GlobeNewswire Inc | Oct 28, 2020 07:30AM EDT

October 28, 2020

Operating highlights:

Three months ended Nine months ended September 30 September 30 2020 2019 2020 2019 Revenues (millions) $ 741.9 $ 672.3 $ 1,997.4 $ 1,731.8 Adjusted EBITDA 88.7 77.1 203.8 171.3 (millions) (note 1)Adjusted EPS (note 2) 1.19 0.92 2.44 2.38 GAAP Operating 59.1 49.7 120.0 (205.8 ) ^Earnings (1)GAAP EPS 0.75 0.50 1.52 (6.93 ) ^ (1) (1) Includes $314.4 million settlement of long-termincentive arrangement with FirstService's Founder and Chairman.

TORONTO, Oct. 28, 2020 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported strong results for its third quarter ended September 30, 2020. All amounts are in US dollars.

Revenues for the third quarter were $741.9million, a 10% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) increased 15% to $88.7million, and Adjusted EPS (note 2) was $1.19, representing 29% growth over the prior year quarter. During the third quarter, FirstService reported GAAP Operating Earnings of $59.1million, up from $49.7million in the prior year period. The GAAP diluted earnings per share was $0.75 in the quarter, compared to $0.50 for the same quarter a year ago.

For the nine months ended September 30, 2020, revenues were $2.00billion, a 15% increase relative to the comparable prior year period, Adjusted EBITDA was $203.8million, up 19%, and Adjusted EPS was $2.44, versus $2.38 in the prior year period. FirstServices GAAP Operating Earnings were $120.0million in the current year period, versus an Operating Loss of $205.8 million in the prior year, reflecting the 2019 settlement of the long-term incentive arrangement (LTIA) with its Founder and Chairman in the amount of $314.4million. The GAAP diluted earnings per share for the nine months year-to-date was $1.52, compared to GAAP loss per share of $6.93 in the prior year period.

We are pleased to have rebounded this quarter to report strong organic growth buoyed by increased activity levels in restoration, said Scott Patterson, Chief Executive Officer of FirstService. Our operations continue to demonstrate resilience in the current pandemic environment and we look forward to a solid finish to the year, he concluded.

About FirstService CorporationFirstServiceCorporation 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 US$2.4billion 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. More information is available at www.rstservice.com.

Segmented Quarterly ResultsFirstService Residential revenues were $374.8million for the third quarter, matching the top-line in the prior year quarter. Growth was tempered by continued COVID-related closures of client facilities, which negatively impacted our amenity management services revenue. Adjusted EBITDA for the quarter was $41.8million, versus $39.8million in the prior year period. GAAP Operating Earnings were $35.2million, versus $33.0million for the third quarter of last year. Margin expansion during the quarter was driven by an increase in higher margin ancillary revenues, primarily related to strong home resale activity.

FirstService Brands revenues during the third quarter grew to $367.2million, up 24% relative to the prior year period, of which 15% was organic. Organic growth was principally driven by strong performance at our restoration service lines, which benefited from increased storm-related activity and large loss claims relative to last year. Adjusted EBITDA for the third quarter was $48.7million, versus $40.8million in the prior year period. GAAP Operating Earnings were $28.5million, versus $22.1million in the prior year quarter.

Corporate costs, as presented in Adjusted EBITDA, were $1.8million in the third quarter, relative to $3.5million in the prior year period. On a GAAP basis, corporate costs for the quarter were $4.5million, relative to $5.4million in the prior year period. The year-over-year cost reduction is due to lower compensation costs and foreign exchange.

Conference CallFirstService will be holding a conference call on Wednesday, October 28, 2020 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, 2019 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.

