FSV - Earnings call transcript Q1 2022 | FirstService Corporation

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Operator

Welcome to the First 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 differ 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 US Securities and Exchange Commission.

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

Scott Patterson

up revenues Thank you up line were that top today Thank prior Jeremy X.X% with Rakusin morning, welcome, for out. played QX a you, results the we reflected quarter were call. the results the the with XX% impressive XX%. morning share year, per in line will we of up organic together, with both joining this over walk conference the strong way an prior for divisions. We're the at the growth XX%. margin our earnings everyone. pleased year on I'm and compared X.X% quarter Chris. revenue X%, growth Good through to very EBITDA Total and you was across and released reflecting very

supply by We and challenged continue to inflationary be labor a chain pressures. issues, market, tight

Jeremy Residential, our pleased communities. decline contract relating reflects ago, organic was particularly non-seasonal for wins. This with Net-net, and reopening modest new the first X% experienced to with over versus more it XXXX. strong was top to deliver line the a At during division balance results primarily amenity in from FirstService offset the from provide for bottom and each then at growth growth detail. at revenues during pass a to of financial resales us our net XX%, and solid a up by challenges enabled that transfer ancillary largely organic we're year strong facilities the for disclosure quarter The revenues the were growth operating ahead I'll overcome summarize We quarter. and of to expectations. our boost Our the X%, modestly organic the income of managed a tuck-unders within line made a certain quarter.

for to show forward balance the year, expect FirstService Residential. QX the we to of growth and Looking line top similar

FirstService with organic growth year, for towards the to fire quarter six acquisitions restoration on the and were XXXX, over Brands, in the last end five Moving the protection. revenues reported we of at tuck-unders and from balance including one XX% up in the XX%

Our Paul restoration year, Onsite brands X% a and Posting was of over million organic prior revenues and business. Last deep QX with which added up generated a day-to-day without event Davis is this brands progress over making Texas our First we in that in surge revenue organically, had year $XX we're our XX% to a from the reflection growth. impressive increasing freeze customers claims numbers. and on level similar both adding the terms revenues above the at

second be a are QX XXXX. without will freeze. it challenge Our strong quarter, revenues from weather We and to expecting $XX backlog approximately a solid in Texas deep year we the QX achieved match of million booked last in the remains but we

our for QX. is strong at strong our good estimate slightly balance of weather-dependent. feel for very brands which will restoration year, are be Our results point best the but the we as into levels this translate we down that penetration, in Activity mentioned, should and, it I is market generally about somewhat

International includes Moving and Closets, California Painters, inspection. Service which, Pillar a now our Home home reminder, To to as Post brands, CertaPro Coverings Floor

Service and we for supply throughout Home build these levels is them improvement it brands. continue enter organically remained as brands issues Home we were our Services much our over are in revenue that to produce able to us credit Activity were We as XX% home Home and strong year-over-year, quarter. on strong teams very chain challenged which sustain group, to should flat up the a backlogs and prices quarter XX% through Omicron to did. sequentially. the with spending. of the first The a As XXXX strong in combination quarter, up we January in

capacity chain sequential although growth to challenges, plus we facing and to incrementally and of ongoing show year-over-year expect supply are we We in quarter another add growth. continue XX% QX

construction Moving we distribution, strong Century a has multifamily position was Fire, to in very organic. driven had by The and plus which and half active Century revenue very these remains verticals. on another XX% quarter, growth, including strong commercial market,

repair to service build the continues addition, momentum. and In division inspection

similar expect and QX for a year. the of growth in level Century We at balance of the

to to and provide review in a our Let results forward. Jeremy me fulsome-look call more detail now on

