Highlights:
- Revenues up 57%
- EBITDA up 15%
- Adjusted net earnings up 21%
- Adjusted diluted EPS up 14%
- Updates financial outlook - fiscal 2006 EPS range now $1.16 to
$1.20
- Provides preliminary outlook for year ending March 31, 2007
TORONTO, Jan. 31 /CNW/ - FirstService Corporation (Nasdaq: FSRV; TSX:
FSV.SV) today reported record results for its third quarter ended December 31,
2005. All amounts are in US dollars.
Quarterly revenues were $342.0 million, an increase of 57% relative to
the same period last year. EBITDA (see definition and reconciliation below)
increased 15% to $27.9 million. Adjusted net earnings were $10.3 million, up
21% from $8.5 million in the prior year period. Adjusted diluted earnings per
share were $0.32, up 14% from $0.28 in the prior year period. The adjustment
(see reconciliation below) represents non-cash amortization of short-lived
brokerage backlog intangible assets, relating to pending brokerage
transactions and listings, recognized on recent acquisitions in the Company's
Colliers International commercial real estate services platform.
For the nine months ended December 31, 2005, revenues were
$946.1 million, up 67% versus the prior year period, while EBITDA was up 46%
to $74.6 million. Adjusted net earnings were $35.9 million, up 42% for the
nine month period, while adjusted diluted earnings per share were $1.13, up
36%.
"Our results for the third quarter were very strong and continued the
momentum that began early in the year. Our balance sheet has never been
stronger, putting us in an excellent position for future growth," said Jay S.
Hennick, Founder and Chief Executive Officer. "While we are pleased with the
performance of all our service lines, the results from our Residential
Property Management business were exceptional both in terms of year over year
growth and margin expansion and our Colliers International operation continued
its strong performance," he added.
About FirstService Corporation
------------------------------
FirstService is a leader in the rapidly growing service sector, providing
services in the following areas: commercial real estate; residential property
management; integrated security services; property improvement and business
services. Market-leading brands include Colliers International in commercial
real estate; The Continental Group in residential property management;
Intercon Security and Security Services & Technologies in integrated security
services; California Closets, Paul Davis Restoration, Pillar to Post Home
Inspections and CertaPro Painters in property improvement; and Resolve
Corporation in business services.
FirstService is a diversified service company with more than
US$1.2 billion in annualized revenues and over 16,000 employees worldwide.
More information about FirstService is available at www.firstservice.com.
Segmented Quarterly Operating Results
-------------------------------------
Residential Property Management revenues increased to $82.8 million for
the quarter, 32% higher than in the prior year period. Internal growth of 29%
was attributable to growth in contractual property management fee and
ancillary services revenues. Services provided to existing clients recovering
from the impact of Hurricane Wilma also contributed to the higher than normal
internal growth rate. EBITDA for the quarter was $7.3 million, up 62% from
$4.5 million one year ago, while margins improved 170 basis points due to
operating leverage and an increase in high-margin ancillary services revenues.
Colliers International, the Company's commercial real estate services
operation, generated revenues of $141.2 million for the third quarter
representing growth of 185%, much of which was the result of the acquisitions
of CMN International Inc. ("CMN") in November 2004 and Los Angeles-based
Colliers Seeley International, Inc. ("Seeley") in November 2005. Internal
growth was 22% relative to the same period one year ago resulting from
continuing robust brokerage activity in most of its markets, especially North
America. Third quarter EBITDA was $11.5 million, at a margin of 8.2%. The
margin reported in the prior year period reflected the results for the month
of December 2004 only, which month is the seasonal peak in this business.
Revenues in Property Improvement Services totalled $32.4 million, an
increase of 21% over the prior year period. Internal growth was 12%, with
strong system-wide sales increases generated across franchise systems. EBITDA
for the third quarter was $3.1 million, an increase of $0.3 million relative
to last year.
