FSV - Earnings call transcript Q3 2021 | FirstService Corporation

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Operator

Welcome to the Third Quarter Investors Conference Call. Today's call is being recorded. Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance or achievements contemplated in the forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's annual information form as filed with the Canadian Securities Administrators and in the company's Annual Report on Form 40-F as filed with the U.S. Commission. Exchange and Securities

Patterson. today's XXXX. being to I to Mr. call reminder, sir. Tuesday, turn Today October over Scott Officer, Executive XX, would Chief go call a ahead, recorded. is is the Please As now like

Scott Patterson

highlights everyone Good a growth Rakusin, our will Jeremy with thank you is start the today. summary I on performance the for us Thank third morning, results. for and look Jeremy conference with quarter of And you, our will drivers more and a Phyllis. me at off call. CFO financial joining quarter. the line with follow detailed

with digit third organic generated environment, Let and Outside division. and through you Fire staffed. quarter, and quarter the during by Northeast supply XX chain growth of our reopening X%. reflecting in FirstService with line the COVID the a Jeremy improvement share condo in at on movement A for challenges amenity was Atlantic X%. will contributor Pacific, quarter start profitability of his prior year-over-year our South high per up managed expectations to with of experienced a brands. organic and continued Atlantic in a revenues We've This with strengthens and addition organic our the Jeremy EBITDA has our team this marquee our were strong revenues touch year-over-year which challenges end revenue FirstService add position Residential compared $X.XX At Canada. strong leadership over quarter FirstService leading importantly, and the about is operating second open every up quarter very prepared by the Atlantic acquisition strength pleased in this long-term and organic was in XX% obstacles. XXXX, the at year. quarter again reflect for XX.X% organic for of company Pacific. associates. more a U.S. will portfolio comments. Total the prior growth, seasonal extends at the X% the team I great that the walk portfolio of division labor versus results XX% fitness in the last Again strong to at growth reopening manages management Residential metrics compared the of facilities of with Earnings organic me pool rise year. the home up were highlight million margin generated XXX in to a about the XX% The Century mid-single pools team the of lingering Residential, we in we platform management with talent the was at despite centers XX% year XXX the quarter, and year-over-year in Florida saying, these the a reopening, and growth for for began Florida. growth particular of together The are our us. and a acquisition significant growth deepens across long tough detail. community. were very admired and We were Pacific $X.XX

year. amenity quarter the fourth from benefiting the to revenue recent prior we single the Looking to show growth reopenings at digit relative Residential, expect and to FirstService high acquisition

the XX%, were Moving revenues quarter up X% FirstService for to brands, organically. on by

leads down Home to to by Improvement Home slightly. levels and all we record Our was to generate and continues were market segment QX, be XX% strong Improvement sequentially The we organic of up booking. relative continue

year issue produce our many been capacity the the with we've resurgence of our compounding tight ability quarter and has market. the all capacity The to branches, brands impacted during the labor to these work. of due been in challenge dealing Our COVID

In quarter, the complete which we our impacted with numerous ability work. were to during addition, issues chain supply confronted

were faced Improvement issues Home due to shortages. the of with All shipping scheduling brands material delays and

So XX% we to (sic) XXXX we rescheduling growth, which our had do versus impressive we the most We're the reflects of our The work opportunity remains prior news customers extensively were deferred versus is but the [XXXX], quarter year of us be much up we good for and quarter. pipeline. other XX% chain better. believe that XX% and in with past and for is, communicating can Through XXXX. for quarter or behind expect measures, we this issues show the where is are fourth improved to which our the to expected Improvement brands, growth and alternative sourcing north supply this we early in largely Home where

hurricane wind past Hurricane storms late We Iowa quarter We benefited million in Louisiana, the final that relative Our growth in then restoration million closed together included against during with from again XX% to where this from impacted Davis, which year generated jobs. is August, QX organic a growth. result we're early September. are Jersey and quarter have New restoration [indiscernible] and mid-single $XX York Paul in brands of thrilled Texas XX last tough we Ida New the organic And us year last FirstOnSite from digit quarter revenues our Laura. the these strong about generated we over to for events. up about and comparative This and a