Jeremy Rakusin

Thank to you, morning Scott. everyone. Good

results start first expected, overall me of were particularly Let in which challenges. basis, face on by the than QX consolidated summarizing operational a our better

the the in $XX.X finally, $XXX Adjusted revenues QX margin quarter. per $X.XX, XX% the X.X% And over was versus compared a a was $XXX a EPS of increase adjusted over in for we reported prior And margin yielded prior growth the to year's $X.XX million. For million EBITDA million, for our XX% share up the million, quarter, of representing 'XX. the $XX.X year this 'XX. X.X% QX X% quarter

periods. GAAP to arriving segment EBITDA results at I'll our adjustments now and and two EPS Our adjusted with are approach disclosures respectively, adjusted in divisions. in earnings in for summarize our consistent EPS, operating prior the

last fourth out called margin mix ancillaries. same while labor-driven margin higher basis increased points EBITDA expected, $XXX increase up was this the basis and the X% to prior of the a encompassing XX relative points When year's first was quarter FirstService division's margin impacted the $XX.X XX and prior the The over the for as XX% in quarter labor margin margin came last over and our inflation the better. last X.X% division X.X% QX was quarter year. pre-pandemic to million, comparing normalized dynamics, XXXX, two by year. at we Residential revenue EBITDA X.X% down services of factors quarter, margin generated mix million, the more in over revenues wage The was market

how are our in existing inflationary So, we managing through pressures. are with teams summary, pleased

of in weighted we to of For the towards first remainder during close Residential within our million the the the over margin XX% we FirstService quarter, up $XX.X particularly with year-over-year expecting level. second gap $XXX work. EBITDA to prior first margin division, reported million, Brands year. XXXX, Shifting X% the over improvement increase X.X% last of the revenues the in half against came FirstService quarter. versus division year current are margin the year decline, had given margin Texas year's quarter to at freeze an declined X.X% forecasted the division the The last prior year's the surge headwind restoration quarter. We

due and with ongoing in both supply operational January labor globally to Omicron with faced impacted also We disruptions the during quarter, our chains.

margin challenges these jobs quarter delivered QX of our and at costs brands, in resulted While higher inefficiencies exceeded still overall completing division we an the pre-pandemic XXXX well that of this margin X.X%. in several

either or Our inflationary with lag. a relative businesses have lockstep covering remain modest nimble pressures in off and resilient

thus are Brands will improvement we We coming performance confident in margin division incremental our year-over-year the show quarters. in

our cash than consolidated over working quarter. generated modest before Turning million we a increase capital more $XX last changes, flow, to first year's

working peak operations balance With that the capital seasonal flow had year cash trough ramp QX, up investments in periods. of for their businesses those we

up Capital flow be stronger quarters expenditures cash modestly million, in will year-over-year. were XXXX. $XX.X operating during of remaining the quarter Our all

current million the the range come level. the to outset flurry quarter period, the provided any $XXX Scott, of Acquisition period a in our We year. during add the our but contributed portion during of from and of strong million XX% did typical in heard healthy deal close tuck-unders $XX the to of within $XX we'll in you and quarter, tracking not EBITDA pipeline acquisitions vary CapEx with that convert coming as at the made for continue progress to million million balance We than quarters. our $XX quarter of at to replenishing the line our we at lower for the the to top expect target activity can year, level should the to growth close normalized the to year from performance in million and XXXX we revenue total in the $XX to

of months X.X quarter and with in million, as in net at in net debt trailing conservative ended sheet line balance EBITDA every We respect. times also measured remains resulting relatively the to Our year-end. strong $XXX with XX debt a first by leverage

further quarter, terms. provides The flexible first growth. of debt billion, our our bank by balance $X capacity and the undrawn million facility us structure approximately bolstered size credit increasing to this the liquidity more to on credit current ample revolving revolver, hand, we with drive cash During of on $XXX an unsecured plus with

the relatively year, to That XXXX, performance our year low our section. Looking line the year-end XXXX our prepared now you. XXXX margins line in indicators ask our all in forward, teens full concludes particularly incremental consistent February. contribution from I growth. to open finish growth. drive comments expected, expect I with call EBITDA in to margin top provided half outlook businesses of the in questions. With Strong would with for in improvement the will remains intact the resulting our back with with results aggregate operator year-over-year of our consolidated the and double-digit Thank annual we

Operator

[Operator Instructions] Scotiabank. Our of Doumet first question comes from George

Your line is open.