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; (vi) stock-based compensation expense; and (vii) settlement of the LTIA. 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$) 2020 2019 2020 2019 Net earnings (loss) $ 40,966 $ 26,336 $ 76,663 $ (241,199 )Income tax 12,969 10,872 24,118 20,650 Other income, net (269 ) (229 ) (645 ) (6,353 )Interest expense, 5,464 12,719 19,881 21,060 netOperating earnings 59,130 49,698 120,017 (205,842 )(loss)Depreciation and 26,184 24,181 73,179 51,033 amortizationSettlement oflong-term incentive - - - 314,379 arrangementAcquisition-related 950 1,493 1,752 5,373 itemsStock-basedcompensation 2,468 1,772 8,880 6,382 expenseAdjusted EBITDA $ 88,732 $ 77,144 $ 203,828 $ 171,325

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; (iv) stock-based compensation expense; (v) a stock-based compensation tax adjustment related to a US GAAP change; and (vi) settlement of the LTIA. 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$) 2020 2019 2020 2019 Net earnings (loss) $ 40,966 $ 26,336 $ 76,663 $ (241,199 )Non-controllinginterest share of (760 ) (2,057 ) (5,841 ) (6,262 )earningsSettlement oflong-term incentive - - - 314,379 arrangementAcquisition-related 950 1,493 1,752 5,373 itemsAmortization of 13,191 13,029 35,416 22,235 intangible assetsStock-basedcompensation 2,468 1,772 8,880 6,382 expenseStock-basedcompensation tax - - - (2,854 )adjustment for USGAAP changeIncome tax on (4,071 ) (3,848 ) (11,517 ) (8,149 )adjustmentsNon-controllinginterest on (303 ) (374 ) (823 ) (542 )adjustmentsAdjusted net $ 52,441 $ 36,351 $ 104,530 $ 89,363 earnings Three months ended Nine months ended(in US$) September 30 September 30 2020 2019 2020 2019 Diluted netearnings (loss) per $ 0.75 $ 0.50 $ 1.52 $ (6.84 )shareNon-controllinginterest redemption 0.17 0.11 0.13 0.25 incrementSettlement oflong-term incentive - - - 8.37 arrangementAcquisition-related 0.02 0.04 0.04 0.12 itemsAmortization ofintangible assets, 0.21 0.24 0.60 0.43 net of taxStock-basedcompensation 0.04 0.03 0.15 0.13 expense, net of taxStock-basedcompensation tax - - - (0.08 )adjustment for USGAAP changeAdjusted earnings $ 1.19 $ 0.92 $ 2.44 $ 2.38 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(unaudited) 2020 2019 2020 2019 Revenues $ 741,932 $ 672,253 $ 1,997,360 $ 1,731,816 Cost of revenues 496,367 451,671 1,343,526 1,181,025 Selling, general andadministrative 159,301 145,210 458,886 385,848 expensesDepreciation 12,993 11,152 37,763 28,798 Amortization of 13,191 13,029 35,416 22,235 intangible assetsSettlement oflong-term incentive - - - 314,379 arrangementAcquisition-related 950 1,493 1,752 5,373 items (1)Operating earnings 59,130 49,698 120,017 (205,842 )(loss)Interest expense, 5,464 12,719 19,881 21,060 netOther income (269 ) (229 ) (645 ) (6,353 )Earnings (loss) 53,935 37,208 100,781 (220,549 )before income taxIncome tax 12,969 10,872 24,118 20,650 Net earnings (loss) 40,966 26,336 76,663 (241,199 )Non-controllinginterest share of 760 2,057 5,841 6,262 earningsNon-controllinginterest redemption 7,379 4,419 5,588 9,386 incrementNet earnings (loss)attributable to $ 32,827 $ 19,860 $ 65,234 $ (256,847 )Company Net earnings (loss) per common shareBasic $ 0.76 $ 0.51 $ 1.54 $ (6.93 )Diluted 0.75 0.50 1.52 (6.93 ) Adjusted earnings $ 1.19 $ 0.92 $ 2.44 $ 2.38 per share (2) Weighted averagecommon shares (thousands)Basic 43,476 39,224 42,480 37,087 Diluted 43,942 39,691 42,868 37,542

