管理層發言
Good day, and welcome to the Second Quarter Investors Conference Call. Today's call is being recorded. Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward-looking statements and involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's annual information form as filed with the Canadian Securities Administrators and in the company's annual report on Form 40-F, as filed with the U.S. Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is 07/23/2026. As a reminder, if you would like to ask a question, please press *11 on your telephone. You will then hear an automated message advising that your hand is raised. If you would like to remove yourself from the queue, please press *1 again. I would now like to turn the call over to Chief Executive Officer, Mr. Scott Patterson. Please go ahead, sir.
Thank you, Lisa. Good morning, everyone. Thank you for joining our Q2 conference call. I am on today with our CFO, Jeremy Alan Rakusin. I will kick us off with some high-level comments. Jeremy will follow with more detail. Let me start by saying that we are generally pleased with our Q2 results in an economic environment that continues to be quite challenging. We are also pleased with the progress we made during the quarter on a few fronts that we believe puts us in position to achieve a stronger second half of the year and gain momentum into 2027. Total revenues for the second quarter were up 2% over the prior year, half organic growth. EBITDA for the quarter was up 3%, reflecting a consolidated margin of 11.2%, up 10 basis points over the prior year and better than expectation primarily within our brands division. Jeremy will walk through the detail in his prepared comments. Finally, our earnings per share were up 2% over the prior year, in line with top-line growth. Looking at our divisional results, FirstService Residential revenues were in line with expectation and up 5% organically. The reported revenues were slightly less at 4% reflecting the sale of our residential pool maintenance business early in the quarter. We separated and sold residential accounts that have accumulated over the years to focus solely on commercial pool maintenance and management. Our core property management business continues to perform solidly on expectation, and we expect similar results for the balance of the year. Moving on to FirstService Brands, revenues for the quarter were up 1% with strength at Century Fire, tempered by approximately flat results at our restoration and home service brands and largely offset by revenue declines within our roofing operation. I will walk through each of the segments. Revenues for our two restoration brands, Paul Davis and First On-Site, were down slightly from the prior year. As we pointed out at the last two quarter ends, we entered the year with a weakened pipeline due to the mild weather experienced in Q4 of last year which has impacted us in the first half of this year. Towards the end of Q2 and into July, we made significant progress in signing work and bolstering our pipeline back to historically healthy levels. In particular, we won a number of large loss projects across North America that will convert to revenue over the next 12 to 18 months. In addition, we are seeing opportunities for specialty construction projects that have arisen through our restoration work with certain customers and in certain verticals. Looking forward, we expect to show approximately 5% year-over-year growth in the back half of the year for our restoration brands. It is a modest outlook relative to the uptick in activity, as it is difficult to forecast how quickly the recent backlog additions will convert to revenue. Our experience suggests that scoping, permitting, and insurance navigation could create delays in generating revenue. Storm and hurricane activity in the coming months could add to the backlog and improve this growth outlook. Moving to our Roofing segment, revenues for the quarter were down approximately 6% on a reported basis and 10% organically, lower than our expectation. There are a few factors that impacted our top line during the quarter. First and foremost, the market remains stubbornly weak and ultra-competitive, both the new construction market outside of data centers and the reroof market. The market conditions are particularly acute in two of our larger branch regions, Las Vegas and Southwest Florida. In both markets, we have intentionally moved away from certain low-margin work that was in our pipeline. The other factor during the quarter was the delay of a few large reroof projects that we expected to complete during the quarter. The delays accounted for half the miss relative to our expectation. All the projects remain in our backlog. The roofing market has been a challenge for us in the past year. It has been a difficult environment, and with ongoing macroeconomic uncertainty, it is unlikely to improve materially in the near term. That said, we strongly believe that the long-term thesis is unchanged. Roofing is a huge market and an essential service with long-term tailwinds. We believe in our team and are focused on continuing to build the platform. As evidence of our ongoing belief in the opportunity, we closed on the acquisition during the quarter of Sheffer's Roofing in Kansas City. Sheffer's is a leader in the market serving customers throughout Missouri and northern Arkansas, and strengthens our presence in the important Midwest region. Looking forward to Q3, we expect our roofing operations to be down slightly with organic growth off in the mid-single-digit range. Moving to Century Fire, we had another strong quarter that was right on expectation and mirrored our Q1 result, with revenues up over 10% versus the prior year, including high-single-digit organic growth. During the quarter, we announced the acquisitions of Titan Fire Protection, based in Tampa, Florida, and GSC Fire and Security based in Austin, Texas. Titan is a sprinkler installation company serving commercial customers across Central Florida. GSC is an alarm installation and service company serving the Austin and San Antonio markets. In both cases, Century will look to partner with the management teams to broaden the service capability and provide both sprinkler and alarm install and service across the respective customer bases. Looking forward for Century, we finished the quarter with an improved backlog sequentially, and expect similar strong 10%+ year-over-year growth in the third and fourth quarters. Now on to our home service brands, which as a group generated revenues that were up slightly versus a year ago, modestly better than our expectation. As a reminder, our home service brands include California Closets, CertaPro Painters, Floor Coverings International, and Pillar To Post home inspection. Activity levels at these brands are closely tied to the housing market and consumer sentiment, both of which continue to hover around 10-year lows. The teams continue to do a great job driving increases in close ratio and average job size to eke out revenue gains. We are not getting any help from market improvement and we are not expecting any over the back half of the year. Market indices and economic forecasts all suggest continued weakness in the housing market and consumer confidence. Looking forward for our home services group, we expect the teams to continue to take market share to drive similar results for the third and fourth quarters with revenues that are slightly up year over year. Let me now hand off to Jeremy.
