GlobeNewswire Inc | Apr 27, 2021 07:30AM EDT

April 27, 2021

Organic Growth and Increased Operating Margins Drive Strong Profitability

Operating highlights:

Three months ended March 31 2021 2020 Revenues (millions) $ 711.1 $ 633.8 Adjusted EBITDA (millions) (note 1) 59.8 43.9 Adjusted EPS (note 2) 0.66 0.37 GAAP Operating Earnings (millions) 33.9 16.0 GAAP EPS 0.50 0.13

TORONTO, April 27, 2021 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported strong results for its first quarter ended March 31, 2021. All amounts are in US dollars.

Consolidated revenues for the first quarter were $711.1 million, up 12% relative to the same quarter in the prior year, with organic growth accounting for half of the increase. Adjusted EBITDA (note 1) increased 36% to $59.8 million, and Adjusted EPS (note 2) was $0.66, representing 78% growth over the prior year quarter. GAAP Operating Earnings were $33.9 million, relative to $16.0 million in the prior year period. GAAP diluted earnings per share was $0.50 per share in the quarter, versus $0.13 in the same quarter a year ago.

We are pleased to have kicked off the year with a strong first quarter, said Scott Patterson, Chief Executive Officer of FirstService. We saw growing momentum in our home improvement brands and capitalized on increased restoration activity, while our FirstService Residential platform showed continued strength and resilience in countering the impact of the pandemic, he concluded.

About FirstService CorporationFirstService 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 Americas largest manager of residential communities; and FirstService Brands - one of North Americas largest providers of essential property services delivered through individually branded franchise systems and company-owned operations.

FirstService generates approximately US$2.8 billion in annual revenues and has approximately 24,000 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 and the Toronto Stock Exchange under the symbol FSV. More information is available at www.rstservice.com.

Segmented Quarterly ResultsFirstService Residential revenues were $350.5 million for the first quarter, an increase of 3% versus the prior year quarter, including 1% organic growth. Top-line performance continued to be moderated by temporary COVID-19-driven amenity closures and management contract suspensions in certain regions, particularly in the northeast U.S. and Canada. Adjusted EBITDA for the quarter was $29.4 million, up from $23.9 million in the prior year period. GAAP Operating Earnings were $23.2 million, up from $17.4 million versus the first quarter of last year. Operating margins were positively impacted by ancillary revenue, primarily driven by increased home resale activity.

FirstService Brands revenues for the first quarter totalled $360.6 million, up 23% relative to the prior year period. The revenue increase was comprised of 13% organic growth, with the balance from recent tuck-under acquisitions. Revenue was driven by robust growth at our home improvement brands, and further bolstered by increased weather-related activity across our restoration operations. Adjusted EBITDA was $33.4 million, up from $21.9 million in the prior year quarter. GAAP Operating Earnings were $16.5 million, versus $4.9 million in the prior year quarter. Operating margin expansion reflected the benefit of operating leverage in our businesses tied to strong home remodelling activity, as well as the increased contribution mix of restoration operations to the Brands division for the current quarter.

Corporate costs, as presented in Adjusted EBITDA, were $3.0 million in the first quarter, relative to $2.0 million in the prior year period. On a GAAP basis, corporate costs for the quarter were $5.9 million, relative to $6.3 million in the prior year period.

Conference CallFirstService will be holding a conference call on Tuesday, April 27, 2021 at 11:00 a.m. Eastern Time to discuss results for the first quarter of 2021. The numbers to use for this call are 1) toll-free 1-888-241-0551; or 2) for international callers, 647-427-3415, with the conference ID number 1932237 for all participants. The call will be simultaneously web cast and can be accessed live or after the call at www.firstservice.com in the Investors / Newsroom section.

Forward-looking StatementsThis 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) the magnitude and length of economic and operational disruption resulting from the COVID-19 pandemic; (ii) general economic and business conditions, which will, among other things, impact demand for FirstServices services and the cost of providing services; (iii) the ability of FirstService to implement its business strategy, including FirstServices ability to acquire suitable acquisition candidates on acceptable terms and successfully integrate newly acquired businesses with its existing businesses; (iv) changes in or the failure to comply with government regulations; and (v) other factors which are described in FirstServices annual information form for the year ended December 31, 2020 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. Our interim consolidated financial statements and related managements discussion and analysis will be made available on SEDAR at www.sedar.com.

Notes1. Reconciliation of net earnings to Adjusted EBITDA:

Adjusted EBITDA is defined as net earnings, adjusted to exclude: (i) income tax; (ii) other (income) expense; (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, its ability to service debt, and 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 Companys overall enterprise valuation and to evaluate acquisition targets. Adjusted EBITDA is presented as a supplemental measure because the Company believes such a measure is useful to investors as a reasonable indicator of operating performance, due to the low capital intensity of the Companys 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 Companys 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 (loss) to adjusted EBITDA appears below.

Three months ended(in thousands of US dollars) March 31 2021 2020 Net earnings $ 23,843 $ 5,780 Income tax 7,720 1,546 Other income (1,868 ) (229 )Interest expense, net 4,187 8,887 Operating earnings 33,882 15,984 Depreciation and amortization 23,225 23,507 Acquisition-related items (99 ) 405 Stock-based compensation expense 2,787 3,969 Adjusted EBITDA $ 59,795 $ 43,865

2. Reconciliation of net earnings and net earnings per share to adjusted net earnings and adjusted EPS:

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 expense related to 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 share, as determined in accordance with GAAP. The Companys 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 per share to adjusted EPS appears below.

