FirstService(FSV) - 2025 Q2 - Quarterly Report

Executive Summary & Financial Highlights FirstService reported robust Q2 and YTD 2025 financial performance, characterized by strong revenue growth, significant Adjusted EBITDA expansion, and increased profitability across key metrics Consolidated Financial Performance - Q2 & YTD 2025 FirstService reported strong financial results for Q2 and the first six months of 2025, demonstrating solid top-line growth and significant operating margin expansion, driving increased profitability across key metrics Consolidated Financial Highlights (Q2 & YTD 2025 vs. 2024) | Metric | Q2 2025 (millions) | Q2 2024 (millions) | Q2 YoY Growth | YTD 2025 (millions) | YTD 2024 (millions) | YTD YoY Growth | | :------------------------- | :----------------- | :----------------- | :------------ | :------------------ | :------------------ | :------------- | | Revenues | $1,415.7 | $1,297.5 | 9% | $2,666.6 | $2,455.5 | 9% | | Adjusted EBITDA (note 1) | $157.1 | $132.5 | 19% | $260.4 | $215.9 | 21% | | Adjusted EPS (note 2) | $1.71 | $1.36 | 26% | $2.63 | $2.03 | 30% | | GAAP Operating Earnings | $97.3 | $83.9 | 16% | $136.5 | $122.0 | 12% | | GAAP Diluted EPS | $1.01 | $0.78 | 29% | $1.07 | $0.92 | 16% | CEO Commentary CEO Scott Patterson expressed satisfaction with the strong financial results, noting that the year-over-year growth profile mirrored the first quarter and positioned the company well to achieve its 2025 goals despite macroeconomic uncertainty - Strong financial results largely mirrored the year-over-year growth profile seen in the first quarter[4] - Resilient top-line performance and strong profitability across operations during the first half of the year[4] - Company is well on track to deliver on its goals for 2025 despite continued macroeconomic uncertainty[4] About FirstService Corporation FirstService Corporation is a leading North American provider of essential outsourced property services, operating through its FirstService Residential and FirstService Brands platforms Company Overview FirstService Corporation is a leading North American provider of essential outsourced property services, operating through two distinct, industry-leading platforms: FirstService Residential and FirstService Brands - FirstService Corporation is a North American leader in the essential outsourced property services sector[5] - Operates through two industry-leading service platforms: FirstService Residential (largest manager of residential communities) and FirstService Brands (largest provider of essential property services via company-owned and franchise systems)[5] Company Scale | Metric | Value | | :------------- | :----------------- | | Annual Revenues | Over US$5.4 billion | | Employees | Approximately 30,000 | | Stock Exchange | NASDAQ (FSV), TSX (FSV) | | Index | S&P/TSX 60 index | Segmented Performance Analysis FirstService Residential and FirstService Brands both demonstrated strong Q2 2025 revenue and Adjusted EBITDA growth, while corporate costs saw a slight decrease FirstService Residential FirstService Residential reported a 6% revenue increase and 11% Adjusted EBITDA growth in Q2 2025, driven by 3% organic growth and ongoing efficiency improvements in its client service delivery model FirstService Residential Q2 Performance (2025 vs. 2024) | Metric | Q2 2025 (millions) | Q2 2024 (millions) | YoY Growth | | :---------------- | :----------------- | :----------------- | :--------- | | Revenues | $593.0 | $557.5 | 6% | | Organic Growth | 3% | N/A | N/A | | Adjusted EBITDA | $65.5 | $59.1 | 11% | | Operating Earnings | $51.6 | $49.1 | 5% | - Adjusted EBITDA margin improvement reflected ongoing efficiencies in the property management client service delivery model[8] - Operating Earnings margin was in-line with the prior year[8] FirstService Brands FirstService Brands achieved an 11% revenue increase and 23% Adjusted EBITDA growth in Q2 2025, supported by 1% organic growth, double-digit growth at Century Fire Protection, and contributions from recent tuck-under acquisitions FirstService Brands Q2 Performance (2025 vs. 2024) | Metric | Q2 2025 (millions) | Q2 2024 (millions) | YoY Growth | | :---------------- | :----------------- | :----------------- | :--------- | | Revenues | $822.7 | $740.0 | 11% | | Organic Growth | 1% | N/A | N/A | | Adjusted EBITDA | $95.2 | $77.6 | 23% | | Operating Earnings | $56.5 | $46.3 | 22% | - Organic growth of 1% was driven by double-digit growth at Century Fire Protection, offsetting lower results in Roofing Corp of America operations[9] - Recent tuck-under acquisitions across the division also contributed to the top-line increase[9] - Increase in operating margins was attributable to continued operating process improvements at restoration and home services brands[9] Corporate Costs Corporate