Integrated Security Services revenues in the third quarter were
$40.1 million, an 8% increase relative to the prior year period. Excluding the
impact of foreign exchange, growth was 5%. The revenue growth was attributable
to higher levels of commercial security systems installation activity.
Quarterly EBITDA was $2.8 million versus $2.9 million in the prior year
period.
Third quarter Business Services revenues were $45.4 million, up 10%
relative to the prior year period. Excluding the impact of foreign exchange,
growth was 6%. The revenue increase was the result of higher volumes from
several clients as well as the recently won student loan processing contract.
EBITDA was $7.3 million, up from $6.3 million in the third quarter last year
while margins increased 80 basis points to 16.0%. The increases were
attributable mainly to the fulfilment operations, which benefited from
continuing higher production volumes and better capacity utilization.
Quarterly corporate costs were $4.0 million, relative to $2.5 million in
the prior year period. The increase was attributable to additional management
resources necessary to support the growth of the Company, higher
performance-based compensation expense and Sarbanes-Oxley related costs.
A comparison of segmented EBITDA to operating earnings is provided below.
Repurchases of FirstService Shares
----------------------------------
During the period from October 31, 2005 to December 23, 2005, the Company
purchased 472,700 Subordinate Voting Shares for cancellation through the
facilities of the Toronto Stock Exchange and Nasdaq National Market at an
average cost of $23.68 per share pursuant to a Normal Course Issuer Bid. The
repurchases represented approximately 1.6% of the total shares outstanding
prior to the repurchase and were funded from operating cash flow and cash on
hand.
Financial Outlook
-----------------
As a result of continuing strong performance, FirstService is increasing
the previously issued outlook for fiscal 2006.
<<
Year ending Year ending
(in millions of US March 31, 2006 March 31, 2007
dollars, except per
share amounts) Updated Previous Preliminary
------- -------- -----------
Revenues $1,200 - $1,225 $1,125 - $1,175 $1,300 - $1,400
EBITDA $107.0 - $110.0 $102.0 - $108.0 $116.0 - $126.0
Adjusted diluted
earnings per share $1.16 - $1.20 $1.08 - $1.16 $1.27 - $1.37
Note: The outlook assumes (i) no further acquisitions or divestitures
completed during the outlook period and (ii) current economic conditions
in the markets in which the Company operates remaining unchanged and in
particular the market for commercial real estate services. Actual results
may differ materially. The Company undertakes no obligation to continue
to update this information.
Conference Call
---------------
FirstService will be holding a conference call on Tuesday, January 31,
2006 at 11:00AM Eastern Time to discuss results for the third quarter, the
outlook for the balance of fiscal 2006 and the preliminary outlook for fiscal
2007. The call will be simultaneously web cast and can be accessed live or
after the call at www.firstservice.com in the "Investor Relations/News
Releases" section.
Forward-looking Statements
--------------------------
This press release includes forward-looking statements. Forward-looking
statements include the Company's financial performance outlook and statements
regarding goals, beliefs, strategies, objectives, plans or current
expectations. These statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results to be materially
different from any future results, performance or achievements contemplated in
the forward-looking statements. Such factors include: (i) general economic and
business conditions, which will, among other things, impact demand for the
Company's services and the cost of providing services; (ii) the ability of the
Company to implement its business strategy, including the Company's ability to
acquire suitable acquisition candidates on acceptable terms and successfully
integrate newly acquired businesses with its existing businesses; (iii)
changes in or the failure to comply with government regulations; and (iv)
other factors which are described in the Company's filings with the Ontario
Securities Commission and U.S. Securities and Exchange Commission.
