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FirstService Corporation (FSRV)

Q1 2013 Earnings Conference Call

April 26, 2013 11:00 pm ET


Jay Hennick, Founder & CEO

D. Scott Patterson, President & COO

John Friedrichsen, SVP & CFO


David Gold - Sidoti

Brandon Dobell - William Blair

Stephen MacLeod - BMO Capital Markets

Stephanie Price - CIBC

Brian Hikisch - Raymond James

Will Marks - JMP Securities

Tal Woolley - RBC

Anthony Zicha - Scotia Bank



Good day, ladies and gentlemen, and welcome to the First Quarter Investors Conference. Today’s call is being recorded. Legal counsel requires as to advice that the discussions 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 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 Friday, April 26, 2013. At this time for opening remarks and introductions, I would like to turn the call over to the Founder and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir.

Jay Hennick

Thank you, operator, and good morning everyone and thanks for joining us. With me today is Scott Patterson, President and Chief Operating Officer; and John Friedrichsen, Senior Vice President and Chief Financial Officer.

This morning FirstService reported better than anticipated results for the seasonally slow first quarter as revenues at Colliers International, FirstService Residential and FirstService Brands were all up strongly versus the prior year quarter.

Colliers International had particularly strong bottom-line performance reflecting market share gains and continued growth in multi-market assignments, corporate services, investment and capital market activities.

And as expected, results from Field Asset Services were down considerably from the prior year quarter due to sharp declines in foreclosure volumes associated with the recovery in the U.S. economy. Revenues from Field Assets during the quarter were down a full $41 million from last year making the quarter a very tough comparison indeed.

Many will recall few years ago during the financial crisis that field assets was generating exceptional cash flows for FirstService. Those earnings were very important at that time. They gave us the fire power, we needed to invest in our businesses at perfect time in the economic cycle and now those investments are paying off handsomely as you will hear.

Scott and John will have more to say about our operational and financial highlights in just a few minutes.

Looking forward, FirstService will continue to create value one step at a time through our three growth engines, Colliers International, one of the top global players in commercial real estate, FirstService Residential, North America’s largest residential property manager and Property Services is a leading provider of essential services delivered through company owned operations, franchise systems and contractor networks.

Just before the quarter end ended, we announced the acquisition of Colliers Germany adding market leading players in Munich, Stuttgart and Berlin and over side of the important relationships with affiliates in Düsseldorf and Frankfurt. Having a leadership position the anchor of the entire EU not only accelerates our growth in the region but also reinforces our ability to serve clients in Europe and around the world. Over the years the FirstService partnership model has been an important competitive advantage for us that had made all the difference in the world in the case of Colliers Germany.

Our new people – new partners are people who have a deep market knowledge and experience and they have built their businesses slowly and carefully over many years. But they also understand that the market is changing and now more than ever clients want service providers that are better capitalized and better able to deliver services seamlessly on a global basis.

Our new partners at Colliers Germany are not however all that new. You see they have been with Colliers and have been Colliers affiliates now for ages. We worked together with them on many engagements over the years. So coming together was just a natural step for both of us. I would like to formally welcome all of them into the FirstService family.

Before I turn things over to John, I would like to comment briefly on our plans to simplify our capital structure and institute a dividend on our common shares. The plan involves eliminating our outstanding 7% preferred shares by way of a partial redemption for cash followed by a conversion of the balance of the preferred shares into common shares.

Instituting the cash dividend on our common shares creates a new source of investment income for the holders of our common shares in addition to their capital appreciation. But it also introduces FirstService to a new universe of dividend oriented investors which should help with our liquidity.

In summary, we are pleased with results from our first quarter and confident we are on track to deliver strong year-over-year growth in revenue EBITDA and earnings per share for the balance of the year.

Now, let me ask John to take you through the financial details for the quarter. Scott will follow with his operational report and then we will open things up to questions. John?

John Friedrichsen

Thank you, Jay, and good morning.

As announced in our press release earlier this morning and covered by Jay in his opening remarks FirstService reported first quarter financial results that include a revenue and adjusted EBITDA that were better than our expectations. Consistent with our first quarter in each of the last three years Colliers International’s commercial real estate operation was the main contributor to our growth in revenues while our property services division reported another decline in its results.

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