DKI our and a on storms, of More have team. our reflection account. And gaining and leadership New existing restoration Each areas that events. Jersey was is excited Florida double incremental national are expand share Central addition regularly Indiana our region. our digit, proud we're by impacted restoration that weather quarter positive during serving new Philadelphia. in excited in on are specialist which an strategic and Metro growing ability talent brings organic These low the and Excluding to in and important customers commercial respond We were each insurance is FirstOnSite the the accounts. to by strong at to business of that day-to-day our momentum acquisitions enhances footprint growth the to Panhandle acquisitions signing complete on in with

a growth that carry which fourth get of digits million and expect continue $XX to buoyed outside quarter strong the grew at Century that double solid to was a with XXXX by drive service by work QX. this event. commercial remained and near a and our and activity our Fire to weather account fourth restoration double-digit to We solid quarter, from we'll with Backlogs national again our from construction brands and momentum backlog quarter to strong repair market XXXX program. close strong see expect year-over-year in we bid

with how teams growth, X% organic hand a momentum It's the are pleased to organic Before in great I consolidated win the ability Jeremy, off continued each to I want their with to market reflection at strong our Over and Jeremy. on in line. basis, day-to-day. to a on service emphasize we you growth

Jeremy Rakusin

Scott. Good everyone. you, morning Thank

and performance you segmented and of strong driven I was but and will FirstService a revenue FirstService organic overall financial as recap. balanced quarter heard, very consolidated commentary first across in both just provide brands. by moment just third Our growth our divisions Residential a

over over reported performance $XXX.X At I'll $X.XX, the adjusted top-line we within compared of EPS prior revenues contributions With revenues million, period to months year-to-date the are on year-to-date XX% year-over-year. X% and did the same XX% at our EPS earnings quarter. up $XX.X year of reported XX%, to resulted per across adjusted both come For our XX% segmented for billion period, million includes the our results growth. the GAAP points in XX.X% came to the billion, our providing EBITDA an increased $XXX.X in third million in elaborate up respectively. margin we prior decline year. margin $X.XX in and third nine Within and an two up in revenues for from third at quarter XX all our also EPS even operations of terms quarter, have divisions. in $X.XX release FirstService quarter. increase consistent X% $XXX.X to strong currently XX% our highlights last increase the period. line adjusted $XX.X disclosed $X.XX adjusted million remaining sits Financial this $X same are EBITDA FirstService the This year-to-date organic with On and the and EBITDA with adjusted at XXXX. time, results. of in significant earnings EBITDA in EBITDA basis, at board, now lastly, division, we from include respectively EBITDA approach from see share morning's both Residential $XXX of a year basis of XX.X%. in strong And at XX%, operating margin for top-line increase at factors. delivered our prior XX% and profitability Adjustments total by QX which growth overall consolidated a EPS million, million, up and moderate This Adjusted the

increase have division. experienced we in wages be cost price getting increases of the but First, it general recoup much to contract contract, We through can in of subject plus this like some through across will renewals. in

for yielded contributing the the facility fully overall was averaged to coming division quarter sub margin quarter, The a the reopenings burdened second XX% factor margin typical to the onstream labor support which our down amenity increased during our margin. that

by the that million FirstService contribution both and quarter, as brand prior strong Scott commented on, well Now current from our $XXX.X growth versus the drivers revenues of XX% the period, during generated division third to supported tuck-under organic division, the up acquisition. year recent as

also million our third to protection our During on chain jobs. was XX.X% consolidated to of resulting the scheduling more overall in supply material primarily XX.X% couple profitability. year-over-year, note our EBITDA inefficiencies with compared at margin year's Reverting issues our now teams comments pricing margin $XX quarter, The those to a decline labor and came our which results, down and QX. frontline just brands at caused input to Century related our a back increased and Improvement increase a brand constraints within costs Home in affecting to chain both last the current X% raw in attributable supply bottlenecks, Fire completing

that reflecting the overall million compared our year normalization a a the incurred driven of to operating we costs third in corporate compensation COVID the impacted quarter. and First, EBITDA earnings reductions $X prior year-over-year expenses in increase during cost quarter

in million cost mid-teens, consistent dollars. is corporate my quarter rate the of back the annualized millions cost regarding an reversion to corporate in run of total $X.X QX during with Our comments

realized business we gain of related quarter. of adjusted part contributed third of after the based $XX.X which $X.XX non-core basis, earnings our legacy Residential Florida, FirstService to Second, was pest for an sale our in $X.XX this our small to divestiture other share On in the per million division. income tax control

million the million four an incremental program. We period acquisition deployment tuck-under activity terms during $XX transactions quarter, In $XX capital and bring third that invested will without the saw revenues. strong annualized of approximately we during

remains pipeline deal teams of as Our our engaged targets. with to in be stages varying dialogue continue quite active, prospective

with track portion We in million, requirements, flow quarter. these $XX at $XX sitting fund the are us was balance also incrementally our target. sheet while $XX capital million good during allowing a million at internally with the expenditures third full Cash strengthening our during quarter, year-to-date incurred CapEx year same further. strong we And to capital on the of time

up the Before million line year existing We $XX across of of working tuck-under operating almost $XX capital support changes, the quarter. prior over investments EBITDA after and required both cash businesses flow the acquisitions. strong realized growth flow cash recent working with growth our capital organic from million was operations board to in

million, quarter-end at coming prior months sheet debt $XXX sequentially our trailing our XX resulting to Our included second EBITDA, at net net in from in debt of X.Xx down balance leverage quarter.

