FirstService Corporation Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Overview: Total revenues up 4% y/y (driven by tuck-under acquisitions), EBITDA up 3% to $165 million (11.4% margin), EPS up 8% to $1.76.
• FirstService Residential: 8% revenue growth, organic growth 5%, mid-single-digit growth expected in Q4.
• FirstService Brands: Revenues up 1% (acquisitions offset organic decline); restoration brands saw sequential growth but down 7% y/y; captured market share in mild weather, but Q4 expected down 20% y/y vs prior year due to lack of cat storm events.
• Roofing: Revenues up mid-single digit (acquisitions), organic decline 8%; deferred commercial projects and reduced new construction impacted organic performance; confident in market position despite macro uncertainty.
• Century Fire: Strong quarter with over 10% revenue growth, backlog strong, expecting double-digit growth in Q4.
• Home Service Brands: Revenues flat, but improved close ratio and job size offset weak lead flow.

Segment Performance

• FirstService Residential: Revenues up 8% with organic growth at 5%. EBITDA was $66.4 million, a 13% increase over Q3 2024, with a Q3 margin of 11% (up 50 basis points from Q3 2024). Revenue contribution: Not explicitly stated as a percentage but was $605 million for the quarter.
• FirstService Brands: Aggregate revenues up 1%, with organic declines of 4% offset by tuck-under acquisitions. Restoration brands (Paul Davis and First Onsite) saw sequential growth but were down 7% y/y. Revenue contribution: $842 million for the quarter.
• Roofing: Revenues up mid-single digit driven by acquisitions; organically, revenues declined 8%. Backlog deferral of large commercial projects and reduced new construction impacted organic performance.
• Century Fire: Revenues up over 10% vs prior year, with broad-based growth in branch network. Backlog remains strong, expecting double-digit growth in Q4.
• Home Service Brands: Revenues flat with year ago, due to weak existing home sales and economic uncertainty but improved close ratio and job size.

Guidance

• Consolidated revenues to have mid-single-digit growth for full year 2025.
• 2025 consolidated EBITDA growth expected in the high single digits, approaching 10% y/y.
• Q4 FirstService Residential margins expected to be roughly in line to slightly up vs prior year.
• FirstService Brands Q4 revenues expected to be roughly in line y/y.
• Roofing Q4 revenues modestly up y/y (driven by acquisitions), with organic weakness expected.
• Century Fire Q4 expected to have double-digit revenue growth.

Risks

• Mild weather patterns impacting restoration revenues, with 2025 named storm revenues expected to be less than 2% of total restoration revenues.
• Macro environment uncertainty delaying new commercial construction and reroof/maintenance decisions in roofing.
• Competitive market for tuck-under deals, particularly in roofing with high multiples and private equity competition.
• Delayed award activity in roofing due to macro factors, affecting organic growth.

Question and Answer

Q: Divergence in performance between Century Fire and roofing?

A: Century Fire has ~50% of business in service repair and inspection (recurring), benefited from data centers and multifamily; roofing affected by deferred commercial projects and reduced new construction.

Q: Margins in Brands division?

A: Home Improvement and Century Fire have strong profitability; restoration brands focused on brand, accounts, and streamlining, despite mild weather.

Q: Competition for tuck-under deals?

A: Competitive market, especially in fire protection and residential property management with high multiples; roofing also competitive with private equity-owned platforms, activity slowed in recent quarters due to macro uncertainty.

Q: Organic growth in roofing?

A: Organic growth down due to deferred projects and reduced new construction; branches are strong, and leadership is strong, expecting growth to return once market stabilizes.

Q: Backlog in restoration?

A: Backlog about same as prior quarter, slightly off from last year, but solid and healthy given environment.