GlobeNewswire Inc | Oct 26, 2021 07:30AM EDT

October 26, 2021

Operating highlights:

Three months ended Nine months ended September 30 September 30 2021 2020 2021 2020 Revenues (millions) $ 849.4 $ 741.9 $ 2,392.1 $ 1,997.4 Adjusted EBITDA (millions) 94.2 88.7 243.8 203.8 (note 1)Adjusted EPS (note 2) 1.50 1.19 3.36 2.44 GAAP Operating Earnings 61.5 59.1 156.8 120.0 GAAP EPS 1.03 0.75 2.35 1.52

TORONTO, Oct. 26, 2021 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported strong results for its third quarter ended September 30, 2021. All amounts are in US dollars.

Consolidated revenues for the third quarter were $849.4million, a 14% increase relative to the same quarter in the prior year, including 8% organic growth. Adjusted EBITDA (note 1) increased 6% to $94.2million, and Adjusted EPS (note 2) was $1.50, representing 26% growth over the prior year quarter. During the third quarter, FirstService reported GAAP Operating Earnings of $61.5million, up from $59.1million in the prior year period. The GAAP diluted earnings per share was $1.03 in the quarter, compared to $0.75 for the same quarter a year ago.

For the nine months ended September 30, 2021, consolidated revenues were $2.39billion, a 20% increase relative to the comparable prior year period, Adjusted EBITDA was $243.8million, up 20%, and Adjusted EPS was $3.36, an increase of 38% versus the prior year period. FirstServices GAAP Operating Earnings were $156.8million in the current year period, versus $120.0 million in the prior year. The GAAP diluted earnings per share for the nine months year-to-date was $2.35, compared to $1.52 in the prior year period.

We are pleased that all of our businesses contributed in delivering strong organic growth, said Scott Patterson, Chief Executive Officer of FirstService. This performance was particularly impressive, given the ongoing labour and resource constraints which limited our ability to drive further growth. Market demand indicators remain strong and provide us with confidence in navigating through the challenging macroeconomic environment, 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 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 more than US$3.1billion 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 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.rstservice.com.

Segmented Quarterly ResultsFirstService Residential revenues were $423.1million for the third quarter, up 13% compared to the prior year quarter, including organic growth of 8% and the remaining contribution from recent tuck-under acquisitions. Revenue growth in the quarter reflected ongoing contract wins and was augmented by increased labour-driven services in our amenity management offering related to further client facility reopenings in the aftermath of the pandemic. Adjusted EBITDA for the quarter was $45.1million, versus $41.8million in the prior year period. GAAP Operating Earnings were $38.0million, versus $35.2million for the third quarter of last year. Margins decreased during the quarter as a result of increased wage inflation compared to the prior year.

FirstService Brands revenues during the third quarter grew to $426.4 million, up 16% relative to the prior year period. Organic growth was 9%, with the balance from recent tuck-under acquisitions. Top-line growth was broad-based across all of our service lines, including double-digit organic growth at our home improvement brands and Century Fire Protection. Adjusted EBITDA for the third quarter was $53.0million, versus $48.7million in the prior year period. GAAP Operating Earnings were $31.1million, versus $28.5million in the prior year quarter. The division margin decline was due to increased supply chain costs and associated labour cost increases during the third quarter.

Corporate costs, as presented in Adjusted EBITDA, were $3.9million in the third quarter, relative to $1.8million in the prior year period. On a GAAP basis, corporate costs for the quarter were $7.5million, relative to $4.5million in the prior year period. The year-over-year cost increase reflects higher compensation expense compared to the prior year third quarter, which included significant COVID-19 expense reductions.

Conference CallFirstService will be holding a conference call on Tuesday, October 26, 2021 at 11:00 a.m. Eastern Time to discuss the quarters results. The numbers to use for this call are 1) toll-free 1-888-241-0551; or 2) for international callers, 647-427-3415. 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 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) general economic and business conditions, which will, among other things, impact demand for FirstServices services and the cost of providing services; (ii) 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; (iii) changes in or the failure to comply with government regulations; and (iv) other factors which are described in FirstServices annual information form for the year ended December31, 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. 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.

