FirstService(FSV) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q3 2021 were $849 million, up 14% year-over-year, with organic revenue growth at 8% [6][22] - EBITDA for the quarter was $94 million, reflecting a 6% increase compared to 2020, with a margin of 11.1% down from 12% in the prior year [7][22] - Earnings per share were $1.50, compared to $1.19 last year, marking a 26% increase [7][22] - Year-to-date revenues reached $2.39 billion, up 20% from $2 billion in the prior year, with 13% organic growth [24] Business Line Data and Key Metrics Changes - FirstService Residential revenues increased by 13% with organic growth at 8%, driven by the reopening of seasonal amenities [8][25] - FirstService Brands revenues rose by 16%, with 9% organic growth, although capacity issues due to labor shortages and supply chain challenges were noted [11][28] - Restoration brands, including FirstOnSite and Paul Davis, achieved over 10% growth, with mid-single digit organic growth [14][29] Market Data and Key Metrics Changes - The company reported strong organic growth across all platforms, particularly in FirstService Residential and Century Fire [6][19] - The Home Improvement market remains robust, with record levels of leads and bookings despite challenges [11][12] Company Strategy and Development Direction - The company aims to enhance its market presence in a $60 billion market, focusing on major markets across North America [44] - There is a strategic emphasis on building day-to-day business and reducing dependence on weather-related events [42] - The company plans to continue tuck-under acquisitions while focusing on organic growth [70][71] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued organic growth, expecting high single-digit revenue growth in Q4 [38] - Labor inflation and availability are significant challenges, impacting all business lines, particularly in Home Improvement [59][66] - The company anticipates a return to low to mid-single digit organic growth for FirstService Residential in 2022, while Home Improvement is expected to remain strong [54] Other Important Information - The company incurred a $2 million increase in corporate costs year-over-year, reflecting a normalization of expenses [30] - A gain of $12.5 million was realized from the sale of a non-core pest control business, contributing $0.21 to adjusted earnings per share [32] - The company invested $46 million in tuck-under acquisitions during the quarter, with a strong deal pipeline [33] Q&A Session Summary Question: Can you provide insight into the low double-digit organic growth in restoration excluding storm activity? - Management indicated that growth is driven by executing the growth plan and leveraging the branch network, with a focus on high-end customers [42] Question: What is the strategy for M&A in the restoration segment? - The company aims to strengthen its presence in major markets, as it holds a modest market share in a large market [44] Question: How does the company plan to adjust pricing and wages in the residential segment? - Most of the organic growth is volume-driven, with expectations to recoup wage inflation through price increases during contract renewals [45][46] Question: What trends are observed in average ticket size in Home Improvement brands? - The company is seeing increases in average job size, with consumers booking larger renovation projects [48][49] Question: What is the outlook for the remaining 10% of residential facilities that are not yet open? - Many of these facilities are seasonal and are expected to fully resume operations in 2022 [51][52] Question: How does management view labor inflation and its impact on growth? - Labor inflation has intensified, impacting all business lines, with management focusing on retaining trusted employees [66] Question: What is the expected growth rate for the restoration business through 2025? - The company targets mid-single digit growth over the long term, with a focus on organic growth and strategic acquisitions [70]