Thank you, Scott. Good morning, everyone. As always, I will provide details of our segmented financial performance, summarize our cash flow, capital deployment and balance sheet position, and close out the commentary with a look forward. But first, a recap of our consolidated financial results. Revenues for the second quarter were $1.45 billion, up 2% year over year, and we reported adjusted EBITDA of $161.7 million, up 3% versus the prior year. Adjusted EPS came in at $1.75, a 2% increase over Q2 2025. This brings our year-to-date consolidated financial performance for the first half of the year to revenues of $2.77 billion, an increase of 4% over last year; adjusted EBITDA of $267 million, representing 3% growth over the $260 million last year, a margin of 9.7%, down 10 basis points year over year; and adjusted EPS for the first half of the year sits at $2.69 versus $2.63 in the prior year period. Our adjustments to operating earnings and GAAP EPS to calculate our adjusted EBITDA and adjusted EPS, respectively, have been summarized in this morning's press release and remain consistent with our disclosure in prior periods. Reviewing the second quarter segmented financial performance, I will lead off with our FirstService Residential division. Quarterly revenues came in at $617 million, up 4% over the prior year, and as Scott mentioned, up 5% organically. EBITDA for the quarter was $69 million, a 6% year-over-year increase with an 11.2% margin, up 20 basis points over the 11% margin in Q2 of last year. For the first half of 2026, our division EBITDA margin sits at 9.9%, up 30 basis points compared to the equivalent prior year period. During the remainder of the year, we expect margin improvement to continue at similar pacing to the year-to-date performance as our teams continue to extract efficiencies in various areas of the enterprise. Shifting to the FirstService Brands division, our financial metrics for the second quarter were relatively comparable to last year's Q2, including revenues of $832 million and EBITDA at $96 million, both up 1%. Our margin during the quarter was 11.5%, down 10 basis points, with the quarter-over-quarter performance better than both Q1 and our expectations heading into the current quarter. In particular, home services margins performed relatively better as we continue to optimize the balance of marketing and promotional investments in support of lead flow. Turning to our cash flow profile, we generated $112 million in operating cash flow during the second quarter prior to working capital movements and in line with the prior year. Cash flow after accounting for working capital changes was $130 million for the quarter, and sits at almost $220 million year to date. Our capital expenditures during the quarter were a little over $30 million and with our year-to-date total at $60 million, we expect our annual CapEx to be roughly $130 million, less than our initial target of $140 million we provided at the beginning of the year. Acquisition spending on tuck-under deals during the quarter was just over $40 million. The combination of our recent free cash flow performance together with conservative debt levels on our balance sheet supported our decision during the second quarter to also execute share repurchases under our normal course issuer bid. During the quarter, we purchased more than 1.8 million shares at a total cost of almost $250 million or an average price per share of US$135.91. With these buybacks, our leverage, as measured by net debt to EBITDA, increased modestly to 1.8x from the 1.5x level at the end of Q1. Our leverage remains conservative, and we still have ample liquidity with more than $800 million of cash on hand and undrawn bank credit facility balances. This current financial flexibility allows us to continue opportunistically repurchasing additional FirstService shares under the buyback program when we see the valuation of our large diversified enterprise trading at a meaningful discount to smaller private market businesses in our respective industries. At the same time, we are focused on building our tuck-deal pipeline to deploy growth capital when we see acceptable acquisition valuations and target return thresholds. Concluding with an outlook, our FirstService Residential division will deliver growth in the balance of the year, largely mirroring recent quarters: mid-single-digit top-line growth with modest year-over-year margin improvement. For the Brands division, Scott has provided top-line growth indicators for each of the operating businesses which aggregates to mid-single-digit revenue growth in the back half of the year. This performance will be skewed to the fourth quarter and influenced by the amount of restoration backlog to revenue conversion from the increased pipeline activity levels that Scott referenced, as well as capitalizing on any additional potential seasonal spikes in weather activity in the coming months. Putting it all together on a consolidated basis, for the upcoming third quarter, we expect both revenue and EBITDA growth to be similar to the second quarter in the low single-digit range. For the full year, consolidated revenue growth is expected to be similar to or modestly better than our year-to-date top-line growth and we are anticipating mid-single-digit annual EBITDA growth over 2025. That concludes our prepared comments. Lisa, you may now open the call to questions.