FIRSTSERVICE CORPORATION
Condensed Consolidated Statements of Earnings
---------------------------------------------
(in thousands of US dollars, except per share amounts)
(unaudited)
Three months ended Nine months ended
December 31 December 31
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenues $ 342,002 $ 218,184 $ 946,070 $ 565,927
Cost of revenues 222,684 137,017 603,051 373,312
Selling, general and
administrative expenses 91,393 56,863 247,304 127,241
Depreciation 4,517 3,879 13,447 10,536
Amortization of intangibles
other than backlog 1,043 739 2,798 2,041
Amortization of brokerage
backlog(1) 3,712 4,958 4,870 4,958
---------- ---------- ---------- ----------
Operating earnings 18,653 14,728 74,600 47,839
Other (income) expense(2) (2,542) (341) (3,729) (341)
Interest expense 3,722 2,797 11,746 7,357
---------- ---------- ---------- ----------
17,473 12,272 66,583 40,823
Income taxes 6,606 3,587 22,637 11,903
---------- ---------- ---------- ----------
10,867 8,685 43,946 28,920
Minority interest share of
earnings 2,714 3,380 10,881 6,684
---------- ---------- ---------- ----------
Net earnings from continuing
operations 8,153 5,305 33,065 22,236
Net (loss) earnings from
discontinued operations, net
of income taxes - (363) - 1,626
---------- ---------- ---------- ----------
Net earnings $ 8,153 $ 4,942 $ 33,065 $ 23,862
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings (loss) per share
Basic
Continuing operations $ 0.27 $ 0.17 $ 1.10 $ 0.74
Discontinued operations - (0.01) - 0.06
---------- ---------- ---------- ----------
$ 0.27 $ 0.16 $ 1.10 $ 0.80
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted(3)
Continuing operations $ 0.25 $ 0.17 $ 1.04 $ 0.73
Discontinued operations - (0.01) - 0.05
---------- ---------- ---------- ----------
$ 0.25 $ 0.16 $ 1.04 $ 0.78
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Adjusted diluted net earnings
per share from continuing
operations(4) $ 0.32 $ 0.28 $ 1.13 $ 0.83
---------- ---------- ---------- ----------
Weighted average shares
outstanding: (in thousands)
Basic 30,185 29,802 30,215 29,683
Diluted 30,915 30,376 30,951 30,255
Notes
(1) Amortization of short-lived brokerage backlog intangible assets
recognized upon the acquisitions of (i) CMN in November 2004; (ii) an
additional 11.2% interest in CMN on October 1, 2005; and (iii) an
82.3% interest in Seeley on November 23, 2005. Brokerage backlog
represents the fair value of pending commercial real estate brokerage
transactions and listings as at the acquisition date. Amortization is
recorded to coincide with the completion of the related brokerage
transactions.
(2) Other income for the quarter ended December 31, 2005 includes a
$2,012 pre-tax gain on the disposal of two businesses.
(3) Numerators for diluted earnings per share calculations have been
adjusted to reflect dilution from stock options at subsidiaries. The
adjustment for the three months ended December 31, 2005 is $283
(2004 - nil) and for the nine months ended December 31, 2005 is $984
(2004 - nil).
(4) See "Reconciliation of operating earnings, net earnings and net
earnings per share to adjusted operating earnings, adjusted net
earnings and adjusted net earnings per share" below.