COMPANY CONTACTS:

D. Scott PattersonPresident & CEO

Jeremy RakusinChief Financial Officer

(416) 960-9566

Notes1. 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 Companys 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 Companys 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 Nine months ended(in thousands of September 30 September 30US$) 2021 2020 2021 2020 Net earnings $ 52,872 $ 40,966 $ 120,735 $ 76,663 Income tax 17,321 12,969 39,321 24,118 Other income, net (12,539 ) (269 ) (15,295 ) (645 )Interest expense, 3,873 5,464 12,031 19,881 netOperating earnings 61,527 59,130 156,792 120,017 Depreciation and 23,977 26,184 70,876 73,179 amortizationAcquisition-related 5,152 950 4,946 1,752 itemsStock-basedcompensation 3,540 2,468 11,230 8,880 expenseAdjusted EBITDA $ 94,196 $ 88,732 $ 243,844 $ 203,828

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 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 per share to adjusted earnings per share appears below.

Three months ended Nine months ended(in thousands of September 30 September 30US$) 2021 2020 2021 2020 Net earnings $ 52,872 $ 40,966 $ 120,735 $ 76,663 Non-controllinginterest share of (1,564 ) (760 ) (6,927 ) (5,841 )earningsAcquisition-related 5,152 950 4,946 1,752 itemsAmortization of 10,567 13,191 30,987 35,416 intangible assetsStock-basedcompensation 3,540 2,468 11,230 8,880 expenseIncome tax on (3,668 ) (4,071 ) (10,977 ) (11,517 )adjustmentsNon-controllinginterest on (404 ) (303 ) (756 ) (823 )adjustmentsAdjusted net $ 66,495 $ 52,441 $ 149,238 $ 104,530 earnings Three months ended Nine months ended(in US$) September 30 September 30 2021 2020 2021 2020 Diluted net $ 1.03 $ 0.75 $ 2.35 $ 1.52 earnings per shareNon-controllinginterest redemption 0.13 0.17 0.22 0.13 incrementAcquisition-related 0.11 0.02 0.11 0.04 itemsAmortization ofintangible assets, 0.17 0.21 0.50 0.60 net of taxStock-basedcompensation 0.06 0.04 0.18 0.15 expense, net of taxAdjusted earnings $ 1.50 $ 1.19 $ 3.36 $ 2.44 per share

FIRSTSERVICE CORPORATIONCondensed Consolidated Statements of Earnings(in thousands of US dollars, except per share amounts) Three months Nine months ended September 30 ended September 30 2021 2020 2021 2020 Revenues $ 849,431 $ 741,932 $ 2,392,127 $ 1,997,360 Cost of revenues 579,309 496,367 1,624,797 1,343,526 Selling, generaland administrative 179,466 159,301 534,716 458,886 expensesDepreciation 13,410 12,993 39,889 37,763 Amortization of 10,567 13,191 30,987 35,416 intangible assetsAcquisition-related 5,152 950 4,946 1,752 items (1)Operating earnings 61,527 59,130 156,792 120,017 Interest expense, 3,873 5,464 12,031 19,881 netOther income (2) (12,539 ) (269 ) (15,295 ) (645 )Earnings before 70,193 53,935 160,056 100,781 income taxIncome tax 17,321 12,969 39,321 24,118 Net earnings 52,872 40,966 120,735 76,663 Non-controllinginterest share of 1,564 760 6,927 5,841 earningsNon-controllinginterest redemption 5,693 7,379 9,603 5,588 incrementNet earningsattributable to $ 45,615 $ 32,827 $ 104,205 $ 65,234 Company Net earnings per common share Basic $ 1.04 $ 0.76 $ 2.38 $ 1.54 Diluted 1.03 0.75 2.35 1.52 Adjusted earnings $ 1.50 $ 1.19 $ 3.36 $ 2.44 per share (3) Weighted averagecommon shares (thousands) Basic 43,865 43,476 43,798 42,480 Diluted 44,471 43,942 44,351 42,868