分析師問答
Thank you. Please press *11 on your telephone if you would like to ask a question. To remove yourself from the queue, press *11 again. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. Our first question will be coming from the line of Stephen MacLeod of BMO Capital Markets. Please go ahead.
Thank you. Good morning, guys.
Morning.
Morning.
I just wanted to circle back on the roofing business. Obviously, the backdrop is quite weak and you referenced a continued competitive environment. I'm curious what factors you are looking for to potentially see a light at the end of the tunnel with respect to some of the reroofing projects that have been delayed, and how your backlog currently looks.
Yeah. Let me start with the backlog, Steve. It is down year over year, but it is up in June sequentially over May, and May was up sequentially over April. So we are moving in the right direction, but slowly, and I would say battling headwinds. The misses in Q2 were really, as I suggested, from some jobs that delayed. They all still remain in our backlog, but we do not have firm start dates. There are a number of factors associated with each. The largest is an insurance claim relating to hail damage, and it is caught up in negotiations between the owner and insurance carrier. It will take place; it is just a matter of when. And then, as I suggested, we have intentionally moved away from jobs that were in our pipeline due to the tight pricing, which was beyond our comfort level.
Particularly in Southwest Florida. Okay, that is helpful. I guess you noted that one of the largest projects in the backlog was related to an insurance claim. How much of the delays you are seeing are attributable to factors such as that versus the macro backdrop and customers just saying they will do this next year when they have better visibility?
I think the delays are primarily related to delays in construction and whether that is other contractors finishing their bid on time and pushing it out or insurance-related issues. These projects were in our pipeline and we expect them to complete. In terms of building the pipeline more quickly, we are seeing softness in the market.
That is helpful. Thanks, Scott. And then maybe one for Jeremy. On the normal course issuer bid, you were obviously very active in the quarter. I know you talked a little bit about the balance between funding M&A as well as being active when the stock price is materially dislocated from fair value. How do you prioritize those two things, and how active do you expect to be on the buyback in the back half of the year?
Yes. We have been buying at current levels and you can be sure that we will continue to do so, given our balance sheet is still quite conservative, under 2x. We would feel comfortable going at least to the mid-twos level; 2.5x would be a strong comfort level for us. We are always going to look at our pipeline, so if we see imminent deals that are of size and provide attractive returns, that would take priority. But I think we can do both with our current balance sheet and $800 million-plus of liquidity. We can do them in tandem. So there is a lot of flexibility to use the buyback program as well as not compromise our tuck-under acquisition prospect.
That is great. Thanks, Jeremy.
Thank you. One moment for the next question, please. The next question is coming from the line of Stephen Sheldon of William Blair. Please go ahead.
Hey, good morning. Thanks. Scott, I wanted to dig in a little more on restoration and some of your comments in the prepared remarks. It sounds like sales activity and the pipeline has picked up there in the quarter and it's not tied to big storm activity. Can you refresh us on the progress building out relationships with larger, more national accounts? Is that becoming more impactful to the trajectory of the business? Also, I'd love more detail on where the team is finding success with more specialized and complex restoration services, like you alluded to in the prepared remarks.