in under total To close-off credit on our liquidity of million strong, an also our debt and for outlook, already our approximately the remained be digits. with have availability Our hand businesses. consolidated heard expect undrawn prepared facility. in basis, with to comments a for cash $XXX capacity top-line of and you the growth quarter we each QX Scott's indicators On therefore our high single fourth revenue

anticipate relatively quarter. driven to line largely XXXX Residential, Our in consolidated at we that On saw at consolidated to third communicated a our labor consistent EBITDA in we earnings XX% our margin cost FirstService margin and call. due in full in year-over-year decline, some expectations we'll similar on around the year as EBITDA dilution second basis, we come see fourth quarter, margin with with quarter our the

now will scheduled we Phyllis, February. high-level open call earnings our prepared some color can our of you. to terms XXXX Thank XXXX That during the In our call year-end for question. concludes comments. early outlook, up you provide

Operator

Doumet [Operator Instructions] question from the first of Your Bank. comes line with George Scotia

George Doumet

Scott, activity. organic did talk I I excluding low want you big and storm think restoration number, the double alluded to to That's earlier. about digit the growth that

to can previously from? basis? I kind wondering bit digit coming the was forward you little go wondering, on baseline give how that that a think strength think that single And on mid-single just digits So should we for color that's of us just of where but a high of

Scott Patterson

Sure, George. it's I in our position think branch executing and really national with leveraging ourselves account. on particular, network mean, the I growth to plan better

our a success Specifically, where really of that time, basis. training year, aggressively network sales our we and real recruited a focusing be where verticals local would our We're healthcare need facilities we're branch out examples regional build have relationships. talent same enabled that's national and force. the we've number on on investing and each teams and and our in defense winning contractors, sales the the differentiate at ourselves more having high-end level specialist this At can us chemical quarters and and of same our sales verticals certification In complex to is customers, particularly high it's also time, business. building established

So building we on goal relative are for our the is that's focused weather industry, events, storms strategically dependence us. cat our and a to lower on business day-to-day

George Doumet

a for maybe of segment how you'd part that. vertical, which a or we this in Is it. there gears this game to in maybe top switching Thanks want a like Okay. of M&A the get in? have terms ultimately to to big plan presence on markets, in Staying strategy

Scott Patterson

on number the And this on with side; mean, $XX share. a commercial two -- market I a we side certainly Well, number are modest billion is residential there the is market. very two

drive all relative we of we So major our major markets and the current across in to in that. and the to strategically, all we need able multiples can size. a have to terms be strong North serve America And be national markets, continue very to customers towards presence

George Doumet

Okay.

of a how we lot, Jeremy, this how to not I think volume? continue? much call pricing bit a And little the was Thanks. point, wages? out business, those adjust Should did you last of Can pricing the we and quarter talk growth expect talk maybe one XX% if to segment, may, us. plus. organic Just you Can residential cost that's maybe that? about explain you is X% versus trends of I

Jeremy Rakusin

Yes, sure.

pricing So half-ish. And different. just been is of of and end its modest. I George, It's historically back this your very percent, volume. most a question, no the in percent a mean, industry, that's

are So those components, of price we with wage the plus contracts. year efficiencies always renew. increases been we're as progress working have some of going work the or of be capture that cost multi-year in six non-pass dealing teams last that terms years, then, the to believe through And one that extract some five, over in can those. continuing to through inflation always back and to And on contracts operating

margin will of allow due again, the those factors impact any So wage two combination in us to inflation. recoup to,

Operator

CIBC. Scott Your of next with the line comes from question Fromson

Scott Fromson

you can, are So maybe seeing ticket for adjusted size? is, or in you recent of put demographics kind in way inflation your what Improvement change terms it business? Home to you are brands, the if seeing a average another In for of

Scott Patterson

of terms I'm I'm buyers I I your just digesting the services. become we're of Scott more understood the a younger of certainly, of first in part generations much think, change in not and our millennials, as on focusing homeowners they sure our demographics question.

Scott Fromson

to per guess Just, call seeing basically growth, basis, metric even call it go up? a revenue that I you is but relates you organic per are Or that on track?

