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FirstService Corp. (FSRV)

Q3 2010 Earnings Call

October 27, 2010; 11:00 am ET


Jay Hennick – Founder and Chief Executive Officer

Scott Patterson – President and Chief Operating Officer

John Friedrichsen – Senior Vice President and Chief Financial Officer


Sara O’Brien – RBC Capital Markets

Dave Gold – Sidoti

Frederic Bastien – Raymond James

Stephen MacLeod – BMO Capital Markets

Brandon Dobell - William Blair

Stephanie Price – CIBC

Damir Gunja – TD Securities



Welcome to FirstService Corporation's third quarter earnings 2010 conference call. Legal counsel requires us to advise that the discussion scheduled to take place may contain forward-looking statements that involve risks and uncertainties. Actual results may be materially different from those contained in these forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in the Form 10-K and in the company's other filings with Canada and US Securities Commission. As a reminder, today's call is being recorded and today is Wednesday, October 27, 2010.

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, and good morning, everyone. As the operator said, I'm Jay Hennick, the Chief Executive Officer of the company. 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 very solid third quarter results. Revenues were up 18% for the quarter; adjusted EBITDA of 5% and adjusted earnings per share was up slightly versus the prior year quarter.

For the nine-month period, revenues were up 16%, adjusted EBITDA up 14% and adjusted earnings per share up 7%. And finally, our cash flow, another very important indicator of our success continued to be very strong up 32% versus the prior year quarter. John will provide full details on our financial results in a few minutes.

Overall, as I said we're pleased with our third quarter results. Colliers International demonstrated very strong revenue growth in the United States, Canada, Australia and Asia while continuing to invest in its brand and in its global platform. Revenues in residential property management and property services also grew relative to the prior year period despite more difficult market conditions. Scott will expand on all of this in his operational report following shortly.

Since gaining control of Colliers at the end of 2009, FirstService initiated a massive re-branding effort to create brand consistency on a worldwide basis. Many of you will recall seeing Colliers signage co-branded with many different local names in many different markets. We are in the process of transitioning away from this to one uniform Colliers International name brand providing singular and consistent branding in all 61 countries where we operate.

We decided to undertake this initiative because we believe the Colliers International brand offers tremendous potential for the future. Colliers International is not only the third most recognized commercial real estate brand in the world, in fact some say the second most recognized. But it also conveys an immediate sense of integrity and experience to clients globally. It’s truly an institutional brand in the industry, something that’s very hard to replicate.

During the quarter, Colliers also entered into a new licensing agreement in the research triangle area, otherwise known as Raleigh-Durham. Anthony & Company widely regarded as the best firm in the area has become Colliers International and we’re pleased to add the new Colliers Raleigh-Durham to our global organization. There are two or three more licenses being contemplated in secondary markets in the coming months, none of which is material, but each will help strengthen our service capabilities throughout our US platform.

And finally, as you will recall, FirstService acquired 29.9% interest in publicly traded Colliers UK at the end of last year. We made the investment to help stabilize the business, upgrade operating systems and strengthen the management team. Like New York, London is an important market that drives business to other markets. During the quarter, Colliers UK continued to show some progress, although slower than we would have liked as market conditions in Western Europe remain weaker than expected.

FirstService residential is the largest manager of residential properties in North America. We currently manage more than 4100 properties, low, medium and high-rise residential buildings, gated communities, active adult communities and a variety of other properties that comprise over 1.2 million homes where more than 3.5 million Americans live. This is the core business for FirstService and it has many similarities to our commercial property management business we operate under the Colliers International banner.

As I said earlier, revenues were up relative to the prior quarter, but the real story in this segment was on the acquisition front. Early in the quarter, we acquired highly respected good scheme property management in New York City. FirstService residential now manages more than 85,000 residential units in the Greater New York area making us the largest player in the market by a wide margin.

And then in September, we also announced our first Canadian acquisition adding condominium first, the market leader in Calgary, Alberta. We are in the process of integrating the condominium first adding operating systems and introducing new programs that will provide greater value to our new clients in the Alberta market.

The other area of our residential property management business that continues to see volume increases is our national accounts business. Providing property management and rental services to large government agencies and financial institutions that repossess residential assets or buy them in the aftermarket in bulk for future resale is a growing part of our business.

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