FirstService Corp. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Total revenues up 8% YOY, driven by tuck-under acquisitions. EBITDA up 24%, EPS up 37%.
• FirstService Residential: Results in line with expectation, working towards historical mid-single-digit organic growth. Q2/Q3/Q4 expected sequential improvement.
• FirstService Brands: Driven by acquisitions, some organic declines. Margin improvements in home services and restoration.
• Specific segments: Restoration US growth from hurricanes, roofing contract deferrals, Century Fire contract timing, Home Services lead flow and pent-up demand.
• Margin improvements: Residential margin expansion due to client accounting and contact center efficiencies. Brands margin up driven by home services and restoration.
• Cash flow and balance sheet: Operating cash flow strong, CapEx pacing within guidance, net debt conservative, liquidity strong at over $800 million

Segment Performance

• FirstService Residential: Revenues up 6%, half organic and half from small tuck-unders over 12 months. EBITDA $41.6 million, up 17%, margin 7.9% (70 basis points increase). Expected similar or slightly better organic growth in Q2 and sequential improvement in Q3/Q4.
• FirstService Brands: Revenues $726 million, up 10% driven by tuck-under acquisitions. EBITDA $67.8 million, up 22%, margin 9.3% (90 basis points increase).
  • Restoration: Revenues mid-single-digit, flat organic. US growth from hurricanes, Canadian ops down ~30% of North American restoration. Backlogs solid. Q2 expected flat to modestly up.
  • Roofing: Revenues up almost 50% YOY from Florida acquisitions, organic down 10% due to weather and deferred contracts. Q2 expected up 25-30% YOY, organic modestly down.
  • Century Fire: Strong quarter, mid-single-digit organic growth, repair/service/inspection up. Some contract deferrals, backlog building, expected strong results.
  • Home Services: Revenues down 3% YOY, lead flow down due to consumer confidence. Pent-up demand expected in H2. Q2 expected slightly down YOY

Guidance

• Consolidated: Q2 revenue growth similar to Q1, EBITDA low double-digit growth. Residential margin up, brands margin in line to slightly up.
• FirstService Residential: Similar or slightly better organic growth in Q2, sequential improvement in Q3/Q4.
• FirstService Brands: Q2 revenues up due to acquisition impact, organic down modestly, but underlying demand strong with contract awards expected to accelerate in H2

Risks

• Macro uncertainty: Impact on commercial and residential spending, delays in contract awards due to economic uncertainty and tariffs.
• Weather impact: Affected roofing production hours in Q1.
• Consumer confidence: Impact on home services lead flow and conversions

Question and Answer

Q: Consolidated exposure to macro gyrations A: Jeremy and Scott discuss about $1 billion of revenues exposed to residential and commercial, modest portion Q: Brands business conversions A: Scott says uncertainty causes hesitation, but pent-up demand expected later Q: Roofing organic decline breakdown A: Scott estimates half weather-related, half commercial delay Q: Restoration hurricane work timeline A: Scott says backlog conversion over balance of year, total backlog similar to prior periods Q: Residential margin expansion details A: Jeremy explains client accounting and contact center efficiencies, long-term margin target around 9-10% Q: Labor availability and market share A: Scott says labor turnover down, wage inflation stabilized, helping market share gains