Right. We have been talking about it for a few years—how hard the team's been working in terms of developing and enhancing the national account roster, while at the same time developing expertise in a number of verticals: health care and government, and generally developing a reputation for large-loss claims. In the last four to six weeks, we signed a number of large loss projects that will benefit us over the next 18 months or so. These projects are tied to various regional weather events or specific fire or water damage claims—factories, large warehouses, government buildings, big-box retail, multifamily—across North America. So it is a significant rally for us. That has certainly enhanced our backlog and is likely to help us into 2027. Many of these projects are still being scoped; sizes are not clear. We will see some revenue in Q4, but the bigger impact will be in 2027.
I was asking about things like retrofits, capital improvements and some new construction opportunities—are you seeing those?
We have been asked to submit bids on unique situations based on our experience, and we have a few wins with some pending. Momentum is building. The specialty contracting work has evolved from our expertise in health care; we have team members with specific certification and training around mitigation and construction in sensitive health care environments. That expertise has led to other construction opportunities in health care and beyond.
Got it. Very helpful.
We are feeling good about restoration because of the pipeline where it is today, and we are heading into storm season. Who knows what might happen, but we do feel good about the position we are in heading into the back half and into 2027 for sure.
Thank you. One moment for the next question. The next question is coming from the line of Daryl Young of Stifel. Please go ahead.
Hey, good morning, everyone. I wanted to touch on residential and your new cross-selling initiative that you announced—Resilience First—that looks to be a concerted effort to cross-sell restoration with residential. Could you expand on what that is, the opportunity, and whether there are any other cross-sell opportunities you are pursuing?
Yes. That program is between FirstService Residential and our restoration brands and roofing operations. It is cross-selling, but I really think about it as a focus on bringing value to our managed communities and differentiating FirstService Residential from competitors. The goal is to reduce the frequency of loss events through prevention and then minimize the severity of losses. We are talking about complementary inspections, training, education, and storm preparation. Most of the losses we see in our communities are water losses. Educating residents and property managers around water shutoff—certainly when they leave on vacation—can prevent losses. Water entering one unit often seeps into neighboring units and typically becomes a larger loss scenario. We are focused on access to a proprietary leak detection program for our communities. If we are successful, it will reduce the number of claims, reduce the severity of loss, and drive down insurance costs for our communities. Again, the focus is on differentiating FirstService Residential.
Got it. Okay. And then just moving to margins: performance continues to be quite strong despite a softer organic growth environment. When organic growth recovers, can you hold the existing benefits, or will some costs come back as activity levels pick up? Put differently, is there operating leverage still to come from here?
You have to look at it business by business. In property management, costs are largely variable as we grow, and that business is performing in line with expectations. We have a bit of margin expansion built in. On the Brands side, pretty much every business generates good operating leverage when you get top-line growth. Even if there are some investments that come in support of that growth, it is a net positive to the margin.
Okay, that is it for me. I will get back in the queue. Thanks.
Thank you. One moment for the next question. The next question is coming from the line of Erin Kyle of CIBC. Please go ahead.
Good morning. Thanks for taking the questions. I just wanted to go back to the roofing segment and follow up on an earlier point. From your view, what is impacting the segment the most from a macro perspective—rates, inflation, the Middle East conflict and oil prices, or all of the above? What really needs to change for award activity to start converting?
Remember that new construction outside of data centers is down year over year, and that is a big chunk of the market. That is a driver. A lot of new construction-focused roofers have turned their attention to the reroof market. The reroof market is probably flat nationally, but the level of competition around reroof has increased significantly. Everything you mentioned—interest rates, the Middle East conflict, inflation—impacts both markets. Reroofs can be deferred, but longer term they are nondiscretionary. It is a matter of time. I think the competitive environment will normalize because some pricing is not sustainable. Southwest Florida is a unique situation: the market is particularly weak relative to the rest of the U.S. Post-Hurricane Ian, a number of roofers expanded to Florida to capitalize on the surge, and right now there is overcapacity in that market, making every job over-competitive. We have a very strong position and we will be fine; it will just take some time.
That is helpful. And on the M&A side: you flagged fewer bidders as some funds have pulled back in this environment, and M&A spend remains modest. As you think about capital deployment, are you taking a more conservative approach evaluating targets, or how should we think about M&A spend going forward?
