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FirstService Reports Very Strong Fourth Quarter Results

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Strong Organic Growth Supported by Robust Restoration Activity

Operating highlights:

    Three months ended   Year ended  
    December 31   December 31  
    2020   2019   2020   2019    
                           
Revenues (millions) $ 775.1   $ 675.6   $ 2,772.4   $ 2,407.4    
Adjusted EBITDA (millions) (note 1)   79.9     63.9     283.7     235.2    
Adjusted EPS (note 2)   1.02     0.66     3.46     3.00    
                           
GAAP Operating Earnings   49.4     31.4     169.4     (174.4 ) (1)
GAAP EPS   0.50     0.13     2.02     (6.58 ) (1)
                           
(1) Includes $314.4 million of expense associated with the settlement of the long-term incentive arrangement with FirstService's Founder and Chairman.  

TORONTO, Feb. 09, 2021 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV, NASDAQ:FSV) today announced very strong fourth quarter and full year results for the year ended December 31, 2020. All amounts are in US dollars.

Revenues for the fourth quarter were $775.1 million, a 15% increase relative to the same quarter in the prior year. Adjusted EBITDA (note 1) was $79.9 million, up 25%, and Adjusted EPS (note 2) was $1.02, up 55% from the prior year quarter. GAAP Operating Earnings were $49.4 million, relative to $31.4 million in the prior year period. GAAP diluted EPS was $0.50 per share in the quarter, compared to $0.13 for the same quarter a year ago.

For the year ended December 31, 2020, revenues were $2.77 billion, a 15% increase relative to the prior year. Adjusted EBITDA was $283.7 million, up 21%, and Adjusted EPS was $3.46, up 15% versus the prior year of $3.00. GAAP Operating Earnings were $169.4 million, compared to a GAAP Operating Loss of $174.4 million in the prior year period, reflecting the settlement of the long-term incentive arrangement ("LTIA") with FirstService's Founder and Chairman in the amount of $314.4 million during the second quarter of 2019. GAAP earnings per share was $2.02 versus a GAAP loss per share of $6.58 in the prior year.

"We capped off the year with a very strong fourth quarter, largely driven by organic growth," said Scott Patterson, Chief Executive Officer of FirstService. "We are proud of our performance throughout 2020, demonstrating strength and stability in the face of the pandemic, and we look forward to capitalizing on our growth opportunities as the environment improves," 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 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. 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 Fourth Quarter Results
FirstService Residential revenues totalled $362.5 million for the fourth quarter, up 4% relative to $347.1 million in the prior year quarter. This organic top-line growth was bolstered by strong ancillary services, particularly from robust home resales across North America and increased maintenance and project management activity in certain markets. Adjusted EBITDA was $35.5 million, compared to $29.8 million reported in the prior year period. GAAP Operating Earnings were $28.0 million, versus $23.3 million for the fourth quarter of last year. Margin improvement was due to higher margin ancillary revenue, primarily tied to home resales.

FirstService Brands revenues totalled $412.5 million, up 26% versus $328.5 million in the prior year period. The increase included 18% organic growth, with the balance from recent tuck-under acquisitions. Organic growth for the quarter was principally driven by Global Restoration, which continued to capitalize on weather-related and large loss claims arising from increased storm activity during the preceding third quarter. Adjusted EBITDA for the quarter was $48.6 million, up 28% versus the prior year quarter. GAAP Operating Earnings were $28.1 million, versus $13.9 million in the prior year quarter. The division EBITDA margin was relatively in line with the prior year quarter, while the operating earnings margin improved year-over-year due to accelerated intangible asset amortization in 2019 arising from the large Global Restoration acquisition.

Corporate costs, as presented in Adjusted EBITDA were $4.2 million in the fourth quarter, relative to $3.9 million in the prior year period. On a GAAP basis, corporate costs for the quarter were $6.6, relative to $5.8 million in the prior year period.

Segmented Full Year Results
FirstService Residential revenues were $1.42 billion for the full year, slightly higher than in 2019. Our top-line was adversely impacted by COVID-related client facility closures, which affected our delivery of amenity management services for most of 2020. Adjusted EBITDA was $138.4 million, up 6% versus the prior year. GAAP Operating Earnings were $112.6 million, compared to $104.7 million in the prior year. Margin improvement was largely due to an increase in higher margin ancillary revenue, principally tied to strong home resale activity levels.

FirstService Brands revenues for the year totalled $1.36 billion, up 36% versus the prior year, comprised of 8% organic growth and the balance from recent acquisitions, including full-year contribution from the significant Global Restoration transaction, which closed in mid-2019. Organic revenue growth was strong at Global Restoration, which capitalized on increased storm-related activity relative to the prior year. Top-line growth within the division was tempered by a decline in our home improvement service lines, which were negatively impacted by COVID-related, government-mandated "stay at home" measures for a significant portion of the year. Adjusted EBITDA for the year was $155.1 million, up 31% relative to the prior year. GAAP Operating Earnings were $78.8 million, versus $60.6 million a year ago. The earnings margins in the division modestly declined due to the full-year contribution of lower margin Global Restoration operations in 2020.

