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FirstService Reports Strong Second Quarter Results

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Robust, Balanced Organic Growth Drives Double-Digit Revenue Increases Across Both FirstService Residential and FirstService Brands

Operating highlights:

    Three months ended   Six months ended
    June 30   June 30
    2019     2018   2019     2018
                         
Revenues (millions) $ 573.9     $ 495.3   $ 1,059.6     $ 921.8
Adjusted EBITDA (millions) (note 1)   65.0       57.1     94.2       82.5
Adjusted EPS (note 2)   1.12       0.86     1.45       1.10
                         
GAAP Operating Earnings   (268.5 )   (1) 42.4     (255.5 )   (1) 53.4
GAAP EPS   (7.48 )   (1) 0.63     (7.69 )   (1) 0.80
                         
(1) Includes $314.4 million settlement of long-term incentive arrangement with FirstService's Founder and Chairman.      


TORONTO, July 24, 2019 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV, NASDAQ:FSV) today reported strong results for its second quarter ended June 30, 2019. All amounts are in US dollars.

Revenues for the second quarter were $573.9 million, a 16% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) increased 14% to $65.0 million, and Adjusted EPS (note 2) was $1.12, a 30% increase versus the prior year quarter. During the second quarter, FirstService reported a GAAP Operating Loss of $268.5 million, reflecting the settlement of the long-term incentive arrangement ("LTIA") with its Founder and Chairman in the amount of $314.4 million. GAAP Operating Earnings were $42.4 million in the prior year period. The GAAP loss per share was $7.48 in the quarter, versus GAAP earnings per share of $0.63 for the same quarter a year ago.

For the six months ended June 30, 2019, revenues were $1.06 billion, a 15% increase relative to the comparable prior year period, Adjusted EBITDA was $94.2 million, up 14%, and Adjusted EPS was $1.45, a 32% increase versus the prior year period. The GAAP Operating Loss was $255.5 million in the current year period, relative to GAAP Operating Earnings of $53.4 million in the prior year period. The GAAP loss per share for the six months year-to-date was $7.69, compared to GAAP earnings per share of $0.80 in the prior year period.

"We delivered another quarter of very strong operating results, principally led by solid organic growth across our businesses," said Scott Patterson, Chief Executive Officer of FirstService. "We are excited about our prospects for the balance of the year, supported by continued broad-based growth and significant contribution from our recently acquired Global Restoration business," 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$2 billion in annual revenues and has approximately 22,000 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 $370.4 million for the second quarter, up 13% versus the prior year quarter, with organic growth accounting for half of this increase. Adjusted EBITDA for the quarter was $39.2 million, versus $33.4 million in the prior year period. Top-line growth was primarily driven by contract wins in our property management business, as well as strong contribution from our seasonal pool and amenity management services. Margin improvement was largely attributable to the strength in these seasonal operations. GAAP Operating Earnings were $32.3 million, versus $27.5 million for the second quarter of last year.

FirstService Brands revenues during the second quarter grew to $203.5 million, up 21% relative to the prior year period and including 6% organic growth together with contribution from recent tuck-under acquisitions across our company-owned operations. Adjusted EBITDA for the second quarter was $28.4 million, up from $26.7 million in the prior year period. Organic growth during the quarter was strong at our California Closets and Century Fire Protection company-owned operations and within our franchised systems. Top-line growth and margins within the division were tempered by weaker performance at our Paul Davis company-owned operations relative to the prior year period. GAAP Operating Earnings were $20.7 million, versus $19.1 million in the prior year quarter.

Corporate costs, as presented in Adjusted EBITDA, were $2.6 million in the second quarter, relative to $3.0 million in the prior year period. On a GAAP basis, corporate costs for the quarter were $321.5 million, relative to $4.3 million in the prior year period, with the increase primarily attributable to the settlement of the LTIA with FirstService's Founder and Chairman.

Conference Call
FirstService will be holding a conference call on Wednesday, July 24, 2019 at 11:00 a.m. Eastern Time to discuss the quarter's results. The number to use for this call is toll-free 1) 1-888-241-0551 or 2) 647-427-3415 for international callers. 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. 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, 2018 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; (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 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
    2019     2018     2019     2018  
                         
Net earnings (loss) $ (275,680 )   $ 29,894     $ (267,535 )   $ 38,829  
Income tax   8,569       9,285       9,778       8,613  
Other income, net   (6,131 )     (39 )     (6,124 )     (103 )
Interest expense, net   4,772       3,210       8,341       6,084  
Operating earnings (loss)   (268,470 )     42,350       (255,540 )     53,423  
Depreciation and amortization   14,165       12,903       26,852       24,686  
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