Creating Value
One Step at a Time
FirstService
2018 Annual Report
1,132
1,264
$1,931MM
5-YEAR REVENUE CAGR
13
%
CUMULATIVE GROWTH
2014 - 2018
71
%
CUMULATIVE GROWTH
2014 - 2018
1
54
%
CUMULATIVE GROWTH
2014 - 2018
211
%
CUMULATIVE MARGIN
EXPANSION 2014 - 2018
50
%
2014 2015 201820172016
2014 2015 201820172016
2014 2015 201820172016 2014 2015 201820172016
Revenues
(US$ millions)
Adjusted EBITDA
(US$ millions)
1,483
130
1,729
159
75
103
0.84
1.20
Adjusted EPS
(US$)
Adjusted EBITDA
Margin
1.62
8.8
%
1.99
9.2
%
191
2.61
9.9
%
6.6
%
8.2
%
1995 1996 19981997 1999 2000 200320022001 2004 2005 2006 2007 201020092008 2011 201420132012
$37MM
2015 20172016 2018
23 YEARS REVENUE
COMPOUNDED
ANNUAL GROWTH
19
%
1,931
Financial Highlights
About FirstService
Corporation
FirstService Corporation is a North American
leader in the essential property services
sector serving its customers through two
industry-leading platforms:
• FirstService Residential – North America’s
largest manager of residential communities;
• FirstService Brands – one of North
America’s largest providers of essential
property services to residential and
commercial customers delivered
through individually branded franchise
systems and company-owned operations.
FirstService Residential and FirstService
Brands both rely on the same operational
foundations for success:
• Proven business models and core
competencies in managing and growing
market-leading outsourced property
services businesses;
• Focus on service excellence and
leveraging our significant scale
advantages and differentiators to
benefit our clients;
• Leadership positions with well-recognized
brands and modest market shares in
very large, fragmented markets providing
significant growth opportunities;
• Disciplined tuck-under acquisition
program ensuring strong returns on
invested capital; and
• Partnership philosophy aligning
business leaders with shareholders
to add long-term value.
FirstService Corporation’s compelling
track record of financial performance
includes:
• Highly predictable and recurring
contractual revenue;
• Strong free cash flow with modest
capital expenditures;
• Conservative balance sheet;
• Consistent dividend increases (four
10%+ increases in four years since
spin-off; cumulative 50% increase); and
• Future growth target of 10%+
compounded annual revenue growth.
1,132
1,264
$1,931MM
5-YEAR REVENUE CAGR
13
%
CUMULATIVE GROWTH
2014 - 2018
71
%
CUMULATIVE GROWTH
2014 - 2018
154
%
CUMULATIVE GROWTH
2014 - 2018
211
%
CUMULATIVE MARGIN
EXPANSION 2014 - 2018
50
%
2014 2015 201820172016
2014 2015 201820172016 2014 2015 201820172016 2014 2015 201820172016
Revenues
(US$ millions)
Adjusted EBITDA
(US$ millions)
1,483
130
1,729
159
75
103
0.84
1.20
Adjusted EPS
(US$)
Adjusted EBITDA
Margin
1.62
8.8
%
1.99
9.2
%
191 2.61
9.9
%
6.6
%
8.2
%
1995 1996 19981997 1999 2000 200320022001 2004 2005 2006 2007 201020092008 2011 201420132012
$37MM
2015 20172016 2018
23 YEARS REVENUE
COMPOUNDED
ANNUAL GROWTH
19
%
1,931
1,132
1,264
$1,931MM
5-YEAR REVENUE CAGR
13
%
CUMULATIVE GROWTH
2014 - 2018
71
%
CUMULATIVE GROWTH
2014 - 2018
154
%
CUMULATIVE GROWTH
2014 - 2018
211
%
CUMULATIVE MARGIN
EXPANSION 2014 - 2018
50
%
2014 2015 201820172016 2014 2015 201820172016 2014 2015 201820172016
2014 2015 201820172016
Revenues
(US$ millions)
Adjusted EBITDA
(US$ millions)
1,483
130
1,729
159
75
103
0.84
1.20
Adjusted EPS
(US$)
Adjusted EBITDA
Margin
1.62
8.8
%
1.99
9.2
%
191 2.61
9.9
%
6.6
%
8.2
%
1995 1996 19981997 1999 2000 200320022001 2004 2005 2006 2007 201020092008 2011 201420132012
$37MM
2015 20172016 2018
23 YEARS REVENUE
COMPOUNDED
ANNUAL GROWTH
19
%
1,931
1,132
1,264
$1,931MM
5-YEAR REVENUE CAGR
13
%
CUMULATIVE GROWTH