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, 2020 December 31, 2019 Assets Cash and cash equivalents $ 158,570 $ 121,198 Restricted cash 23,795 13,093 Accounts receivable 415,712 393,730 Prepaid and other current 196,015 140,115 assetsCurrent assets 794,092 668,136 Other non-current assets 12,208 11,824 Fixed assets 130,226 131,545 Operating lease right-of-use 137,511 132,893 assetsGoodwill and intangible assets 1,048,188 1,011,071 Total assets $ 2,122,225 $ 1,955,469 Liabilities and shareholders' equityAccounts payable and accrued $ 318,695 $ 241,670 liabilitiesOther current liabilities 98,013 80,369 Operating lease liabilities - 33,901 30,622 currentLong-term debt - current 56,501 5,545 Current liabilities 507,110 358,206 Long-term debt - non-current 548,130 761,078 Operating lease liabilities - 114,248 111,247 non-currentOther liabilities 83,784 66,150 Deferred income tax 51,904 58,239 Redeemable non-controlling 179,161 174,662 interestsShareholders' equity 637,888 425,887 Total liabilities and equity $ 2,122,225 $ 1,955,469 Supplemental balance sheet informationTotal debt $ 604,631 $ 766,623 Total debt, net of cash 446,061 645,425

Consolidated Statements of Cash Flows (in thousands of US dollars) Three months ended Nine months ended September 30 September 30(unaudited) 2020 2019 2020 2019 Cash provided by (used in) Operating activitiesNet earnings $ 40,966 $ 26,336 $ 76,663 $ (241,199 )(loss)Items not affecting cash:Depreciation and 26,184 24,182 73,179 51,033 amortizationNon-cashsettlement oflong-term - - - 289,721 incentivearrangementDeferred income (2,134 ) (22 ) (6,339 ) 1,443 taxOther 2,486 2,058 8,155 1,000 67,502 52,554 151,658 101,998 Changes innon-cash working capitalAccounts (27,384 ) 3,010 5,509 (16,218 )receivablePayables and 34,295 (37,878 ) 52,630 (42,800 )accrualsOther (32,494 ) 2,549 (14,837 ) 21,641 Net cash providedby operating 41,919 20,235 194,960 64,621 activities Investing activitiesAcquisition ofbusinesses, net (64,507 ) (9,585 ) (64,507 ) (555,116 )of cash acquiredDisposition ofbusiness, net of - - - 13,030 cash disposedPurchases of (8,820 ) (11,821 ) (30,901 ) (34,108 )fixed assetsOther investing (544 ) (724 ) (1,330 ) 135 activitiesNet cash used ininvesting (73,871 ) (22,130 ) (96,738 ) (576,059 )activities Financing activitiesIncrease inlong-term debt, (41,863 ) 23,586 (163,787 ) 612,465 netProceeds receivedon common share - - 150,008 - issuancePurchases ofnon-controlling (3,723 ) (199 ) (18,790 ) (33,409 )interests, netFinancing fees - (167 ) - (3,863 )paidDividends paid tocommon (7,168 ) (5,883 ) (20,259 ) (16,158 )shareholdersDistributionspaid to (3,368 ) (1,995 ) (3,418 ) (6,264 )non-controllinginterestsOther financing 5,255 539 6,483 950 activitiesNet cash providedby (used in) (50,867 ) 15,881 (49,763 ) 553,721 financingactivities Effect ofexchange rate (101 ) 586 (385 ) 275 changes on cash Increase(decrease) incash, cash (82,920 ) 14,572 48,074 42,558 equivalents andrestricted cash Cash, cashequivalents andrestricted cash, 265,285 107,830 134,291 79,844 beginning ofperiod Cash, cashequivalents and $ 182,365 $ 122,402 $ 182,365 $ 122,402 restricted cash,end of period

Segmented Results(in thousands of US dollars) FirstService FirstService (unaudited) Residential Brands Corporate Consolidated Three monthsended September 30 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 2019 Revenues $ 375,196 $ 297,057 $ - $ 672,253 Adjusted 39,787 40,838 (3,481 ) 77,144 EBITDA Operating 33,036 22,062 (5,400 ) 49,698 earnings FirstService FirstService Residential Brands Corporate Consolidated Nine monthsended September 30 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 2019 Revenues $ 1,064,911 $ 666,905 $ - $ 1,731,816 Adjusted 100,783 80,297 (9,755 ) 171,325 EBITDA Operating 81,397 46,659 (333,898 ) (205,842 )earnings

COMPANY CONTACTS:

D. Scott PattersonPresident & CEO

Jeremy RakusinChief Financial Officer

(416) 960-9566