Double-Digit Annual Revenue and Operating Earnings Growth

Operating highlights:

Three months ended

Year ended

December 31

2023

2022

2023

2022

Revenues (millions)

1,079.3

1,020.1

4,334.5

3,745.8

Adjusted EBITDA (millions) (note 1)

103.3

102.5

415.7

351.7

Adjusted EPS (note 2)

1.11

1.22

4.66

4.24

GAAP Operating Earnings

48.1

67.5

244.9

219.0

GAAP EPS

0.14

0.86

2.24

2.72

TORONTO, Feb. 06, 2024 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV, NASDAQ:FSV) today announced fourth quarter and full year results for the year ended December 31, 2023. All amounts are in US dollars.

Consolidated revenues for the fourth quarter were $1.08 billion, a 6% increase relative to the same quarter in the prior year. Adjusted EBITDA (note 1) was $103.3 million, up 1%, and Adjusted EPS (note 2) was $1.11, versus $1.22 in the prior year quarter.

Operating Earnings for the quarter were $48.1 million, relative to $67.5 million in the prior year period, with the decrease attributable to contingent acquisition consideration fair value adjustments on prior tuck-under acquisitions. Diluted EPS was $0.14 per share in the quarter, compared to $0.86 for the same quarter a year ago.

For the year ended December 31, 2023, consolidated revenues were $4.33 billion, a 16% increase relative to the prior year, including 10% organic growth. Adjusted EBITDA was $415.7 million, up 18%, and Adjusted EPS was $4.66, versus the prior year of $4.24. Operating Earnings were $244.9 million, versus $219.0 million in the prior year period. Diluted earnings per share was $2.24, compared to $2.72 in the prior year.

"We are pleased with our fourth quarter performance which lined up with our expectations," said Scott Patterson, Chief Executive Officer of FirstService. "For the full year, we delivered double-digit organic top-line growth and strong profitability across both divisions, as our brands continued to realize share gains in their respective markets," 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 more than US$4.3 billion in annual revenues and has approximately 29,000 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.ﬁrstservice.com.

Segmented Fourth Quarter Results

FirstService Residential generated revenues of $496.3 million for the fourth quarter, up 12% relative to the prior year quarter, including 9% organic growth. Growth was driven by new contract wins, with particularly strong performance at our sited labour communities. Adjusted EBITDA was $43.5 million, an increase of 14% compared to $38.1 million reported in the prior year period. Operating Earnings were $34.1 million, versus $30.6 million for the fourth quarter of last year. Operating margins were relatively in-line with the prior year quarter.

FirstService Brands recorded revenues of $583.0 million, up 1% versus $578.0 million in the prior year period. Revenues declined 7% on an organic basis due to milder weather patterns at our restoration operations, compared to the significant loss claims activity from hurricanes Ian and Fiona in the prior year quarter. The division top-line performance included very strong growth at Century Fire together with solid contribution from our home services brands, partially offsetting the restoration-driven headwinds. Adjusted EBITDA for the quarter was $61.1 million, compared to $67.4 million in the prior year quarter. Operating Earnings were $20.6 million, versus $44.0 million in the prior year quarter. The segment Adjusted EBITDA margin (note 1) decline was primarily attributable to lower profitability in our restoration operations due to the reduced weather-related activity during the period. The operating earnings margin was further impacted by contingent acquisition consideration fair value adjustments.

Corporate costs, as presented in Adjusted EBITDA (note 1), were $1.2 million in the fourth quarter, relative to $3.0 million in the prior year period. Corporate costs for the quarter were $6.7 million, relative to $7.1 million in the prior year period.

Segmented Full Year Results

FirstService Residential reported revenues of $2.0 billion, up 13% relative to 2022, including 10% organic growth and the balance from tuck-under acquisitions. The strong organic growth was primarily driven by new contract wins, together with contribution from increased labour-related and ancillary services with our existing clients. Adjusted EBITDA was $187.8 million, up 11% versus the prior year. Operating Earnings were $155.0 million, compared to $138.9 million in the prior year. Operating margins were in-line with the prior year.

