FirstService Corporation Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Overview: Fourth quarter revenues up 1%, EBITDA flat year-over-year, EPS up 2% to $1.37. Full-year revenues up 5%, Consolidated EBITDA up 10%, EPS up 15%.
• FirstService Residential: Q4 revenues up 8% with organic growth at 5%. Expects mid-single-digit organic growth in 2026. Q1 organic growth expected at 3%-4% due to cancellations in certain amenity management services, but core community management expected to drive mid-single-digit growth for the year.
• FirstService Brands: Q4 revenues down 3% aggregate, 7% organically. Restoration brands down 13% Y/Y but excluding storms up modestly. Roofing revenues down organically over 5%. Home service brands up 3% Y/Y. Century Fire had strong Q4 with over 10% Y/Y revenue growth.
• Cash Flow and Capital Deployment: Q4 operating cash flow $155 million, a 33% increase year-over-year. Full-year cash from operations over $445 million, up 56% vs 2024. 2025 CapEx totaled $128 million, expected $140 million in 2026. Dividend increased 11% to $1.22 per share.

Segment Performance

• FirstService Residential: Q4 revenues up 8% with organic growth at 5%, matching Q3 expectations. Annual revenues finished 7% up over prior year with 4% organic growth. EBITDA for Q4 was $51.5 million, a 12% increase year-over-year. Annual EBITDA increased 13% with a margin of 9.8%, up 50 basis points from 2024.
• FirstService Brands: Q4 revenues down 3% aggregate, 7% organically. Organic growth at Century Fire offset by declines in restoration brands and roofing. Annual revenues for FirstService Brands were $3.2 billion, up 4% over prior year, with EBITDA $354 million, up 4%. Margin for full year remained at 11%. Century Fire had Q4 revenues up over 10% vs prior year with high single-digit organic growth. Home service brands saw revenues up 3% vs prior year.

Guidance

• Consolidated Q1 revenue growth expected in mid-single-digit range. Consolidated EBITDA Q1 roughly in line with Q1 2025. Full-year EBITDA Y/Y growth expected in high single digits, with consolidated margin flat.
• FirstService Residential expects mid-single-digit organic growth in 2026, with Q1 at 3%-4% due to service cancellations.
• FirstService Brands expects growth in 2026 assuming historic weather patterns, with Q1 restoration expected modestly up.

Risks

• Organic growth pressure in FirstService Residential early in 2026 due to declines in certain amenity management services.
• Muted demand environment in roofing, with tighter capital budgets for reroof projects.
• High valuations and competitive M&A market affecting acquisition strategy.

Q: Frederic Bastien asks about M&A and deploying capital.

A: Scott Patterson states they are patient in the current environment, focusing on tuck-unders, partnering with families and owners wanting a 'forever owner', and being selective in M&A.

Q: Stephen MacLeod asks about margins and recent freeze.

A: Jeremy Rakusin says full-year both divisions roughly in line, with first quarter residential margins in line and brands margins declining, but EBITDA flat with revenue growth. Scott Patterson mentions the recent freeze is early and hard to quantify.

Q: Stephen Sheldon asks about margins in residential and roofing.

A: Jeremy Rakusin discusses margin levers in residential, noting lapping of heavy lifting and tapering margin expansion. Scott Patterson talks about roofing market stabilization and backlog, expecting growth with sequential improvement.

Q: Erin Kyle asks about roofing competition and M&A.

A: Scott Patterson mentions competition in roofing has intensified, and they are cautious in M&A, focusing on tuck-unders and being open to larger acquisitions but cautious on valuation.

Q: Tim James asks about M&A valuations and roofing silver linings.

A: Scott Patterson talks about approach to M&A, focusing on solid add-ons with good leadership, and seeing opportunities with families wanting a 'forever owner'. On roofing, sees opportunities as sellers adjust to lower valuations.

Q: Daryl Young asks about margins and data centers.

A: Jeremy Rakusin discusses margin compression in roofing due to competition. Scott Patterson mentions Century Fire benefiting from data center construction but being cautious about over-focusing on it.