Scott Patterson

seeing something we job average It is. and each businesses. certainly our we're increases at size track of It No. is

is Some of that price.

increasing the growth brands. volume two are this more quarter, on book, there still most expecting and nimble There's time, but is take XX is next some because out lag in increases booked and certainly, in three But the our to we're larger at quarter, price that renovation ambitious of And seeing work. Improvement responding terms We we price. consumers months. XX% a same Home jobs cost with of to are more

we're that also. And seeing so

Scott Fromson

said for what's for. opened, exactly are the on what residential just XX%? residential or I outlook was guess, the That's facilities I amenities, looking XX% business, Thanks. remaining And the of you

Scott Patterson

Well, them that are many seasonal. open are of

XXXX. And so be it'll

Scott Fromson

Okay.

So you full resumption? the expect

Scott Patterson

do. We do. We

Operator

question comes James. with Bastien from Raymond next Your Frederic of the line

Frederic Bastien

into you pretty and about that to heading to the both and at mid visibility return been some point. with single for expectations you've upfront XXXX? Scott, growth we're well FSB have digit rates organic but in your for like looks be us FSR to Certainly much do above that going how beyond QX,

Scott Patterson

Home FirstService parts, the that some we then, organic to think, we everything to I through But Residential, there's that to low to XXXX. digit And moving see Improvement, back brands, points strength expect settle growth. mid-single continued that

will 'XX that Fire tailwind good just expect. And continues depends the to into we've feel us very I comps the growth for Honestly, I going tough a dealing then, going I be so. to 'XX brands, the restoration. really we we're think about and across very, strong. that be restoration, Century on board. So it organic got be with mean,

Frederic Bastien

Okay, for cool. Thanks that.

that at just some And Fire, of whether you've we tuck-in where just wondering look businesses done still get now right there's also and number if sort now, growth. both of a looking with areas Now, for Century you're your at whitespace acquisitions. footprint restoration and reside

Scott Patterson

storm opportunity South for higher into for then, Southeast Atlantic but region. parts of -- a not these we whitespace there Florida, needs in in both are the U.S. deal us, there footprint opportunity. where activity. have and to necessarily U.S., lots the is businesses, opportunity to Western south, of and in area out we in And in it continues the us be our of in -- Atlantic Atlantic Middle there's We Fire Florida. are the whitespace moved this similarly, great acquisitions have have we build through mid of still need the is And we Century to in And Texas, year, Restoration,

So again, and in Texas in general. the southeast

Frederic Bastien

Scott. Thanks, Great, thanks.

Next will than to in earnings is rate sense the we rate us it quarter? lower where in non-controlling [indiscernible] predict give seemed us to unusual one for at the came to current had than you that's it if attributable up have there Is forecast. a for little hard of percentage least come lower And a of Jeremy. that and model The pretty can anything in year? the end but

Jeremy Rakusin

for on on forecast long-term But businesses. depends number. it said Frederic. annual share hard It owned mix guys. basis, is the is a Quarter-to-quarter businesses XXX% of X% good Yes, versus partner a I'd to you as interest you or minority our say the earnings

Operator

next Your line the from of question comes BMO MacLeod Stephen Capital with Markets.

Stephen MacLeod

couple brands impacted Just a assume, on of you have questions I specifically. assume inflation is inflation of there that's any here availability And in labor the to of you case, labor the on held quantify it would safe versus way that the labor because the more and some had top-line to more much is shortages? residential? labor sort how of were back if

Scott Patterson

in Even business. it impacted us every

I felt mean, I I more extent, think position right. not in it I'm certain we can that Home continue also. brand the -- Improvement, have we on but, we It restoration to a open it. think, quantify number sure an unprecedented probably side. you're of was to

quantify, And parts. up work, next over Improvement couple Home that XX%. XX. get moving to of the expected it quarters but so at we be brands We tough were to many as up we'll make We to

Stephen MacLeod

contracts side, your scale, something find think understandable. they these you come staffing have see then presumably you're at renew into a of positioned smaller opportunity see when on XXXX. to to the accelerated new could we can't with headwinds. for rate? competitors up that's or And reasonable well Yes, you Maybe an Okay. manage potentially the That's inflation, contract staffing or through labor as residential about kinds and Do heading maybe the renewal the for wins? on

Scott Patterson

not We're expecting that.

on that One the is of companies, private us smaller with the the issues competing compete with they price.