Corporate costs, as presented in Adjusted EBITDA, were $9.8 million for the full year, relative to $13.7 million in the prior year, with the decrease primarily attributable to foreign exchange. On a GAAP basis, corporate costs were $21.9 million, relative to $339.7 million a year ago, with the decrease primarily attributable to the settlement of the LTIA in the second quarter of 2019.

Conference Call & Presentation
FirstService will be holding a conference call on Tuesday, February 9, 2021 at 11:00 a.m. Eastern Time to discuss the results for the fourth quarter and full year. 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 web cast 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, 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.

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. 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
    2020   2019   2020     2019  
                         
Net earnings (loss) $ 32,927   $ 13,568   $ 109,590     $ (227,631 )
Income tax   11,747     6,497     35,865       27,147  
Other expense (income)   284     338     (361 )     (6,015 )
Interest expense, net   4,437     11,020     24,318       32,080  
Operating earnings (loss)   49,395     31,423     169,412       (174,419 )
Depreciation and amortization   25,203     28,524     98,382       79,557  
Settlement of long-term incentive arrangement   -     -     -       314,379  
Acquisition-related items   2,548     2,166     4,300       7,539  
Stock-based compensation expense   2,748     1,744     11,628       8,126  
Adjusted EBITDA $ 79,894   $ 63,857   $ 283,722     $ 235,182  

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; (iv) stock-based compensation expense; (v) a stock-based compensation tax adjustment related to a US GAAP change; and (vi) settlement of the LTIA. 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
    2020     2019     2020     2019  
                         
Net earnings (loss) $ 32,927     $ 13,568     $ 109,590     $ (227,631 )
Non-controlling interest share of earnings   (513 )     (1,612 )     (6,354 )     (7,874 )
Settlement of long-term incentive arrangement   -       -       -       314,379  
Acquisition-related items   2,548       2,166       4,300       7,539  
Amortization of intangible assets   11,048       16,463       46,464       38,698  
Stock-based compensation expense   2,748       1,744       11,628       8,126  
Stock-based compensation tax adjustment for US GAAP change   -       -       -       (2,854 )
Income tax on adjustments   (3,587 )     (5,321 )     (15,104 )     (13,470 )
Non-controlling interest on adjustments   (304 )     (492 )     (1,127 )     (1,034 )
Adjusted net earnings $ 44,867     $ 26,516     $ 149,397     $ 115,879  
                         
    Three months ended   Twelve months ended
(in US$) December 31   December 31
    2020     2019     2020     2019  
                         
Diluted net earnings (loss) per share $ 0.50     $ 0.13     $ 2.02     $ (6.51 )
Non-controlling interest redemption increment   0.24       0.17       0.37       0.42  
Settlement of long-term incentive arrangement   -       -       -       8.13  
Acquisition-related items   0.05       0.04       0.10       0.16  
Amortization of intangible assets, net of tax   0.18       0.29       0.77       0.72  
Stock-based compensation expense, net of tax   0.05       0.03       0.20       0.15  
Stock-based compensation tax adjustment for US GAAP change   -       -       -       (0.07 )
Adjusted earnings per share $ 1.02     $ 0.66     $ 3.46     $ 3.00  


FIRSTSERVICE CORPORATION
Operating Results
(in thousands of US$, except per share amounts)
          Three months     Twelve months
          ended December 31     ended December 31
      2020     2019     2020       2019  
                             
Revenues   $ 775,055   $ 675,594   $ 2,772,415     $ 2,407,410  
                             
Cost of revenues     528,272     453,072     1,871,798       1,634,097  
Selling, general and administrative expenses     169,637     160,409     628,523       546,257  
Depreciation     14,155     12,061     51,918       40,859  
Amortization of intangible assets     11,048     16,463     46,464       38,698  
Settlement of long-term incentive arrangement     -     -     -       314,379  
Acquisition-related items (1)     2,548     2,166     4,300       7,539  
Operating earnings (loss)     49,395     31,423     169,412       (174,419 )
Interest expense, net     4,437     11,020     24,318       32,080  
Other expense (income)     284     338     (361 )     (6,015 )
Earnings (loss) before income tax     44,674     20,065     145,455       (200,484 )
Income tax     11,747     6,497     35,865       27,147  
Net earnings (loss)     32,927     13,568     109,590       (227,631 )
Non-controlling interest share of earnings     513     1,612     6,354       7,874  
Non-controlling interest redemption increment     10,389     6,719     15,977       16,105  
Net earnings (loss) attributable to Company   $ 22,025   $ 5,237   $ 87,259     $ (251,610 )
                             
Net earnings (loss) per common share                        
                             
    Basic   $ 0.51   $ 0.13   $ 2.04     $ (6.58 )
    Diluted     0.50     0.13     2.02       (6.58 )
                             
Adjusted earnings per share (2)   $ 1.02   $ 0.66   $ 3.46     $ 3.00  
                             
Weighted average common shares (thousands)                        
    Basic     43,577     39,750     42,756       38,225  
    Diluted     44,091     40,141     43,184       38,662  

(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$)
           
