FirstService Corporation

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the First Service Corporation Fourth Quarter 2022 Earnings 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 that 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 Fort Lauderdale Statement 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 40F as filed with the U.S. Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is February 7, 2022.

I would now like to turn the call over to Chief Executive Officer, Mr. Scott Pattison. Please go ahead, sir.

Thank you, Howard. Good morning, everyone. Thank you for joining our fourth quarter and year-end conference call. Jeremy Racoosin is on the line with me this morning. And I will open by saying that we are extremely proud with how we closed out the year. Our teams drove very strong top-line organic growth It was our strongest growth quarter of the year. And importantly, we delivered even stronger growth at the EBITDA line. Our teams have been battling inflationary cost pressures and margin headwinds all year. The margin results for the quarter, in large part, are a credit to their year-long discipline around cost containment and incremental pricing initiative. We also benefited from operating leverage in our brand divisions. Total revenues for the quarter were up 19% over the prior year, with organic revenue growth an impressive 15%, boosted by particularly strong growth in our brands division. EBITDA was up 23%, reflecting a margin of 10.1% versus 9.7% in the prior year. Jeremy will jump into the margin and earnings per share detail in his comments. Looking at our divisional results, first service residential revenues were up 9%, 8% organically. The organic growth was again driven by net new contract wins and was broad-based across North America with all of our regions showing solid gains. Just after year end, we were very pleased to announce two acquisitions for first service residential in the New York City market. Tudor Realty Services, and Charles H. Greenthal & Company together add over 350 co-op and condominium properties to our New York City operations. The two marquee portfolios further extend our dominant leadership position in the market. We're excited to welcome the Tudor and Greenthal teams to the First Service residential family. and look forward to working together to bring additional value to our new communities. Looking forward to 2023, we expect to show growth at first service residential at or about 10%, very similar to what we experienced this year. With the organic growth at mid to high single digit, this is a contractual recurring revenue model with only modest swings quarter to quarter as ancillary revenues fluctuate. Moving on to first service brands. Revenues for the quarter were up 28% with three quarters of the growth coming organically. The impressive organic growth number was supported across the board by strong results at our restoration brands, home improvement brands, and Century Fire. Let me go through each. starting with restoration, which includes our results from Paul Davis and First Onsite. Revenues for the quarter were very strong, up about 30% from Q4 of 2021, split two-thirds organic growth and one-third from tuck under acquisitions over the last year. During the quarter, we generated about $85 million from Hurricanes Ian and Fiona, which compares to $40 million of revenue booked in the prior year quarter from storm activity, primarily Hurricane Ida. Organic growth excluding named weather events was mid-single digit. During the quarter, we completed two tuck-under acquisitions within restoration, one under first on-site and one as part of our Paul Davis company-owned platform. At first onsite, we acquired Emergency Restoration, a regional provider of water mitigation and property restoration services in New Orleans. This is an important addition to our footprint that enhances our client coverage in a region that regularly gets hit with weather. And we're off to a great start with this new operation in terms of booking work and adding customers. At Paul Davis, we acquired our franchised operation serving the Salt Lake City and Las Vegas metropolitan areas. This business is one of the largest franchises in the Paul Davis network and the largest restoration company in Salt Lake City. We're excited to partner with Brandon Radmull and his team and believe we have an opportunity to significantly grow these markets. We now own 14 operations within the aggregate network of 330 Paul Davis operations across North America. Looking forward in restoration, we're expecting a solid front half of the year. We're carrying a strong backlog into Q1, both from Hurricane Ian and winter storm Elliot, which hit the last week of December. Elliot was highly unusual in its scope. stretching from the Great Lakes area down to the Mexico border. About 60% of the North American population faced some sort of winter weather advisory or temperature warning. Many of our branches in the U.S. and Canada saw a spike in activity, primarily relating to wind damage and water damage from burst pipes. Our pipeline is up about 25% compared to last year. which will provide a boost for us the next couple of quarters. We expect to show year-over-year revenue growth of about 20% over the first six months weighted towards Q1. It's difficult to estimate how quickly we can work through the backlog and where exactly the revenue will fall. Suffice to say, we're off to a strong start in restoration, and we will provide more visibility at each quarter end. Moving now to our home improvement brands, including California Closets, Serta Pro Painters, Floor Coverings International, and Pirlit of Post Home Inspection. As a group, these brands were up about 10% against a strong Q4 from 2021 that was up 30% over the year prior. December weather impacted our ability to complete as much work as we expected, and our revenues reflected as much. We fell a bit short of our internal estimates. All that work now flows into January and we will make it up. Looking forward, we expect continued growth in 2023. At this point, we estimate growth at a high single-digit level against a very strong 2022. The macro environment is mixed. Home sales are down significantly, while home prices and home equity levels are holding. In general, we're facing modest headwinds in home improvement, but our teams feel strongly we will battle through and continue to grow. The markets are very large. The work is there, and we have the team's and brand's strength to secure it. During the quarter, we further expanded our company-owned operations at California Closets with the acquisition of our franchise territory in Portland, Oregon, adding a market with significant future growth potential. We now own 21 of the 80 California Closet locations, which account for about 50% of system-wide sales. Now on to Century Fire, which had a very impressive fourth quarter, up almost 30% from the prior year, with over 20% organic growth. All aspects of Century's service offering, including sprinkler and alarm installation, service inspection and repair, and national accounts, showed strong momentum in the quarter. Bid activity and backlogs remain very strong, And while we do start bumping up against big comparative quarters, we still expect to generate double-digit growth at Century this coming year. Before I pass on to Jeremy, I want to reiterate how pleased we are with our finish to the year and our 2022 full-year performance. Again this year, we generated in and around 10% organic growth. which is a true credit to our teams and their ability to consistently take share. Over to you, Jeremy.