George Doumet

since generally the any as shoots the more and coming outlook or you seeing the general maybe labor challenging just months? your the green would characterize start same, Are better, of there? we Scott, environment over year

Scott Patterson

more our incremental. the I beginning and recruiting it's success a say on I but that that holds would year. labor tough having same I still the environment. last still as it's in It's approximately say were would call I of general, very we the think mentioned

at we're a have open businesses. We of capacity-constrained many and our still positions number

expect it obviously strong still So we're to making headway it's but continue, I grind. revenues. a driving and

George Doumet

where to-date Okay, are re-signing retentions talk fixed any impacts at still a with and price kind we trending great. higher of in And FSR, bit has renewals contracts, or about you on the that are little mid-XXs? those can had we

Scott Patterson

It's situation, a fluid George.

about in some increases, lock and in contractual increases. ongoing price increases fixed clients, being a been our now, passing our the an that months educating have through price for having it but transparent We cost and relationships through We're very many success will process. working definitely wage we've be

it the will heard And year. balance our second question, keeping - we of will we're you As continue the accounts. part through your from of Jeremy,

right with retention this expectation should We in are line year. having clients with our very and healthy discussions our be our

George Doumet

CapEx by one $XX to confirm, right? for just the million for thanks. $XX million to the CapEx And talk Okay, this $XX And to be $XX dropped for million to we just our should million year? Jeremy. reason XXXX, one why in Can range, last we

Jeremy Rakusin

reason the one-off the the is more George, for in drop category.

spend. normalized bit there, So $XX would million incurred X%, will a Residential what roll year. that's to as and this of revenues, operations That's will some yes, year next $XX office regional the XX% a million it FirstService for moves of XXXX. EBITDA, a at I our couple our of into not we of expect get mean, percentage

If year, year roll We would of is haven't $XX $XX million bit done into there million off that budgets. be that's next incremental. a to this of this coming the

the on timing really one-off CapEx. it's So

Operator

Thank you.

Our next Stephen of question from Capital comes Markets. BMO MacLeod

Your line is open.

Stephen MacLeod

to wanted a home ask improvement business. just bit I about little the

lines. if exceptionally service but there growth by? that are suggested little at why seeing growth least be I'm talk expect first being to you - through about So so I that evolve might expectation the those in wondering growth of of pockets half think where goes it those as year seeing year, at you you Can in strong growth and how lines you had be? you're expect think all. you just within whether you to you're just previously has would of cited And strong that, changed of the sort then that the a kind why the bit strong,

Scott Patterson

of home that historically been the reason XX%, of off year-over-year a increase big a we're of driver strength in spending. is improvement equity home a seeing has massive The equity really and increase which home Right. is big, home price driven

that comfort gives that capacity, Remember to obviously up for brands add we've at the We're of year, we're will time comfortable to balance the for half point QX. the catch visibility capacity-constrained So us the but really that doing for still the it I in the an leads of at booked provided and will us these to opportunity There year. now, trying through QX. work and been we're less this the there. aggressively. recruiting back that outlook market for that continue be certainly some continuing is

is a getting us on the now not work based right capacity. problem So our for

Stephen MacLeod

Okay.

acquisition. you missed think your I helpful. that's in Okay, was Century that prepared gave, I just maybe I it around you split then if And Fire. versus could on number. wondering the just you growth. of the organic said was remarks repeat sort And apologize, XX-XX number I that

Scott Patterson

the is organic that it XX% see it's we for I level year, half a Yes, really. of what the was plus balance said, and

Stephen MacLeod

your on the we of acquisitions the maybe And your Should a then of restoration job Jeremy, been done what think some good complemented the you've segments? business just you sort targets suggested Great. of areas finally similar acquisitions, focused to replenishing other or pipeline. has the recent by on sort and of of that activity about

Scott Patterson

it include I but towards fire does it mean, will be exactly. and likely across divisions, year. Yes, both restoration again activity this weighted

Operator

Thank you.

Next we Bank. of Deutsche Faiza have Alwy

Your line is open.