FirstService Brands revenues were $2.34 billion, up 18% versus the prior year, and comprised of 11% organic growth with the balance from acquisitions. All service lines contributed to the division's organic revenue growth, including an exceptionally strong increase over the prior year at our Century Fire Protection operations. Adjusted EBITDA for the year was $242.4 million, up 23% relative to the prior year. Operating Earnings were $126.5 million, versus $111.6 million a year ago. The segment Adjusted EBITDA margin was positively impacted by operating leverage realized from the strong top-line performance in our restoration and Century Fire businesses. The operating earnings margin was slightly down due to acquisition-related items, primarily contingent acquisition consideration fair value adjustments.

Corporate costs, as presented in Adjusted EBITDA, were $14.4 million for the full year, relative to $13.2 million in the prior year. Corporate costs were $36.6 million, relative to $31.5 million a year ago, with the increase driven primarily by stock-based compensation expense.

Conference Call & Presentation

FirstService will be holding a conference call on Tuesday, February 6, 2024 at 11:00 a.m. Eastern Time to discuss the results for the fourth quarter and full year.

This call is being webcast live at the Company's website at www.firstservice.com. Participants may register for the call here https://register.vevent.com/register/BI3a29ed98b6cc4f77b35613631b9849bb to receive the dial-in number and their unique PIN. To join the webcast in listen only mode, use this link: https://edge.media-server.com/mmc/p/d4d3hvrj . It is recommended that you join 10 minutes prior to the event start (although you may register and dial in at any time during the call).

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, 2022 under the heading "Risk factors" (a copy of which may be obtained at www.sedarplus.ca) 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.sedarplus.ca.

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; and (vi) stock-based compensation expense. 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
	2023			2022			2023			2022

Net earnings	$	23,783		$	44,339		$	147,021		$	145,007
Income tax		12,051			14,806			56,317			48,974
Other income, net		(595	)		(712	)		(5,810	)		(146	)
Interest expense, net		12,823			9,025			47,364			25,191
Operating earnings		48,062			67,458			244,892			219,026
Depreciation and amortization		33,872			30,417			127,934			110,140
Acquisition-related items		16,485			599			21,517			4,520
Stock-based compensation expense		4,924			4,073			21,385			18,046
Adjusted EBITDA	$	103,343		$	102,547		$	415,728		$	351,732

A reconciliation of segment operating earnings to segment Adjusted EBITDA appears below.

(in thousands of US$)


Three months ended December 31, 2023		FirstService			FirstService
		Residential			Brands		Corporate⁽¹⁾

Operating earnings (loss)	$	34,136		$	20,603	$	(6,677	)
Depreciation and amortization		8,373			25,477		22
Acquisition-related items		1,002			14,992		491
Stock-based compensation expense		-			-		4,924
Adjusted EBITDA	$	43,511		$	61,072	$	(1,240	)


Three months ended December 31, 2022		FirstService			FirstService
		Residential			Brands		Corporate⁽¹⁾

Operating earnings (loss)	$	30,562		$	44,040	$	(7,144	)
Depreciation and amortization		7,591			22,804		22
Acquisition-related items		(38	)		594		43
Stock-based compensation expense		-			-		4,073
Adjusted EBITDA	$	38,115		$	67,438	$	(3,006	)



Year ended December 31, 2023		FirstService			FirstService
		Residential			Brands		Corporate⁽¹⁾

Operating earnings (loss)	$	155,044		$	126,468	$	(36,620	)
Depreciation and amortization		33,114			94,729		91
Acquisition-related items		(366	)		21,159		724
Stock-based compensation expense		-			-		21,385
Adjusted EBITDA	$	187,792		$	242,356	$	(14,420	)


Year ended December 31, 2022		FirstService			FirstService
		Residential			Brands		Corporate⁽¹⁾

Operating earnings (loss)	$	138,873		$	111,638	$	(31,485	)
Depreciation and amortization		28,611			81,439		90
Acquisition-related items		1,153			3,200		167
Stock-based compensation expense		-			-		18,046
Adjusted EBITDA	$	168,637		$	196,277	$	(13,182	)


Segment Adjusted EBITDA margin is defined as segment Adjusted EBITDA divided by segment revenues.