2014 - 2018
71
%
CUMULATIVE GROWTH
2014 - 2018
154
%
CUMULATIVE GROWTH
2014 - 2018
211
%
CUMULATIVE MARGIN
EXPANSION 2014 - 2018
50
%
2014 2015 201820172016 2014 2015 201820172016
2014 2015 201820172016
2014 2015 201820172016
Revenues
(US$ millions)
Adjusted EBITDA
(US$ millions)
1,483
130
1,729
159
75
103
0.84
1.20
Adjusted EPS
(US$)
Adjusted EBITDA
Margin
1.62
8.8
%
1.99
9.2
%
191
2.61
9.9
%
6.6
%
8.2
%
1995 1996 19981997 1999 2000 200320022001 2004 2005 2006 2007 201020092008 2011 201420132012
$37MM
2015 20172016 2018
23 YEARS REVENUE
COMPOUNDED
ANNUAL GROWTH
19
%
1,931
1,132
1,264
$1,931MM
5-YEAR REVENUE CAGR
13
%
CUMULATIVE GROWTH
2014 - 2018
71
%
CUMULATIVE GROWTH
2014 - 2018
154
%
CUMULATIVE GROWTH
2014 - 2018
211
%
CUMULATIVE MARGIN
EXPANSION 2014 - 2018
50
%
2014 2015 201820172016 2014 2015 201820172016 2014 2015 201820172016 2014 2015 201820172016
Revenues
(US$ millions)
Adjusted EBITDA
(US$ millions)
1,483
130
1,729
159
75
103
0.84
1.20
Adjusted EPS
(US$)
Adjusted EBITDA
Margin
1.62
8.8
%
1.99
9.2
%
191 2.61
9.9
%
6.6
%
8.2
%
1995 1996 19981997 1999 2000 200320022001 2004 2005 2006 2007 201020092008 2011 201420132012
$37MM
2015 20172016 2018
23 YEARS REVENUE
COMPOUNDED
ANNUAL GROWTH
19
%
1,931
(US$ thousands, except per share amounts) Year ended December 31
2018 2017 2016 2015 2014
Results From Operations
Revenues $ 1,931,473 $ 1,729,031 $ 1,482,889 $ 1,264,077 $ 1,132,002
Adjusted EBITDA
1
190,611 159,312 130,324 103,038 74,997
Operating earnings 127,568 104,962 90,550 70,747 45,621
Net earnings 90,280 75,047 54,243 38,198 26,192
Financial Position
Total assets $ 1,007,474 $ 848,266 $ 770,964 $ 600,483 $ 615,544
Long-term debt 334,523 269,625 250,909 201,199 239,357
Shareholders’ equity 236,226 192,286 181,028 167,026 158,749
Earnings Per Share Data
Adjusted EPS
2
$ 2.61 $ 1.99 $ 1.62 $ 1.20 $ 0.84
Diluted net earnings per common share 1.80 1.41 0.92 0.59 0.36
Diluted weighted average
common shares outstanding (thousands) 36,571 36,559 36,366 36,425 36,363
Cash dividends per common share $ 0.54 $ 0.49 $ 0.44 $ 0.40 $ -
Notes
1. Adjusted EBITDA is defined as net earnings before income tax, interest, depreciation, amortization, other (income) expense, acquisition-related items, and stock-based
compensation expense.
2. Adjusted earnings per share is defined as diluted net earnings per common share, adjusted for the effect, after income tax, of the non-controlling interest redemption
increment, amortization, acquisition-related items, stock-based compensation expense, and a stock-based compensation tax adjustment related to a US GAAP change.
Over Two Decades
of Consistent Growth
A Message From Our CEO
We have many highlights to be proud of in 2018 including:
Double-Digit Revenue Growth
Our top line grew by 12% in 2018 with a healthy 50/50 balance
between organic growth and acquisitions. We consider organic
growth to be the most important measure of brand health across
our various service lines and we are very pleased with the 6%
generated year-over-year. We continue to differentiate our service
delivery and win market share.
Strategic Acquisitions
During 2018, we completed 15 strategic acquisitions balanced
between our two divisions: ten in FirstService Brands and five in
FirstService Residential. Through these transactions we increased
market share, broadened our service offering and expanded our
geographic footprint. Importantly, the deals also brought new top
level talent into the FirstService family. The leadership and talent
at prospective targets is the principal asset we focus on and
ultimately pay for. Last year, we added a number of young leaders
to our team and we expect them to help drive growth for many years.
