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FirstService Reports Strong First Quarter Results

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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 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 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.firstservice.com.

Segmented Quarterly Results
FirstService 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 Call
FirstService 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 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) 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 FirstService's services and the cost of providing services; (iii) 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; (iv) changes in or the failure to comply with government regulations; and (v) other factors which are described in FirstService's 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 management's discussion and analysis will 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 (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 Company's 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 Company's 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 (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 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 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 (decrement)   (0.04 )     (0.03 )
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 (decrement)   (1,815 )     (1,260 )
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   $ 184,295
Restricted cash   24,714     24,643
Accounts receivable   411,937     418,890
Prepaid and other current assets   202,222     191,488
Current assets   791,585     819,316
Other non-current assets   11,807     12,922
Deferred income tax   2,166     2,048
Fixed assets   128,153     126,569
Operating lease right-of-use assets   154,035     153,185
Goodwill and intangible assets   1,083,017     1,082,500
Total assets $ 2,170,763   $ 2,196,540
           
           
Liabilities and shareholders' equity          
Accounts payable and accrued liabilities $ 324,897   $ 349,692
Unearned revenues   103,112     90,131
Other current liabilities   9,765     12,135
Operating lease liabilities - current   36,340     35,315
Long-term debt - current   56,637     56,478
Current liabilities   530,751     543,751
Long-term debt - non-current   495,678     533,126
Operating lease liabilities - non-current   128,623     128,793
Other liabilities   94,768     96,093
Deferred income tax   41,286     41,345
Non-controlling interests   191,250     193,034
Shareholders' equity   688,407     660,398
Total liabilities and equity $ 2,170,763   $ 2,196,540
           
           
Supplemental balance sheet information          
Total debt $ 552,315   $ 589,604
Total 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 acquired   (2,521 )     -  
Purchases 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 restricted cash   (31,512 )     (1,107 )
           
Cash, cash equivalents and restricted cash, beginning of period   208,938       134,291  
           
Cash, cash equivalents and restricted cash, end of period $ 177,426     $ 133,184  


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 EBITDA   29,407     33,407     (3,019 )     59,795
                         
  Operating earnings   23,244     16,506     (5,868 )     33,882
                         
2020                      
  Revenues $ 339,663   $ 294,168   $ -     $ 633,831
  Adjusted EBITDA   23,890     21,946     (1,971 )     43,865
                         
  Operating earnings   17,424     4,907     (6,347 )     15,984

COMPANY CONTACTS:

D. Scott Patterson
Chief Executive Officer

Jeremy Rakusin
Chief Financial Officer

(416) 960-9566


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