             
  December 31, 2020   December 31, 2019
             
Assets          
Cash and cash equivalents $ 184,295   $ 121,198
Restricted cash   24,643     13,093
Accounts receivable   418,890     393,730
Other current assets   191,488     140,115
  Current assets   819,316     668,136
Other non-current assets   14,970     11,824
Fixed assets   126,569     131,545
Operating lease right-of-use assets   153,185     132,893
Goodwill and intangible assets   1,082,500     1,011,071
  Total assets $ 2,196,540   $ 1,955,469
             
             
Liabilities and shareholders' equity          
Accounts payable and accrued liabilities $ 349,692   $ 241,670
Other current liabilities   102,266     80,369
Operating lease liabilities - current   35,315     30,622
Long-term debt - current   56,478     5,545
  Current liabilities   543,751     358,206
Long-term debt - non-current   533,126     761,078
Operating lease liabilities - non-current   128,793     111,247
Other liabilities   96,093     66,150
Deferred income tax   41,345     58,239
Redeemable non-controlling interests   193,034     174,662
Shareholders' equity   660,398     425,887
  Total liabilities and equity $ 2,196,540   $ 1,955,469
             
             
Supplemental balance sheet information          
Total debt $ 589,604   $ 766,623
Total debt, net of cash   405,309     645,425


Condensed Consolidated Statements of Cash Flows              
(in thousands of US$)
        Three months ended     Twelve months ended
        December 31     December 31
      2020       2019       2020       2019  
                           
Cash provided by (used in)                        
                           
Operating activities                        
Net earnings   $ 32,927     $ 13,568     $ 109,590     $ (227,631 )
Items not affecting cash:                        
  Depreciation and amortization     25,203       28,524       98,382       79,557  
  Settlement of long-term incentive arrangement     -       (38,218 )     -       251,503  
  Deferred income tax     (11,715 )     (10,431 )     (18,054 )     (8,988 )
  Other     4,152       1,258       12,307       2,258  
        50,567       (5,299 )     202,225       96,699  
                           
Changes in operating assets and liabilities     46,238       48,486       89,540       11,109  
Net cash provided by operating activities     96,805       43,187       291,765       107,808  
                           
Investing activities                        
Acquisition of businesses, net of cash acquired     (34,052 )     (24,747 )     (98,559 )     (579,863 )
Disposal of business, net of cash disposed     -       -       -       13,030  
Purchases of fixed assets     (8,514 )     (12,520 )     (39,415 )     (46,628 )
Other investing activities     (2,958 )     (1,639 )     (4,288 )     (1,504 )
Net cash used in investing activities     (45,524 )     (38,906 )     (142,262 )     (614,965 )
                           
Financing activities                        
Increase (decrease) in long-term debt, net     (15,500 )     (182,606 )     (179,287 )     429,859  
Proceeds received on common share issuance     -       191,737       150,008       191,737  
Sale (purchases) of non-controlling interests, net     (1,441 )     2,761       (20,231 )     (30,648 )
Dividends paid to common shareholders     (7,189 )     (5,886 )     (27,448 )     (22,044 )
Distributions paid to non-controlling interests     -       -       (5,084 )     (5,725 )
Other financing activities     (1,303 )     1,415       6,846       (2,037 )
Net cash provided by (used in) financing activities     (25,433 )     7,421       (75,196 )     561,142  
                           
Effect of exchange rate changes on cash     725       187       340       462  
                           
Increase in cash, cash equivalents and restricted cash     26,573       11,889       74,647       54,447  
                           
Cash, cash equivalents and restricted cash, start of period     182,365       122,402       134,291       79,844  
                           
Cash, cash equivalents and restricted cash, end of period   $ 208,938     $ 134,291     $ 208,938     $ 134,291  
                           


Segmented Results
(in thousands of US$)
                     
    FirstService   FirstService        
  Residential   Brands   Corporate   Consolidated
                         
Three months ended December 31                      
                         
2020                      
  Revenues $ 362,549   $ 412,506   $ -     $ 775,055  
  Adjusted EBITDA   35,484     48,632     (4,222 )     79,894  
  Operating earnings   27,951     28,064     (6,620 )     49,395  
                         
2019                      
  Revenues $ 347,087   $ 328,507   $ -     $ 675,594  
  Adjusted EBITDA   29,800     38,001     (3,944 )     63,857  
  Operating earnings   23,309     13,927     (5,813 )     31,423  
                         
                         
                     
    FirstService   FirstService        
    Residential   Brands   Corporate   Consolidated
                         
Year ended December 31                      
                         
2020                      
  Revenues $ 1,415,121   $ 1,357,294   $ -     $ 2,772,415  
  Adjusted EBITDA   138,424     155,100     (9,802 )     283,722  
  Operating earnings   112,555     78,786     (21,929 )     169,412  
                         
2019                      
  Revenues $ 1,411,998   $ 995,412   $ -     $ 2,407,410  
  Adjusted EBITDA   130,583     118,298     (13,699 )     235,182  
  Operating earnings (loss)   104,706     60,586     (339,711 )     (174,419 )

COMPANY CONTACTS:

D. Scott Patterson
President & CEO

Jeremy Rakusin
Chief Financial Officer

(416) 960-9566


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