FirstService(FSV) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q3 2020 were $742 million, up 10% year-over-year, with organic growth of 7% and acquisitions contributing the balance [5][20] - EBITDA increased by 15% year-over-year, reflecting a 50 basis points margin improvement, with earnings per share at $1.19, up 29% compared to the prior year [6][20] Business Line Data and Key Metrics Changes - FirstService Residential reported flat revenues of $374.8 million year-over-year, with a 5% increase in EBITDA to $41.8 million and a margin improvement of 60 basis points to 11.2% [7][23] - FirstService Brands saw revenues increase by 24% to $367.2 million, with EBITDA rising 19% to $48.7 million, although margins decreased slightly from 13.7% to 13.3% [11][25] Market Data and Key Metrics Changes - The commercial restoration platform Global experienced significant growth, with revenues up over 70% year-over-year, including 40% organic growth, driven by weather events [13][14] - Canadian operations showed strong year-over-year organic growth despite a market estimated to be down by over 20% due to COVID-19 [16] Company Strategy and Development Direction - The company is focused on expanding its geographic footprint, adding new national accounts, and increasing share of existing accounts, particularly in the restoration business [15][17] - The management emphasized the importance of customer experience and the strong culture within the company, which has contributed to organic growth during the pandemic [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing impacts from the pandemic but expressed confidence in the company's ability to drive growth through diversification and resilience [4][10] - The outlook for Q4 is expected to resemble Q3, with a strong backlog and continued work from recent storm-related activities [34] Other Important Information - The company reported a strong cash flow from operations of $67.5 million, up 28% year-over-year, and a net debt of $446 million, resulting in a leverage ratio of 1.6 times [28][31] - Capital expenditures for the quarter were $9 million, with a full-year target of $45 million, reflecting cost containment measures [29] Q&A Session Summary Question: Year-over-year growth in restoration business - The restoration business was up 70% year-over-year, with 40% organic growth, driven by significant weather events [39] Question: Impact of safety protocols on utilization rates - Safety protocols have reduced capacity at many facilities, impacting service levels, and it is expected that many amenities will remain closed into 2021 [42] Question: Organic growth without amenity openings - If amenities were fully operational, the company would expect to return to the normal organic growth range of 3% to 5% [46] Question: Size of the large loss portfolio - Management differentiated between large loss and storm activity, indicating that large losses are expected to be recurring but did not disclose specific figures [40] Question: Revenue impact from storm activity - The storm activity in Q3 contributed approximately $45 million in revenue, with margins resembling the overall business performance [53][60] Question: Future organic growth expectations - The company expects mid-single digit organic growth moving forward, particularly with the upcoming rebranding in early 2021 [65][66] Question: M&A opportunities in other verticals - The company is actively pursuing opportunities across all platforms, with a focus on restoration but not looking to enter new verticals at this time [87]