Improved Margins
Our consolidated margins increased again this year, by 70 basis
points, supported by increases at both divisions. We have a strong
culture of “continuous improvement” that drives our daily focus on
customer experience and also results in the consistent realization
of cost efficiencies across our operations. This has been particularly
apparent in recent years at FirstService Residential as we
consolidate systems and leverage our scale, and this discipline for
incremental improvement extends to every operation.
Free Cash Flow Supported a Strong Balance
Sheet and Increasing Dividends
We generated another year of strong operating cash flow, which
enabled us to invest in our businesses while also driving internal
and acquisition growth initiatives. Our balance sheet remained
strong at year-end with a leverage ratio of 1.4x net debt to EBITDA.
Early in 2018, we also expanded our debt capacity with an
increased and extended credit facility allowing for $350 million of
total borrowing (including a $100 million accordion feature). Our
financial flexibility also allowed us to recently increase our annual
dividend to US$0.60 per share, the fourth successive 10%+ hike
and a cumulative 50% increase since our spin-off into a new
public company in June 2015.
From left: D. Scott Patterson Chief Executive Officer,
Jeremy Rakusin Chief Financial Officer
We have a proven business model and strategy that has delivered
consistent revenue growth and shareholder returns for over two
decades. We operate in huge, highly fragmented property service
markets with significant running room for growth. Our relentless
focus on customer experience drives retention, repeat business
and word-of-mouth referral resulting in market share gains and
consistent year-over-year organic growth. We augment this with
selective tuck-under acquisitions to take total top-line growth
to 10%+. Our 2018 results reflect the continued execution
of our strategy and represent our 25th consecutive year of
revenue growth.
2018 was another
excellent year for
FirstService
Corporation.
Social Purpose
We launched our Social Purpose program in 2018 as a way to
highlight our ongoing commitment to serving our local communities
and to encourage our teams to do even more. The energy and
enthusiasm around Social Purpose was incredible and in our
first year, we participated in more than 200 community-related
initiatives. In addition, our teams quickly embraced the opportunity
to help each other by financially supporting the FirstService Relief
Fund, which assists our people facing financial hardship during
times of crisis. We approved 29 grants in 2018 with awareness and
momentum increasing throughout the year. See the back cover of
this report for more information on #FirstServeOthers and our
plans for 2019.
People
We are an essential services company comprised of 34,000
employees who share a deep commitment to serve others. Our
people are our greatest asset and the strength of their engagement
is our competitive advantage. During 2018, we increased our
investment in people development and culture-building initiatives
for the fifth year running. We operate in very tight labour markets
across North America and our ability to recruit, hire, onboard, train
and retain employees who share our values is critical to our
continued success. We aspire to be THE employer of choice in
all our markets and, in 2018, we again saw returns from our
investments with improvement in recruiting metrics, employee
retention and employee engagement measures.
Summary and Look Forward
We are very pleased with our strong 2018 results which continue
an impressive run for us since our spin-off in June 2015. Revenues
are up more than 70%, EBITDA is up 154% and our stock price is
up 145% over the four years since. We have consistently stated
that our long-term goal is to grow our revenues at an average
annual rate of at least 10% with incremental growth at the EBITDA
line. We have achieved and exceeded this goal for many years and
are confident that 2019 will deliver more of the same. Our markets
continue to show strength and operationally we are in an excellent
position to capitalize.
Longer term, we remain excited about the huge growth opportunities
we have in our service markets and the potential for continued
efficiencies and margin improvement across the board.
We want to thank our operating partners and teams for their
continued commitment to making a difference every day. Together,
we are successfully building iconic, winning brands with service
excellence as the foundation. It is an exciting journey with much
work still to do.
D. Scott Patterson
Chief Executive Officer
EBITDA by
division
1
1. Excludes unallocated corporate costs.
Revenue by
division
34,000 Total
Employed
65
%
35
%
59
%
41
%
56
%
44
%
FirstService
Residential
Employees
FirstService
Brands
Franchisee
Associates
Cumulative
Dividend
Growth*: 50
%
*as of February 2019
FirstService
at a Glance
FirstService Residential is the largest residential property
manager in North America, with 8,500 communities and
more than 1.7 million residential units under management.
Its mission is to deliver exceptional client service and
solutions that enhance the value of every property and the
lifestyle of every resident in the communities it manages.
In achieving these objectives, FirstService Residential
leverages its scale, expertise and local knowledge to add
value to its clients and differentiate itself from its
competitors. The business invests extensively in a team of
people who are committed to customer service excellence
and living its values on a daily basis: Being genuinely helpful,
aiming high, owning it, doing what’s right, improving it and
building great relationships.
