Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenues increased by 16% year-over-year, driven primarily by acquisitions.
- EBITDA for the quarter rose by 12% to $132 million, reflecting a consolidated margin of 10.2%.
- FirstService Residential revenues were up 8%, with organic growth close to 7%.
- The acquisition of Cityscape strengthens FirstService Residential's leadership position in the Bay Area.
- Century Fire had a very strong quarter, up sequentially over Q1 and up organically over the prior year by a high single-digit percentage.
Negative Points
- Organic growth was flat for the quarter, with gains at FirstService Residential offset by declines in the restoration segment.
- Revenues for the restoration brands, Paul Davis and FIRST ONSITE, were down by about 5% and off organically by over 10% for the third consecutive quarter.
- Adjusted EPS for the quarter was $1.36, down from $1.46 in Q2 2023.
- The weak housing market, higher interest rates, and general economic uncertainty negatively impacted the home improvement market.
- Interest expense nearly doubled year-over-year, reflecting higher interest rates and a larger debt balance.
Q & A Highlights
Q: Can you talk about the pipeline for the restoration business, especially with recent hurricane activity?
A: Hurricane Barrel will not be a significant event for us or the market. Increased claims in Houston are more related to residential water mitigation, with minimal impact on large commercial claims. (D. Scott Patterson, CEO)
Q: What is the outlook for the brands business in terms of margin improvement and revenue growth?
A: We expect organic growth within our restoration business and modest declines in home improvement. Roofing is a new business for us, and we anticipate mid-single-digit organic growth for the brands division. (D. Scott Patterson, CEO; Jeremy Rakusin, CFO)
Q: Are there other priority areas for the roofing business beyond Florida?
A: Florida remains a priority, but we are also focusing on Texas, Mid-Atlantic, and California. We have opportunities across the U.S. (D. Scott Patterson, CEO)
Q: How should we think about the sizing of future roofing deals?
A: Future deals will generally be smaller, more in line with typical tuck-unders. The recent larger acquisitions were strategic moves to establish a significant presence in key markets. (D. Scott Patterson, CEO)
Q: Can you discuss the seasonality of the roofing business and its impact on quarterly performance?
A: Q2 and Q3 are the seasonal peaks for most roofing businesses. Florida-based businesses may have more year-round activity due to the climate. (Jeremy Rakusin, CFO)
Q: What are the growth opportunities for FirstService Residential in Northern California?
A: The focus is on high-rise and large master-planned communities. The addition of the Cityscape team strengthens our presence and positioning in the market. (D. Scott Patterson, CEO)
Q: How are the promotional investments in the home improvement business performing?
A: We have dialed back marketing spend and discounting to focus on balancing market share gains and bottom-line performance. This has led to improved margins. (D. Scott Patterson, CEO)
Q: Can you provide an update on Century Fire's growth and future outlook?
A: We expect Century Fire to continue growing at a high single-digit rate for the rest of the year and into 2025. (D. Scott Patterson, CEO)
Q: How is labor availability impacting FirstService Residential?
A: Labor availability has improved significantly, reducing turnover and helping us maintain contractual obligations. This has positively impacted our revenue. (D. Scott Patterson, CEO)
Q: What should we expect for the minority interest share of earnings going forward?
A: The minority interest share of earnings is expected to be in the 9% to 10% range, tracking lower year-to-date but conservatively estimated. (Jeremy Rakusin, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