Three months ended(in thousands of US dollars) March 31 2021 2020 Net earnings $ 23,843 $ 5,780 Non-controlling interest share of earnings (3,767 ) (1,755 )Acquisition-related items (99 ) 405 Amortization of intangible assets 10,012 11,361 Stock-based compensation expense 2,787 3,969 Income tax on adjustments (3,328 ) (3,986 )Non-controlling interest on adjustments (175 ) (222 )Adjusted net earnings $ 29,273 $ 15,552 Three months ended(in US dollars) March 31 2021 2020 Diluted net earnings per share $ 0.50 $ 0.13 Non-controlling interest redemption increment (0.04 ) (0.03 )(decrement)Acquisition-related items - 0.01 Amortization of intangible assets, net of tax 0.16 0.19 Stock-based compensation expense, net of tax 0.04 0.07 Adjusted EPS $ 0.66 $ 0.37

FIRSTSERVICE CORPORATION Operating Results (in thousands of US dollars, except per share amounts) Three months ended March 31(unaudited) 2021 2020 Revenues $ 711,066 $ 633,831 Cost of revenues 490,812 435,149 Selling, general and administrative expenses 163,246 158,786 Depreciation 13,213 12,146 Amortization of intangible assets 10,012 11,361 Acquisition-related items (1) (99 ) 405 Operating earnings 33,882 15,984 Interest expense, net 4,187 8,887 Other income (1,868 ) (229 )Earnings before income tax 31,563 7,326 Income tax 7,720 1,546 Net earnings 23,843 5,780 Non-controlling interest share of earnings 3,767 1,755 Non-controlling interest redemption increment (1,815 ) (1,260 )(decrement)Net earnings attributable to Company 21,891 5,285 Net earnings per share Basic $ 0.50 $ 0.13 Diluted 0.50 0.13 Adjusted EPS (2) $ 0.66 $ 0.37 Weighted average common shares (thousands) Basic 43,696 41,557 Diluted 44,218 41,937

(1) Acquisition-related items include contingent acquisition consideration fair value adjustments, and transaction costs.

(2) See definition and reconciliation above.

Condensed Consolidated Balance Sheets (in thousands of US dollars) (unaudited) March 31, 2021 December 31, 2020 Assets Cash and cash equivalents $ 152,712 $ 184,295Restricted cash 24,714 24,643Accounts receivable 411,937 418,890Prepaid and other current assets 202,222 191,488Current assets 791,585 819,316Other non-current assets 11,807 12,922Deferred income tax 2,166 2,048Fixed assets 128,153 126,569Operating lease right-of-use assets 154,035 153,185Goodwill and intangible assets 1,083,017 1,082,500Total assets $ 2,170,763 $ 2,196,540 Liabilities and shareholders' equity Accounts payable and accrued liabilities $ 324,897 $ 349,692Unearned revenues 103,112 90,131Other current liabilities 9,765 12,135Operating lease liabilities - current 36,340 35,315Long-term debt - current 56,637 56,478Current liabilities 530,751 543,751Long-term debt - non-current 495,678 533,126Operating lease liabilities - non-current 128,623 128,793Other liabilities 94,768 96,093Deferred income tax 41,286 41,345Non-controlling interests 191,250 193,034Shareholders' equity 688,407 660,398Total liabilities and equity $ 2,170,763 $ 2,196,540 Supplemental balance sheet information Total debt $ 552,315 $ 589,604Total debt, net of cash 399,603 405,309

Condensed Consolidated Statements of Cash Flows(in thousands of US dollars) Three months ended March 31(unaudited) 2021 2020 Cash provided by (used in) Operating activities Net earnings $ 23,843 $ 5,780 Items not affecting cash: Depreciation and amortization 23,225 23,507 Deferred income tax (749 ) (2,056 )Other 2,974 3,824 49,293 31,055 Changes in non cash working capital Accounts receivable 8,252 20,982 Payables and accruals (26,920 ) (10,479 )Other (3,914 ) (1,739 )Net cash provided by operating activities 26,711 39,819 Investing activities Acquisition of businesses, net of cash (2,521 ) - acquiredPurchases of fixed assets (13,337 ) (15,348 )Other investing activities (2,066 ) (183 )Net cash used in investing activities (17,924 ) (15,531 ) Financing activities Decrease in long-term debt, net (37,653 ) (16,852 )Purchases of non-controlling interests, net (3,391 ) (3,751 )Dividends paid to common shareholders (7,192 ) (6,224 )Other financing activities 7,727 2,342 Net cash used in financing activities (40,509 ) (24,485 ) Effect of exchange rate changes on cash 210 (910 ) Decrease in cash, cash equivalents and (31,512 ) (1,107 )restricted cash Cash, cash equivalents and restricted cash, 208,938 134,291 beginning of period Cash, cash equivalents and restricted cash, $ 177,426 $ 133,184 end of period

Segmented Results(in thousands of US dollars) FirstService FirstService (unaudited) Residential Brands Corporate Consolidated Three months ended March 31 2021 Revenues $ 350,480 $ 360,586 $ - $ 711,066 Adjusted 29,407 33,407 (3,019 ) 59,795 EBITDA Operating 23,244 16,506 (5,868 ) 33,882 earnings 2020 Revenues $ 339,663 $ 294,168 $ - $ 633,831 Adjusted 23,890 21,946 (1,971 ) 43,865 EBITDA Operating 17,424 4,907 (6,347 ) 15,984 earnings

COMPANY CONTACTS:

D. Scott PattersonChief Executive Officer

Jeremy RakusinChief Financial Officer

(416) 960-9566