costs for Q2 2025 decreased slightly compared to the prior year, reflecting a reduction in unallocated corporate overhead expenses Corporate Costs (Q2 2025 vs. 2024) | Metric | Q2 2025 (millions) | Q2 2024 (millions) | YoY Change | | :-------------------- | :----------------- | :----------------- | :--------- | | Corporate costs (Adj. EBITDA basis) | $3.6 | $4.2 | (14%) | | Total Corporate costs | $10.9 | $11.5 | (5%) | - Corporate costs represent corporate overhead expenses not directly attributable to reportable segments and are therefore unallocated within segment operating earnings (loss) and Segment Adjusted EBITDA[20] Non-GAAP Financial Measures Reconciliation This section provides detailed reconciliations and definitions for non-GAAP financial measures, including Adjusted EBITDA and Adjusted EPS, crucial for understanding FirstService's underlying operating performance Adjusted EBITDA Reconciliation This section defines Adjusted EBITDA as a non-GAAP measure used by FirstService to evaluate operating performance, debt servicing ability, and for planning and valuation purposes, providing a detailed reconciliation from net earnings - Adjusted EBITDA is defined as net earnings, adjusted to exclude income tax, other (income) expense, interest expense, depreciation and amortization, acquisition-related items, and stock-based compensation expense[15] - The Company uses Adjusted EBITDA to evaluate its operating performance, ability to service debt, and as an integral part of its planning and reporting systems, believing it is useful to investors as a reasonable indicator of operating performance due to the low capital intensity of its service operations[15][16] Consolidated Adjusted EBITDA Reconciliation (in thousands of US$) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------ | :------ | :------- | :------- | | Net earnings | 55,431 | 44,937 | 69,511 | 59,834 | | Income tax | 23,677 | 18,584 | 29,677 | 24,599 | | Other income, net | (996) | (115) | (1,082) | (1,995) | | Interest expense, net | 19,166 | 20,531 | 38,430 | 39,557 | | Operating earnings | 97,278 | 83,937 | 136,536 | 121,995 | | Depreciation and amortization | 45,632 | 39,225 | 89,808 | 76,032 | | Acquisition-related items | 7,662 | 2,306 | 19,895 | 3,906 | | Stock-based compensation expense | 6,556 | 7,019 | 14,155 | 13,927 | | Adjusted EBITDA | 157,128 | 132,487 | 260,394 | 215,860 | Segmented Adjusted EBITDA Reconciliation (Q2 2025, in thousands of US$) | Metric | FirstService Residential | FirstService Brands | Corporate | | :-------------------------- | :----------------------- | :------------------ | :-------- | | Operating earnings (loss) | 51,606 | 56,522 | (10,850) | | Depreciation and amortization | 11,789 | 33,820 | 23 | | Acquisition-related items | 2,100 | 4,873 | 689 | | Stock-based compensation expense | - | - | 6,556 | | Adjusted EBITDA | 65,495 | 95,215 | (3,582) | Adjusted EPS Reconciliation This section defines Adjusted EPS as a non-GAAP measure that provides a supplemental view of the Company's underlying operating performance and enhances comparability, detailing its reconciliation from diluted net earnings per share and also defining organic growth - Adjusted EPS is defined as diluted net earnings per share, adjusted for the effect, after income tax, of non-controlling interest redemption increment, acquisition-related items, amortization expense related to intangible assets from acquisitions, and stock-based compensation expense[21] - The Company believes Adjusted EPS is useful to investors for understanding underlying operating performance and enhancing comparability of results from period to period[21] Adjusted EPS Reconciliation (in US$) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Diluted net earnings per share | $1.01 | $0.78 | $1.07 | $0.92 | | Non-controlling interest redemption increment | 0.13 | 0.16 | 0.35 | 0.32 | | Acquisition-related items | 0.14 | 0.05 | 0.35 | 0.08 | | Amortization of intangible assets, net of tax | 0.30 | 0.26 | 0.57 | 0.49 | | Stock-based compensation expense, net of tax | 0.13 | 0.11 | 0.29 | 0.22 | | Adjusted earnings per share | $1.71 | $1.36 | $2.63 | $2.03 | - Organic growth is defined as revenue growth adjusted to exclude the revenue attributable to acquired businesses for a period of twelve months following their acquisition[23] Condensed Consolidated Financial Statements This section presents FirstService's condensed consolidated statements of earnings, balance sheets, and cash flows, providing a comprehensive overview of its financial performance and position Statements of Earnings The condensed consolidated statements of earnings provide a detailed breakdown of FirstService's revenues, costs, and profitability for the three and six months ended June 30, 2025, and 2024 Condensed Consolidated Statements of