Reconciliation of Operating Earnings, Net Earnings and Net Earnings Per
-----------------------------------------------------------------------
Share to Adjusted Operating Earnings, Adjusted Net Earnings and Adjusted
------------------------------------------------------------------------
Net Earnings Per Share
----------------------
(in thousands of US dollars, except per share amounts)
(unaudited)
The Company is presenting adjusted earnings measures to eliminate the
impact of amortization of the short-lived brokerage backlog intangible asset
recognized upon the acquisitions of commercial real estate brokerage
businesses. This amortization is being eliminated because the Company believes
the short-lived and non-cash nature of this charge is not reflective of the
operating performance of the Company. All of the adjustments are considered
"non-GAAP financial measures" under OSC and SEC guidelines. The following
tables provide a reconciliation of the adjusted measures:
Three months ended Nine months ended
December 31 December 31
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Adjusted operating earnings $ 22,365 $ 19,686 $ 79,470 $ 52,797
Amortization of brokerage
backlog (3,712) (4,958) (4,870) (4,958)
---------- ---------- ---------- ----------
Operating earnings $ 18,653 $ 14,728 $ 74,600 $ 47,839
---------- ---------- ---------- ----------
Adjusted net earnings from
continuing operations $ 10,296 $ 8,478 $ 35,949 $ 25,409
Amortization of brokerage
backlog (3,712) (4,958) (4,870) (4,958)
Deferred income taxes 1,411 1,785 1,828 1,785
Minority interest 158 - 158 -
---------- ---------- ---------- ----------
Net earnings from continuing
operations $ 8,153 $ 5,305 $ 33,065 $ 22,236
---------- ---------- ---------- ----------
Adjusted diluted net
earnings per share from
continuing operations $ 0.32 $ 0.28 $ 1.13 $ 0.83
Amortization of brokerage
backlog, net of deferred
income taxes (0.07) (0.11) (0.09) (0.10)
---------- ---------- ---------- ----------
Diluted net earnings per
share from continuing
operations $ 0.25 $ 0.17 $ 1.04 $ 0.73
---------- ---------- ---------- ----------
Reconciliation of EBITDA to Operating Earnings
----------------------------------------------
(in thousands of US dollars)
(unaudited)
EBITDA is defined as net earnings from continuing operations before
minority interest share of earnings, income taxes, interest, depreciation and
amortization. The Company uses EBITDA to evaluate operating performance and as
a measure for debt covenants with its lenders. EBITDA is an integral part of
the Company's planning and reporting systems. Additionally, the Company uses
multiples of current and projected EBITDA in conjunction with discounted cash
flow models to determine its overall enterprise valuation and to evaluate
acquisition targets. The Company believes EBITDA is a reasonable measure of
operating performance because of the low capital intensity of its service
operations. The Company believes EBITDA is a financial metric used by many
investors to compare companies, especially in the services industry, on the
basis of operating results and the ability to incur and service debt. EBITDA
is not a recognized measure of financial performance under United States
generally accepted accounting principles (GAAP), and should not be considered
as a substitute for operating earnings, net earnings or cash flows from
operating activities, as determined in accordance with GAAP. The Company's
method of calculating EBITDA may differ from other issuers and accordingly,
EBITDA may not be comparable to measures used by other issuers. A
reconciliation of EBITDA to operating earnings appears below.
Three months ended Nine months ended
December 31 December 31
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
EBITDA $ 27,925 $ 24,304 $ 95,715 $ 65,374
Depreciation (4,517) (3,879) (13,447) (10,536)
Amortization of intangibles
other than brokerage backlog (1,043) (739) (2,798) (2,041)
Amortization of brokerage
backlog (3,712) (4,958) (4,870) (4,958)
---------- ---------- ---------- ----------
Operating earnings $ 18,653 $ 14,728 $ 74,600 $ 47,839
---------- ---------- ---------- ----------
Condensed Consolidated Balance Sheets
-------------------------------------
(in thousands of US dollars)
(unaudited)
December 31 March 31
2005 2005
------------ -----------