We are not necessarily more conservative; we are sticking to our discipline and being patient. We are not seeing many quality companies come to market, and many owners want to get back to better performance before selling. We focus on the right partnerships and ensuring fit in terms of service line, geography and culture. We expect this year to be similar to last year based on our current pipeline, but nothing fundamental has changed for us—it's the number of opportunities that is different.
Got it. Thank you. I will pass the line.
Thank you. One moment for the next question, please. Next question is coming from the line of Himanshu Gupta of Scotiabank. Please go ahead.
Thank you, and good morning. First on Century Fire, which has been strong for a few years now: are we going to face tough comps at some point? What makes this business so special and how long can these tailwinds last?
Not in our sight line. We continue to experience growth in both the sprinkler and alarm installation side, and on the repair, service and inspection side. We are seeing strength in multifamily. We have some exposure to data center work—approximately 15% of our backlog—but it is not the key driver. We have a strong local branch network that is winning. We grew the backlog sequentially in the second quarter and it is well up over prior year. So we expect continued growth.
Thank you. On roofing, you mentioned the Florida branch and also Las Vegas has seen weakness. Is there anything particular about Las Vegas leading to the softness?
The market in Las Vegas is weak, and for us that market has historically been weighted more towards new construction—well over 50%, versus about 30% on average across our portfolio. We had two strong years of new construction strength in Vegas, including some very large projects in 2024. So we are coming off those peaks and seeing weakness now.
If overall roofing organic growth was down about 10% in Q2, is new construction down much more—like 20% or 30%—and is that the lion's share of the underperformance?
New construction is a meaningful factor, yes. Our recovery will be driven by reroof work; construction help is welcome when it happens, but right now our backlog is heavily weighted toward reroof. That is really our focus going forward.
One last question on capital allocation: have you reached a point where M&A is less accretive than buybacks, or would you still prefer M&A over buybacks in some cases?
We target a mid-teens return on any capital deployment. Growing through tuck-under acquisitions and adding strategic assets to our brands is the primary focus. That said, given our conservative leverage and the valuation discount of our business relative to other assets, buying back stock at current levels is highly compelling. We are able to do both at this juncture and will not compromise our tuck-under program; it's about balancing both paths.
Fantastic. Thank you so much. I'll turn it back.
Thank you. One moment, please. Next question is coming from the line of Frederic Bastien of Raymond James. Please go ahead.
Thank you. Scott, I believe you are in the midst of a brand optimization exercise and investing in the platform. Can you offer an update on that?
Yes. We are continuing and committed to it. It is the implementation of an enterprise-wide financial system that pulls together 14 different operating systems. It will give us much better information and forecasting ability to manage the businesses. It is on track. We also continue to invest in people and generally in the platform.
Will that exercise yield better growth opportunities, enhance margins, or both?
I think it will enhance margins, not materially in the short term. It is not something we are modeling specifically, but it is what we need to do to pull the business together and move forward strategically. It is similar to what we did at FirstService Residential years ago and at FirstOnSite and Century Fire more recently. It puts us in a better long-term position to grow the business.
Understood. Jeremy, I have one for you. Can you clarify if the 1.8 million shares bought back include purchases in July, or does that just pertain to the first six months of the year?
That figure pertains to the first six months of the year.
Can you indicate whether you have been active since then?
No. We were in blackout and our automatic share purchase program trigger points were not activated. We had to set parameters before blackout and they were not hit. We will be out of blackout on Monday, and then we can be active without those constraints.
Okay. Got it. Thanks. That is all I have.
Thank you. One moment for the next question. Our next question is coming from the line of Tim James of TD Securities. Please go ahead.
Thank you. Scott, you talked about fewer M&A opportunities coming to the market. Why do you think that is? With some challenging conditions in roofing and restoration, I might have expected more opportunities.
In those two areas, many owners are coming off numbers that were better in 2023 and 2024 and want to get back to those results before putting the company on the market. Many of these businesses are owned by private equity, and if companies are underperforming, sellers would need to crystallize a loss. So they are reluctant to transact today.
My second question is big picture: do you think there are any structural changes in your businesses or in the ability to roll out capital—thinking about private equity and higher multiples—or are the current challenges purely market forces that should normalize?
I do not see structural changes in the business models. The level of private equity capital we compete with increases every year, which has changed the competitive landscape for acquisitions. But in terms of our businesses' fundamentals, I do not see a structural change. We expect to return to normalized performance when market conditions do.
Okay, thanks.
Thank you. And that does conclude today's programming. Thank you all for participating. You may now disconnect.