Earnings (in thousands of US$) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :---------- | :---------- | :---------- | :---------- | | Revenues | 1,415,733 | 1,297,459 | 2,666,559 | 2,455,504 | | Cost of revenues | 935,334 | 862,463 | 1,776,802 | 1,651,040 | | Selling, general and administrative expenses | 329,827 | 309,528 | 643,518 | 602,531 | | Depreciation | 25,926 | 22,216 | 51,585 | 43,792 | | Amortization of intangible assets | 19,706 | 17,009 | 38,223 | 32,240 | | Acquisition-related items (1) | 7,662 | 2,306 | 19,895 | 3,906 | | Operating earnings | 97,278 | 83,937 | 136,536 | 121,995 | | Interest expense, net | 19,166 | 20,531 | 38,430 | 39,557 | | Other income, net | (996) | (115) | (1,082) | (1,995) | | Earnings before income tax | 79,108 | 63,521 | 99,188 | 84,433 | | Income tax | 23,677 | 18,584 | 29,677 | 24,599 | | Net earnings | 55,431 | 44,937 | 69,511 | 59,834 | | Net earnings attributable to Company | 46,098 | 35,058 | 48,901 | 41,366 | | Diluted net earnings per share | $1.01 | $0.78 | $1.07 | $0.92 | | Adjusted earnings per share (2) | $1.71 | $1.36 | $2.63 | $2.03 | - Acquisition-related items include contingent acquisition consideration fair value adjustments and transaction costs[25][26] Balance Sheets The condensed consolidated balance sheets present FirstService's financial position, detailing assets, liabilities, and shareholders' equity as of June 30, 2025, compared to December 31, 2024 Condensed Consolidated Balance Sheets (in thousands of US$) | Asset/Liability Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Assets | | | | Cash and cash equivalents | 201,806 | 227,598 | | Current assets | 1,622,756 | 1,559,353 | | Goodwill and intangible assets | 2,167,862 | 2,110,866 | | Total assets | 4,369,109 | 4,194,852 | | Liabilities and Shareholders' Equity | | | | Current liabilities | 931,982 | 850,766 | | Long-term debt - non-current | 1,229,053 | 1,257,143 | | Redeemable non-controlling interests | 460,997 | 449,337 | | Shareholders' equity | 1,251,825 | 1,187,746 | | Total liabilities and equity | 4,369,109 | 4,194,852 | | Total debt | 1,242,283 | 1,298,710 | | Total debt, net of cash | 1,040,477 | 1,071,112 | Statements of Cash Flows The consolidated statements of cash flows outline the cash generated and used by FirstService across its operating, investing, and financing activities for the three and six months ended June 30, 2025, and 2024 Consolidated Statements of Cash Flows (in thousands of US$) | Cash Flow Activity | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Net cash provided by operating activities | 162,834 | 130,744 | 204,084 | 121,944 | | Net cash used in investing activities | (78,279) | (152,631) | (123,524) | (209,971) | | Net cash provided by (used in) financing activities | (99,285) | 69,178 | (98,683) | 112,308 | | Increase (decrease) in cash, cash equivalents and restricted cash | (15,408) | 47,414 | (18,816) | 24,632 | | Cash, cash equivalents and restricted cash, end of period | 224,870 | 231,509 | 224,870 | 231,509 | Additional Information This section provides details on the upcoming conference call, cautionary statements regarding forward-looking information, and key company contact information Conference Call Details FirstService will host a conference call on July 24, 2025, to discuss the second quarter results, with options for live webcast and dial-in participation - Conference call scheduled for Thursday, July 24, 2025, at 11:00 a.m. Eastern Time[11] - Live webcast available on the Company's website at www.firstservice.com[11](index=11&type=chunk) - Participants can register for the call to receive a dial-in number and unique PIN[11] Forward-Looking Statements This section serves as a cautionary statement regarding forward-looking statements within the press release, highlighting inherent risks and uncertainties that could cause actual results to differ materially from expectations - Press release includes forward-looking statements, identifiable by words like 'expect to,' 'expected,' 'will,' 'estimated'[13] - Statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[13] - Factors include general economic and business conditions, ability to implement business strategy (including acquisitions), changes in government regulations, and other factors described in SEC filings[13] - The Company does not undertake any obligation to update or revise any forward-looking statements unless required by applicable securities laws[13] Company Contacts Contact information for FirstService Corporation's Chief Executive Officer and Chief Financial Officer is provided for inquiries Company Contacts | Role | Name | Contact | | :---------------- | :--------------- | :-------- | | Chief Executive Officer | D. Scott Patterson | (416) 960-9566 | | Chief Financial Officer | Jeremy Rakusin | (416) 960-9566 |