2018 Highlights
• Achieved highest level of gross revenue from new client
contract wins
• Recorded 15th consecutive quarter of operating margin
improvement since our June 2015 spin-off
• Achieved 9% annual EBITDA margin
• Closed five tuck-under acquisitions:
• Added scale in large Atlanta, GA metropolitan area
and established presence in growing Nashville, TN
market
• Strengthened property management presence
in South Carolina, particularly in Charleston
metropolitan area
• Broadened amenity management service offering
FirstService Brands is a leading North American operator
and provider of essential property services to residential
and commercial customers, with extensive franchise
networks comprising approximately 1,800 franchises and
almost 30 company-owned locations in all 50 U.S. states
and ten Canadian provinces.
In 2018, FirstService Brands’ 17,000 employees within
franchised and company-owned operations generated
aggregate system-wide revenues of approximately
US$2.2 billion. Services are delivered through seven
well-known, market-leading brands, each of which aspire
to define service excellence in their respective markets
through a strong focus on customer experience.
2018 Highlights
• Robust 9% annual organic growth exceeding overall
market growth
• Significant progress within Paul Davis Restoration
company-owned platform in adding management team
strength and building out shared services infrastructure
• Very active tuck-under acquisition activity across all
company-owned platforms with 10 closed transactions:
• Four Restoration company-owned – three with Paul
Davis Restoration (Seattle, WA; Lexington, KY; Western
Canada) and one independent operation
• Two California Closets company-owned – Las Vegas,
NV; Houston, TX
• Four Century Fire tuck-unders increasing scale around
Atlanta, GA metropolitan area and expanding
geographic footprint in Tampa, FL and Raleigh, NC
Chuck M. Fallon
Chief Executive Officer
FirstService Residential
Charlie E. Chase
Chief Executive Officer
FirstService Brands
Revenues
$
1,255M
EBITDA
$
113M
Revenues
$
677M
EBITDA
$
88 M
Planned Companie
s
Janitorial Maintenance Security Concierge
EST. 1983
R
FITNESS SYSTEMS
“The Fitness & Wellness Experts!”
#FirstServeOthers has always been core to who we are at FirstService. After all, it’s
this service-minded approach that has allowed us to grow and prosper over the past
two decades. Launching our Social Purpose program in 2018 provided a platform to
leverage the good work we were already doing as an organization, and to motivate
and inspire our teams to do more. We are galvanizing our collective efforts using the
hashtag #FirstServeOthers, which sends a proud signal that we are people who want
to foster healthy communities for everyone to live, work and play.
Not only has our engagement in Social Purpose activities been rewarding to our
people on a personal level, we are also seeing benefits as an organization. In
addition to helping attract and retain like-minded individuals to our companies, our
team members are supporting each other through donations to the FirstService Relief
Fund and engaging with colleagues at sister companies by attending,
supporting or volunteering at each other’s events. This collaboration strengthens the
fabric of our organization by fostering camaraderie and enhancing our
reputation as a great place to work.
At FirstService, Social Purpose takes on many forms:
• Volunteering for a local charity
• Participating in fundraising events
• Contributing to the FirstService Relief Fund to help our own
• Collecting items for donation drives
• Rolling up our sleeves and getting things done
• Helping those who need it most
• Inspiring others through our actions and stories
This year we have further defined our Social Purpose to represent our collective
commitment to initiatives that support Our People, to activities that support Our
Community and to causes that improve Our Environment.
With 34,000 people throughout our organization, the impact we can create is immense.
How will you #FirstServeOthers?
Our Social Purpose
FirstService.com
Corporate Information
Registrar and Transfer Agent
Canada – TSX Trust Company
Phone: 1.866.600.5869
E-mail: tmxeinvestorservices@tmx.com
U.S. co-transfer agent – Computershare
Phone: 1.800.368.5948
E-mail: webqueries@computershare.com
Stock Exchange Listings
NASDAQ Global Select Market – FSV
Toronto Stock Exchange – FSV
FirstService common shares are included
in the S&P/TSX Composite Index.
Notice of Shareholders’
Meeting
The annual meeting of the share-
holders will be held on Wednesday
April 10, 2019 at 4:00 p.m. (ET) at
The Design Exchange, 234 Bay
Street, Toronto-Dominion Centre,
Toronto, Ontario
FirstService Residential
California partnered with
the United Way
CertaPro Painters team
members participated in
a Habitat for Humanity
project
Volunteers from Paul Davis
worked with Habijax
Super Restoration helped
prepare 124,416 meals
for Feed My Starving
Children