Notes to Condensed Consolidated Statements of Earnings(1) Acquisition-related items include transaction costs, and contingent acquisition consideration fair value adjustments.(2) Other income 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 dollars) September 30, 2021 December 31, 2020 Assets Cash and cash equivalents $ 140,861 $ 184,295 Restricted cash 31,262 24,643 Accounts receivable 534,279 418,890 Prepaid and other current 223,442 191,488 assets Current assets 929,844 819,316 Other non-current assets 17,430 14,970 Fixed assets 134,791 126,569 Operating lease right-of-use 156,708 153,185 assetsGoodwill and intangible assets 1,155,621 1,082,500 Total assets $ 2,394,394 $ 2,196,540 Liabilities and shareholders' equityAccounts payable and accrued $ 400,015 $ 349,692 liabilitiesOther current liabilities 134,922 102,266 Operating lease liabilities - 38,740 35,315 currentLong-term debt - current 56,378 56,478 Current liabilities 630,055 543,751 Long-term debt - non-current 509,270 533,126 Operating lease liabilities - 128,885 128,793 non-currentOther liabilities 105,191 96,093 Deferred income tax 40,078 41,345 Redeemable non-controlling 212,814 193,034 interestsShareholders' equity 768,101 660,398 Total liabilities and $ 2,394,394 $ 2,196,540 equity Supplemental balance sheet informationTotal debt $ 565,648 $ 589,604 Total debt, net of cash 424,787 405,309

Consolidated Statements of Cash Flows (in thousands of US dollars) Three months ended Nine months ended September 30 September 30 2021 2020 2021 2020 Cash provided by (used in) Operating activitiesNet earnings $ 52,872 $ 40,966 $ 120,735 $ 76,663 Items not affecting cash: Depreciation and 23,978 26,184 70,877 73,179 amortization Deferred (995 ) (2,134 ) (2,725 ) (6,339 ) income tax Other (3,998 ) 2,486 4,000 8,155 71,857 67,502 192,887 151,658 Changes innon-cash working capital Accounts (41,135 ) (27,384 ) (79,821 ) 5,509 receivable Payables and 22,073 34,295 13,705 52,630 accruals Other (24,254 ) (32,494 ) 8,493 (14,837 )Net cashprovided by 28,541 41,919 135,264 194,960 operatingactivities Investing activitiesAcquisition ofbusinesses, net (46,408 ) (64,507 ) (86,011 ) (64,507 )of cash acquiredDisposition ofbusiness, net of 15,780 - 15,780 - cash disposedPurchases of (13,245 ) (8,820 ) (42,348 ) (30,901 )fixed assetsOther investing (1,836 ) (544 ) (6,112 ) (1,330 )activitiesNet cash used ininvesting (45,709 ) (73,871 ) (118,691 ) (96,738 )activities Financing activitiesIncrease inlong-term debt, (6,922 ) (41,863 ) (24,827 ) (163,787 )netProceedsreceived on - - - 150,008 common shareissuancePurchases ofnon-controlling (276 ) (3,723 ) (5,676 ) (18,790 )interests, netDividends paidto common (7,999 ) (7,168 ) (23,190 ) (20,259 )shareholdersDistributionspaid to (1,057 ) (3,368 ) (8,213 ) (3,418 )non-controllinginterestsOther financing (1,345 ) 5,255 8,516 6,483 activitiesNet cash used infinancing (17,599 ) (50,867 ) (53,390 ) (49,763 )activities Effect ofexchange rate (531 ) (101 ) 2 (385 )changes on cash Increase(decrease) incash, cash (35,298 ) (82,920 ) (36,815 ) 48,074 equivalents andrestricted cash Cash, cashequivalents andrestricted cash, 207,421 265,285 208,938 134,291 beginning ofperiod Cash, cashequivalents and $ 172,123 $ 182,365 $ 172,123 $ 182,365 restricted cash,end of period

Segmented Results(in thousands of US dollars) FirstService FirstService Residential Brands Corporate Consolidated Three monthsended September 30 2021 Revenues $ 423,069 $ 426,362 $ - $ 849,431 Adjusted 45,083 53,009 (3,896 ) 94,196 EBITDA Operating 37,998 31,074 (7,545 ) 61,527 earnings 2020 Revenues $ 374,756 $ 367,176 $ - $ 741,932 Adjusted 41,805 48,678 (1,751 ) 88,732 EBITDA Operating 35,200 28,451 (4,521 ) 59,130 earnings FirstService FirstService Residential Brands Corporate Consolidated Nine monthsended September 30 2021 Revenues $ 1,179,770 $ 1,212,357 $ - $ 2,392,127 Adjusted 120,984 134,587 (11,727 ) 243,844 EBITDA Operating 101,646 78,329 (23,183 ) 156,792 earnings 2020 Revenues $ 1,052,572 $ 944,788 $ - $ 1,997,360 Adjusted 102,940 106,468 (5,580 ) 203,828 EBITDA Operating 84,604 50,722 (15,309 ) 120,017 earnings