Faiza Alwy

So wanted margins more in And the confidence just depending be as you're to I your I'm back certain get back curious events, color to of if weather flat half that on helpful. first the on just ask about would we to getting year. pricing

Jeremy Rakusin

Faiza. Thanks, that. Sure, I'll take

see of pricing of closer look us structure, talk - the and QX operational picking it and our front-end the of at cost service managers, We is efficiencies. the as together that some again offing pricing. roll our earlier delivery QX. just On a cost telephony, of side, in the on the we up And well that with some property head question to as as Scott some terms but spoke on in lot count, from gap model taking payroll around residential about closing both IT a of

us side, Brands is ability the to for through any cost the increases pretty On good. capture pricing

relatively quarter some on Some lag. immediate, it's of it's of a

so challenges forth. or we the in in whatever capture the and we around supply that inflation, QX So will seeing current chain quarter wage believe we're

a towards that. of skewed well. So restoration the year, And the in to there tends then Paul all at Onsite to the First back aspect weather end be of Davis part fact as is of

see freeze be a for in year. QX and should level margin in Texas better business year last back in we we work of versus year the headwind so of same upcoming typical QX the the don't that have half. the this activity And of This

brands will skewed why to back So the reason in half margin year. another of the improvement be more

Faiza Alwy

Okay, more that around - business a just in could home the impact your remind talked business improvement potential you cyclical how a there tend to - conversation but is if more would you much us like the makes curious how if you improvement secondly, be around might which parts I sense. versus And I'm just then is of lot US. And could of recession defensive. share know get session home curious more prices about and spending, home color you I'm your might how impact, impacted? of

Scott Patterson

Sure.

model. the But with trying we question, start you. I'll over - to to we then is and immune feels mind over the ironic Let that largely talking cycles. resilient me it our right business businesses that from recruiting have the us tackle weather. proven pass two and the about it I very downturns keep aggressively, recession bit And are But understand be odd But to to appreciate in front have largest We've to economic of - a concern. do are and when and increase a the Restoration influenced Faiza. now. and I it's by work opportunity capacity during past is the years a question out in

FirstService Residential and communities business to is contractual need be a our managed.

a particularly they remember California through think of brands think, has construction. in I color Fire these be and us Century I Services So exposure brands brands the you is very the on and in go shares. the Closets. little these discretionary markets. new can And we Home them the And and huge. that some all markets thing neither provide market But, get a modest And exposure, are still Service out around Jeremy, to has are spends. Home our huge will maybe But risk. work. to Service And downturn, really our have are it's - some Home

Jeremy Rakusin

Sure.

home XX% So Brands of around Faiza, consolidated. of and is XX% improvement, division our

really even Closets, very the other $XXX they When be is financial floor and So at it's which we've home were exposed. Cal could a great most looked resilient during is exposure, back that of crisis. million revenue coverings, about like brands million improvement painting total the one the our that $XXX

then revenue, it's revenue So, recurring new there, be development California to $XXX Century Fire, development. and and tied of commented also but to new of contractual XXX Scott of plus Closets a the That's exposed. other million would million-ish on about exposure half half business more tied XX% commercial

it Century, So downturn, what really commercial. depends of type housing, home improvement, more

exposure there at if due any those not both you So the hit factors. may to macro was get see time same

Operator

Thank you. One have And next [technical Scott difficulty] we moment. Fromson

Scott Fromson

of to much be sensitivity increases the you sense Do mix of how Brands excessive much to and growth. trying attributable growth ...organic a particular and FirstService a to XX% at get that price Just organic inflation? sense have to price, inflation. a how

Scott Patterson

just We... Hey, Scott, your was to Brands? relating question

Scott Fromson

to - relating just Yes, exactly.

to relating Brands. Just

Scott Patterson

Jeremy Okay. pass to this, him. I'm to into been going to digging has - I'm going it over

Jeremy Rakusin

I any more Yes, to are taking our costs Scott, make - the increasing. price pricing what mean, that first than we're not not taking we're is is, point

looking over that above supply So of or order a improvement and At we're material brands, incurring. chain to we're not our to labor increases XX% a X% there pass couple inflation us wage of But in expand through. Commercial our the raw costs those margins to the is little account for bit for cost segments. different restoration easier increases. price magnitude to restoration, home

major have agreements master We clients. these service with our

continue We to tear have updating. sheets priced we see that

so a shapes there different relatively jobs, is pass When different - are direct through. these of it's doing almost size. So Each we're project sizes. and

hard we're pricing, environment. - in current of jobs as the it pricing we're kind we're really it's but quantify booking now, new So cost to