(1) Corporate costs represent corporate overhead expenses not directly attributable to reportable segments and are therefore unallocated within segment operating earnings (loss) and Adjusted EBITDA.

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; 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 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
	2023			2022			2023			2022

Net earnings	$	23,783		$	44,339		$	147,021		$	145,007
Non-controlling interest share of earnings		(3,925	)		(3,462	)		(14,140	)		(9,381	)
Acquisition-related items		16,485			599			21,517			4,520
Amortization of intangible assets		13,942			13,659			54,238			48,725
Stock-based compensation expense		4,924			4,073			21,385			18,046
Income tax on adjustments		(4,905	)		(4,611	)		(19,662	)		(17,361	)
Non-controlling interest on adjustments		(665	)		(254	)		(1,517	)		(968	)
Adjusted net earnings	$	49,639		$	54,343		$	208,842		$	188,588

	Three months ended						Twelve months ended
(in US$)	December 31						December 31
	2023			2022			2023			2022

Diluted net earnings per share	$	0.14		$	0.86		$	2.24		$	2.72
Non-controlling interest redemption increment		0.30			0.06			0.72			0.33
Acquisition-related items		0.36			0.01			0.47			0.10
Amortization of intangible assets, net of tax		0.23			0.22			0.88			0.79
Stock-based compensation expense, net of tax		0.08			0.07			0.35			0.30
Adjusted earnings per share	$	1.11		$	1.22		$	4.66		$	4.24

FIRSTSERVICE CORPORATION
Operating Results
(in thousands of US$, except per share amounts)
			Three months						Twelve months
			ended December 31						ended December 31
			2023			2022			2023			2022

Revenues		$	1,079,260		$	1,020,101		$	4,334,548		$	3,745,835

Cost of revenues			735,920			690,314			2,947,008			2,565,720
Selling, general and administrative expenses			244,921			231,313			993,197			846,429
Depreciation			19,930			16,758			73,696			61,415
Amortization of intangible assets			13,942			13,659			54,238			48,725
Acquisition-related items (1)			16,485			599			21,517			4,520
Operating earnings			48,062			67,458			244,892			219,026
Interest expense, net			12,823			9,025			47,364			25,191
Other income, net			(595	)		(712	)		(5,810	)		(146	)
Earnings before income tax			35,834			59,145			203,338			193,981
Income tax			12,051			14,806			56,317			48,974
Net earnings			23,783			44,339			147,021			145,007
Non-controlling interest share of earnings			3,925			3,462			14,140			9,381
Non-controlling interest redemption increment			13,596			2,631			32,490			14,552
Net earnings attributable to Company		$	6,262		$	38,246		$	100,391		$	121,074

Net earnings per common share

	Basic	$	0.14		$	0.86		$	2.25		$	2.74
	Diluted		0.14			0.86			2.24			2.72

Adjusted earnings per share (2)		$	1.11		$	1.22		$	4.66		$	4.24

Weighted average common shares (thousands)
	Basic		44,639			44,420			44,556			44,175
	Diluted		44,874			44,499			44,795			44,494

(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, 2023		December 31, 2022

Assets
Cash and cash equivalents		$	187,617	$	136,219
Restricted cash			19,260		23,129
Accounts receivable			848,230		635,942
Other current assets			311,889		313,582
	Current assets		1,366,996		1,108,872
Other non-current assets			34,418		38,549
Fixed assets			204,188		167,012
Operating lease right-of-use assets			218,299		205,544
Goodwill and intangible assets			1,807,836		1,254,537
	Total assets	$	3,631,737	$	2,774,514


Liabilities and shareholders' equity
Accounts payable and accrued liabilities		$	477,077	$	398,313
Other current liabilities			211,661		153,866
Operating lease liabilities - current			50,898		49,145
Long-term debt - current			37,132		35,665
	Current liabilities		776,768		636,989
Long-term debt - non-current			1,144,975		698,798
Operating lease liabilities - non-current			183,923		168,557
Other liabilities			115,938		78,178
Deferred income tax			53,024		51,097
Redeemable non-controlling interests			332,963		233,429
Shareholders' equity			1,024,146		907,466
	Total liabilities and equity	$	3,631,737	$	2,774,514


