734  53,295  (5,497)  83,532    
 Operating earnings 25,651  28,250  (9,051)  44,850    
                 
                 
               
  FirstService FirstService        
  Residential Brands Corporate Consolidated    
                 
Year ended December 31               
                 
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    
                 
2021               
 Revenues$1,585,431 $1,663,641 $-  $3,249,072    
 Adjusted EBITDA 156,718  187,882  (17,224)  327,376    
 Operating earnings 127,297  106,579  (32,234)  201,642    
                 
                 
 (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


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