- working the XX%, back think mechanisms. time. to And at bit a little adjusters around residential finally We're restoration little Fire, to X% can it's then and best carriers pricing it's we On Century call it. I with a takes the their side, more

You've and increased. are the prices major it. labor work have pricing lot doing there A install steel of where got inputs and we're jobs either our

So we're along. passing

the On XX% the would lower because just at repair be service more X% really it's side, inspection to range, end of it that labor.

Scott Fromson

sense much And kind mix of of how that growth Thanks. you flat? have do a organic of is that or

Jeremy Rakusin

Mix of... in terms

Scott Fromson

of higher business? In of growth terms parts that

Jeremy Rakusin

improvement, I Texas at all million fact plus of organically of all more over face work Onsite of a in last headwind the First business. Century grew modestly in home say mean, and XX% even freeze the I'd $XX Fire, year.

Scott Fromson

And Okay. is to on has turnover become or Is labor challenges follow-up quick factor? - just turnover a tightness. limited recruiting it question a

Jeremy Rakusin

Turnover to 'XX, starting it so was a Scott. factor, factor through is certainly level, of but less to return historical a

Operator

you. Thank

Our next question comes from Stephen William Sheldon Blair. of

Your line is open.

Stephen Sheldon

Hi, congrats results on the Jeremy, Scott and here.

and there Just up me X% I quarter. X% this growing and on you've above following organically that nicely a a again prior question, talked one for we're residential about on side, quick the think to

which So increases that I through? range driven to was guess been how you've the you've that much roughly that the cost - by driven able by closer talked abnormal been inflation to about excluding some - increases wage that that you've of pass labor of cost

Jeremy Rakusin

of is it we X% think to X%. The that portion was price, X%

balance up from fact sort probably historical in the through, our see bit we'll as So it to more it's through X%. we a of of the... work little X% continue to And that

Stephen Sheldon

Okay, great. you. Thank

Operator

TD comes question next Daryl The Young Instructions] Securities. [Operator from of

is open. Your line

Daryl Young

monitoring mix of new question a I like think over that pandemic? growth that versus construction. Fire. Has mix Has sprinkler of shifted side. through was and on It is XX-XX on - historically, course inspection a the new coming Just it lot the Century the significantly sounds installation the

Scott Patterson

to Daryl, trend side. service it's fact, the it's in No, towards continued

thereabouts. sort it's service, have bit, reversed would the but last a XX% think quarter in I it of XX% install, still

Daryl Young

keep in in guess, Century And you So to specifically mix historically? I with to to on seeing? know looking future? kind it's part, been M&A fire the the there is there? is relatively goal that what stable Fire, second valuations the then, continue any I space in change of forward hypercompetitive pipeline, And the are respect

Scott Patterson

XX-XX We're mix. with very the comfortable

with but keeping our all service a at we are supplement And business. branches tuck-unders, we're if business the time fill it certainly out. we that as them knowing as we can install an buy with in that so And that doing mind we look we then

mean still I very last not They have we high. have, are year We the so. change - valuations, very, or in seen the honestly

Daryl Young

Okay, great. the last just And on then side. residential one one,

recessionary there any that through I change in tripled through think - thinking they you then. You've the there. dynamic quite Is ancillary bit that it to through would grow ability another and environment skewed previously towards services already environment? change about recessionary crisis, more spoken on global effectively last the the grew And you've are the than obviously or now since the business a last financial

Scott Patterson

There of it not off so this in No. being mix. been we drive ancillary has terms I of communities of would a level and that The similar. in lot change revenue see very business of units,

Operator

seeing you. Patterson further in to Thank will queue, closing And the am the return I for I conference Scott no questions remarks.

Scott Patterson

thank Thank We joining. you you, everyone look and a strong for Chris, forward July. on in QX reporting to

Operator

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

FirstService (FSV) 27 Apr 222022 Q1 Earnings call transcript