FirstService(FSV) - 2024 Q2 - Quarterly Report

Financial Performance Summary FirstService reported strong Q2 and H1 2024 revenue growth, driven by both segments, despite declines in Adjusted and GAAP EPS Financial Performance Overview | Metric | Q2 2024 | Q2 2023 | Change | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues (US$ millions) | $1,297.5 | $1,119.7 | +16% | $2,455.5 | $2,138.2 | +15% | | Adjusted EBITDA (US$ millions) | $132.5 | $118.4 | +12% | $215.9 | $200.4 | +8% | | Adjusted EPS | $1.36 | $1.46 | -6.8% | $2.03 | $2.31 | -12.1% | | GAAP Operating Earnings (US$ millions) | $83.9 | $82.3 | +1.9% | $122.0 | $123.3 | -1.1% | | GAAP EPS | $0.78 | $1.01 | -22.8% | $0.92 | $1.37 | -32.8% | - CEO Scott Patterson stated, "We are pleased with our second quarter financial results which were driven by strong revenue growth... we are optimistic we will hit our top and bottom line targets in the back half of the year"[7] Segmented Quarterly Results Q2 2024 saw FirstService Residential revenue grow 8%, while FirstService Brands surged 23% due to acquisition, despite organic decline - FirstService Residential: Q2 revenues rose 8% to $557.5 million, with 7% organic growth driven by new property management contracts Adjusted EBITDA increased to $59.1 million from $55.7 million year-over-year[10][14] - FirstService Brands: Q2 revenues grew 23% to $740.0 million, largely due to the Roofing Corp of America acquisition Organic revenue declined 6% compared to a strong prior-year quarter with high weather-related claims Adjusted EBITDA rose to $77.6 million from $65.8 million[11] - Corporate Costs: Corporate costs for Q2 were $11.5 million, up from $8.6 million in the prior year, with the increase driven by foreign exchange impacts and higher stock-based compensation expense[27] Financial Statements Consolidated financial statements show higher revenues but lower net earnings, increased assets from acquisitions, and cash used for investments Condensed Consolidated Statements of Earnings Q2 2024 revenues increased to $1.30 billion, but net earnings attributable to the company decreased to $35.1 million Condensed Consolidated Statements of Earnings (US$ thousands) | (in thousands of US$) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,297,459 | $1,119,734 | $2,455,504 | $2,138,179 | | Operating earnings | $83,937 | $82,321 | $121,995 | $123,271 | | Net earnings | $44,937 | $54,713 | $59,834 | $77,380 | | Net earnings attributable to Company | $35,058 | $45,360 | $41,366 | $61,478 | | Diluted EPS | $0.78 | $1.01 | $0.92 | $1.37 | Condensed Consolidated Balance Sheets Total assets grew to $4.05 billion by June 30, 2024, driven by acquisitions and increased goodwill and debt Condensed Consolidated Balance Sheets (US$ thousands) | (in thousands of US$) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Current assets | $1,481,515 | $1,361,002 | | Goodwill and intangible assets | $2,065,169 | $1,807,836 | | Total assets | $4,046,185 | $3,625,743 | | Current liabilities | $849,737 | $770,774 | | Long-term debt - non-current | $1,289,151 | $1,144,975 | | Shareholders' equity | $1,081,470 | $1,024,146 | | Total liabilities and equity | $4,046,185 | $3,625,743 | Consolidated Statements of Cash Flows H1 2024 operating cash flow increased to $121.9 million, while investing activities used $210.0 million for acquisitions Consolidated Statements of Cash Flows (US$ thousands) | (in thousands of US$) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $121,944 | $85,949 | | Net cash used in investing activities | ($209,971) | ($136,398) | | Net cash provided by financing activities | $112,308 | $75,127 | | Increase in cash | $24,632 | $24,074 | Non-GAAP Financial Measures Reconciliation This section reconciles GAAP to non-GAAP measures like Adjusted EBITDA and EPS, providing a supplemental view of performance Reconciliation of Net Earnings to Adjusted EBITDA Adjusted EBITDA is derived from net earnings by excluding specific items, reaching $132.5 million in Q2 2024 - Adjusted EBITDA is defined as net earnings adjusted to exclude income tax, other income/expense, interest, D&A, acquisition-related items, and stock-based compensation expense It is used to evaluate operating performance and ability to service debt[18] Reconciliation of Net Earnings to Adjusted EBITDA (US$ thousands) | (in thousands of US$) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net earnings | $44,937 | $54,713 | $59,834 | $77,380 | | Adjustments... | | | | | | Adjusted EBITDA | $132,487 | $118,353 | $215,860 | $200,449 | Reconciliation of Net Earnings to Adjusted Net Earnings and EPS Adjusted EPS is derived from diluted EPS by excluding specific after-tax items, reaching $1.36 in Q2 2024 - Adjusted EPS is defined as diluted net earnings per share, adjusted for the after-tax effect of the non-controlling interest redemption increment, acquisition-related items, amortization of intangible assets, and stock-based compensation expense[33] Reconciliation of Net Earnings to Adjusted Net Earnings and EPS (US$) | (in US$) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Diluted net earnings per share | $0.78 | $1.01 | $0.92 | $1.37 | | Adjustments... | | | | | | Adjusted earnings per share | $1.36 | $1.46 | $2.03 | $2.31 |