Supplemental balance sheet information
Total debt		$	1,182,107	$	734,463
Total debt, net of cash			994,490		598,244

Condensed Consolidated Statements of Cash Flows
(in thousands of US$)
	Three months ended						Twelve months ended
	December 31						December 31
		2023			2022			2023			2022

Cash provided by (used in)

Operating activities
Net earnings	$	23,783		$	44,339		$	147,021		$	145,007
Items not affecting cash:
Depreciation and amortization		33,872			30,417			127,934			110,140
Deferred income tax		(18,413	)		9,249			(19,049	)		7,436
Other		18,384			2,076			34,416			18,371
		57,626			86,081			290,322			280,954

Changes in non-cash working capital
Accounts receivable		(23,039	)		(68,445	)		(99,816	)		(69,671	)
Payables and accruals		44,153			28,729			25,656			(11,118	)
Other		36,040			7,653			68,532			(94,272	)

Contingent acquisition consideration paid		(4,334	)		-			(4,334	)		-
Net cash provided by operating activities		110,446			54,018			280,360			105,893

Investing activities
Acquisition of businesses, net of cash acquired		(434,366	)		(44,464	)		(547,182	)		(51,994	)
Purchases of fixed assets		(25,065	)		(22,155	)		(92,734	)		(77,609	)
Other investing activities		(6,173	)		(15,196	)		(6,413	)		(31,197	)
Net cash used in investing activities		(465,604	)		(81,815	)		(646,329	)		(160,800	)

Financing activities
Increase in long-term debt, net		390,998			14,338			446,847			80,156
Purchases of non-controlling interests, net		(111	)		(114	)		(4,285	)		(21,451	)
Dividends paid to common shareholders		(10,042	)		(8,954	)		(39,055	)		(34,884	)
Distributions paid to non-controlling interests		(454	)		-			(7,376	)		(8,061	)
Other financing activities		4,178			(2,960	)		17,814			3,022
Net cash provided by financing activities		384,569			2,310			413,945			18,782

Effect of exchange rate changes on cash		(420	)		(347	)		(447	)		1,202

Increase (decrease) in cash, cash equivalents and restricted cash		28,991			(25,834	)		47,529			(34,923	)

Cash, cash equivalents and restricted cash, start of period		177,886			185,182			159,348			194,271

Cash, cash equivalents and restricted cash, end of period	$	206,877		$	159,348		$	206,877		$	159,348

Segmented Results
(in thousands of US$)


		FirstService		FirstService
		Residential		Brands		Corporate			Consolidated

Three months ended December 31

2023
	Revenues	$	496,281	$	582,979	$	-		$	1,079,260
	Adjusted EBITDA (1)		43,511		61,072		(1,240	)		103,343
	Operating earnings		34,136		20,603		(6,677	)		48,062

2022
	Revenues	$	442,124	$	577,977	$	-		$	1,020,101
	Adjusted EBITDA		38,115		67,438		(3,006	)		102,547
	Operating earnings		30,562		44,040		(7,144	)		67,458



		FirstService		FirstService
		Residential		Brands		Corporate			Consolidated

Year ended December 31

2023
	Revenues	$	1,996,823	$	2,337,725	$	-		$	4,334,548
	Adjusted EBITDA		187,792		242,356		(14,420	)		415,728
	Operating earnings		155,044		126,468		(36,620	)		244,892

2022
	Revenues	$	1,772,258	$	1,973,577	$	-		$	3,745,835
	Adjusted EBITDA		168,637		196,277		(13,182	)		351,732
	Operating earnings		138,873		111,638		(31,485	)		219,026


	(1) See definition and reconciliation on pages 5 and 6.

COMPANY CONTACTS:

D. Scott Patterson

Chief Executive Officer

Jeremy Rakusin

Chief Financial Officer

(416) 960-9566

FirstService Reports Fourth Quarter and Full Year Results