a in cases. approach margin; and these And some significantly lower lower that's their comfortable -- so earning they they're accounts, to

see don't necessarily, opportunity no. I growth So the organic the side, on

Operator

the from comes William line Stephen question of next with Blair. Sheldon Your

Stephen Sheldon

curious last if growth residential trends, First looking expect you're in shift types. in think revenue strong just and at seeing the you the and over growth by mix about few different there, you has to other towards such any versus if the property as the high-rise of mid- portfolio mid- would as segment there, it any property high-rise any be especially years, mix think shift more pretty quarter year type, really And that organic condos segment, condos just another color. in been looking a I as seemed would next between stable back the love

Scott Patterson

Yes.

we event It more there's opportunities change mix, But many it's winning, not subtle. a I high that large including complex requires competitors larger Stephen have. rise of services think lifestyle development. are lifestyle, in offering and and a -- masterplan a service the communities, of if our new very really breadth planning,

a is towards of portfolio. there So shift in type that property subtle our

Stephen Sheldon

ask it. the going and pressures become and headwind helpful. Got it just on quarter even and across back the more rest about think organization bigger the that this you Did labor month-to-month to kind cadence And as growth expect That's there. to the into XXXX? would throughout to of pressure pronounced even then, year to maybe become you wanted an of the

Scott Patterson

say fierce. reopening. months hospitality the it I'm through last over talent is six guess, really It for five the the and comes quarter definitely And or has competition intensified and FirstService going Residential, the I to from for

And need that to brand the turnover, people think improvement we we we'll business. seen it know, But new. pay side, at trust, what pay that comes the we from because higher for amount internally that people carry decision seeing values, someone to and the our people the are we're other I we've clearly the increase home our every seen companies. making construction On we've is,

maybe renewal the come the -- continue and at But fourth in be do up the into perhaps bit end it be And little contracts up a so, the also on come moves front we're we making we're others. contracts of as see for think year. to has quarter. there side we'll I of And moving continue price

we to will multi-year as Jeremy we're But there's our a work going able have immediately. getting not not it to lag, said, be we this. we're through going to back contracts, So be way

Operator

from Instructions] Logan Markets. next question comes with line the RBC of [Operator Your Matt Capital

Matt Logan

Scott, a some talk know taking mind And formal plan. call. I don't commentary business five-year good few really on a restoration earlier But to you you about business how for overall see color would XXXX? rates, the maybe updates the expected businesses and through by appreciated? things evolving you Any like minutes other on you've on division provided the the your branded be have or, would mix growth some

Scott Patterson

It's Matt, like we an organic that's focus. all are businesses, our first. our And growth company

that digit all doing it, the and sales and on that this we're in over and doing teams So work target and foundational recruiting long-term of to network. average hard mid-single And now. to right to restoration platform we businesses, Davis more out we and acquisition There's we're iconic our aspirationally, talked at we time, And work investing of brands. organic our consolidation about it. building each active for operating be now the now. that recruiting And with then the drive enhance necessary drive branch right and over FirstOnSite is through around FirstOnSite I long-term to Paul growth. very want all look

we'll same going seen at be will active, us acquisitions driving But the the continue, be organic not continue growth. to you've continue So pace. And the it's that. won't we

a be it's of looking out getting XX. to will leader terms this So business. we in in And beyond -- We're that.

there's but in else if me the side, to over know you commercial anything don't pause let But residential side, it's long-term. I on aspirationally the fill On want that. the around there. too, me

Matt Logan

that in might be clauses today, opportunity home or inspections that Do services potential restoration a you there's kind whitespace your outside businesses property of related think you're or any at see things aren't or of you vertical? where

Scott Patterson

increase Yes. damage I weather tangential, provide. services something, goes that some into There that general are to say. And of you and would of we restoration Residential. that restoration, perhaps breadth events in opportunities storm and think are and everything tangential We about opportunities there's services provide FirstService those and Tangential the that. to to

can FirstService Residential, provided where and you to building all the about we think staff and services expand.

thinking always don't a And to about much that as so we're expanding as existing we I vertical that our provide necessarily new services know it's customer. things, the those

Matt Logan

Okay. just housekeeping me, if And item mind don't one you gears. changing maybe for

storm about In right. terms was $XX numbers, if have the on it EBITDA quarter, What was million, revenue basis? my of this an that I

Jeremy Rakusin

is the last other have how performed some pretty similar the Would FirstOnSite of in which quarters, six XX%, around is been quarters. as over plus in Matt, has typical

Operator

And time, further at questions. this there are no

Scott Patterson

Phyllis. you, forward for to We call in Thank you thank joining. And everyone look our February. year-end

Operator

this a nice gentlemen, your the for conference have call. day. and Thank and Ladies quarter you third participation investors concludes

FirstService (FSV) 26 Oct 212021 Q3 Earnings call transcript