Assets
------
Cash and cash equivalents $ 76,834 $ 37,458
Accounts receivable 197,223 168,927
Inventories 23,901 20,878
Prepaids and other current assets 30,376 21,507
----------- -----------
Current assets 328,334 248,770
Fixed assets 66,330 57,241
Other non-current assets 24,904 22,754
Goodwill and intangibles 320,670 297,963
----------- -----------
Total assets $ 740,238 $ 626,728
----------- -----------
----------- -----------
Liabilities and shareholders' equity
------------------------------------
Accounts payable and accrued liabilities $ 206,086 $ 155,429
Other current liabilities 10,531 9,147
Long term debt - current 18,489 18,206
----------- -----------
Current liabilities 235,106 182,782
Long term debt - non-current 230,302 201,809
Deferred income taxes 33,186 29,802
Minority interest 30,783 26,464
Shareholders' equity 210,861 185,871
----------- -----------
Total liabilities and equity $ 740,238 $ 626,728
----------- -----------
----------- -----------
Total debt, excluding interest rate swaps $ 248,791 $ 219,732
----------- -----------
Total debt, net of cash, excluding interest
rate swaps 171,957 182,274
----------- -----------
Condensed Consolidated Statements of Cash Flows
-----------------------------------------------
(in thousands of US dollars)
(unaudited)
Nine months ended
December 31
------------------------
2005 2004
----------- -----------
Operating activities
Net earnings from continuing operations $ 33,065 $ 22,235
Items not affecting cash:
Depreciation and amortization 21,115 17,535
Deferred income taxes (1,499) (911)
Minority interest share of earnings 10,881 6,684
Other (94) 743
Changes in operating assets and liabilities 7,233 (10,660)
----------- -----------
Net cash provided by operating activities 70,701 35,626
----------- -----------
Investing activities
Acquisitions of businesses, net of cash acquired (23,301) (56,715)
Purchases of fixed assets, net (20,581) (10,656)
Other investing activities (4,340) 3,306
----------- -----------
Net cash used in investing (48,222) (64,065)
----------- -----------
Financing activities
Increases in long-term debt 28,951 47,944
Other financing activities (12,049) 2,154
----------- -----------
Net cash provided by financing 16,902 50,098
----------- -----------
Net cash provided by discontinued operations - 4,430
----------- -----------
Effect of exchange rate changes on cash (5) 3,260
----------- -----------
Increase in cash and cash equivalents
during the period 39,376 29,349
Cash and cash equivalents, beginning of period 37,458 15,620
----------- -----------
Cash and cash equivalents, end of period $ 76,834 $ 44,969
----------- -----------
----------- -----------
Segmented Revenues, EBITDA and Operating Earnings
-------------------------------------------------
(in thousands of US dollars)
(unaudited)
Commercial
Residential Real Integrated Property
Property Estate Security Improvement
Management Services Services Services
----------------------------------------------
Three months ended December 31
2005
Revenues $ 82,751 $ 141,241 $ 40,091 $ 32,454
EBITDA 7,252 11,532 2,785 3,080
Operating earnings 5,879 6,921 2,076 2,082
2004
Revenues $ 62,918 $ 49,599 $ 37,196 $ 26,812
EBITDA 4,481 10,390 2,902 2,765
Operating earnings 3,204 5,167 2,282 1,892
Nine months ended December 31
2005
Revenues $ 258,791 $ 344,493 $ 108,465 $ 108,210
EBITDA 25,288 30,971 6,261 25,393
Operating earnings 21,271 23,408 4,254 22,682
2004
Revenues $ 206,355 $ 49,599 $ 106,909 $ 87,937
EBITDA 18,545 10,390 8,156 19,711
Operating earnings 14,957 5,167 6,424 17,436
Business Consol-
Services Corporate idated
---------------------------------
Three months ended December 31
2005
Revenues $ 45,351 $ 114 $ 342,002
EBITDA 7,262 (3,986) 27,925
Operating earnings 5,723 (4,028) 18,653
2004
Revenues $ 41,258 $ 401 $ 218,184
EBITDA 6,282 (2,516) 24,304
Operating earnings 4,725 (2,542) 14,728
Nine months ended December 31
2005
Revenues $ 125,883 $ 228 $ 946,070
EBITDA 17,030 (9,228) 95,715
Operating earnings 12,337 (9,352) 74,600
2004
Revenues $ 114,661 $ 466 $ 565,927
EBITDA 14,640 (6,068) 65,374
Operating earnings 10,036 (6,181) 47,839
>>
FirstService reports record third quarter results; residential property management and commercial real estate post strong gains
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