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DATE
Thursday, July 24, 2025 at 11 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Scott Patterson
Chief Financial Officer — Jeremy Rakusin
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TAKEAWAYS
Revenue: $1.4 billion, up 9% year-over-year in the second quarter, driven primarily by tuck-under acquisitions completed in the past twelve months.
Organic Growth: 2% organic growth in the second quarter, with strength in FirstService Residential, Century Fire, and restoration brands; home services were flat, and roofing declined organically.
Adjusted EBITDA: Adjusted EBITDA was $157.1 million, up 19% from the prior year in Q2 2025.
Adjusted EPS: Adjusted EPS was $1.71, a 26% increase from Q2 2024.
FirstService Residential Division Revenue: $593 million, up 6% year-over-year in Q2 2025, with 3% organic growth and EBITDA of $65 million, up 11% at an 11% margin.
FirstService Brands Division Revenue: $823 million in Q2 2025, up 11%, driven mainly by tuck-under acquisitions, with low single-digit organic growth and EBITDA of $95 million, up 23% at an 11.6% margin.
Restoration Brands Organic Growth: 62% organic revenue growth in Paul Davis and First Onsite in Q2 2025, with increased backlog and job count supporting near-term growth expectations.
Roofing Segment: Overall segment revenue rose 25% in Q2 2025 due to acquisitions (primarily Crowder), though organic revenue declined by 10%; management expects improvement, with over 10% growth in Q3 2025 and organic revenues approximately flat year-over-year.
Century Fire Protection: Revenue growth exceeded 15%, with double-digit organic growth at most branches in Q2 2025. acquisitions of TST Fire Protection and Alliance Fire and Safety completed in Utah.
Operating Cash Flow: $163 million in operating cash flow in the second quarter, up 25% year-over-year and exceeding EBITDA. Year-to-date operating cash flow exceeds $200 million, a 67% increase from the same period in 2024.
Free Cash Flow and Leverage: Nearly $70 million of debt was paid down in Q2 2025, reducing net debt to EBITDA leverage to 1.8x from 2.0x in Q1. Liquidity exceeds $860 million as of Q2 2025.
Capital Expenditures: Over $30 million in capital expenditures in Q2, with $63 million year-to-date, on track to meet the full-year target of $125 million.
Outlook: Management reaffirmed "high single-digit revenue growth and margin expansion driving to double-digit EBITDA growth" for the full year 2025. margin expansion in Residential is expected to moderate, while Brands' margins should be roughly flat with last year for the remainder of 2025.
Restoration Outlook: Q3 revenues expected to be down 5%-10% year-over-year due to last year's weather events, but sequentially up mid-single-digits from Q2; large weather events could significantly alter the guidance.
Home Service Brands: Revenues for the home service brands segment were flat year-over-year in Q2 2025. Lead flow declined by almost 10% amid weaker consumer sentiment, but increased close ratios and larger job sizes mitigated the top-line impact.
SUMMARY
FirstService Corporation(FSV 3.13%) management explicitly cited margin gains across business lines in Q2 2025, supported by ongoing operating efficiencies, notably in client accounting and communications. The fire protection business sustained double-digit organic growth and margin outperformance in Q2 2025, driven by expanded service and inspection work. Free cash flow materially improved in Q2 2025, enabling debt reduction and increasing overall liquidity, positioning the company for future growth opportunities. Visibility for the rest of 2025 remains stable, with management reaffirming full-year financial targets and noting that restoration results may fluctuate with large weather events.
CFO Rakusin said, "Operating cash flow during Q2 2025 exceeded our consolidated EBITDA for the period, with a contribution from positive working capital trends."
CEO Patterson said, "We expect a stronger Q3, with revenues up over 10% versus the prior year and organic revenues approximately flat with the prior year."
Management stated that recent tuck-under acquisitions remain the central growth contributor, and that any further material M&A would focus on existing platforms.
Patterson emphasized that, while home service lead flow dropped, the customer mix shifted toward more affluent consumers, supporting job size and close rates.
Rakusin stated that "margin improvement from these efficiencies to moderate in the remainder of the year."
The restoration segment's backlog and day-to-day activity are expected to support near-term incremental revenue in Q3, despite unfavorable prior year comparisons.
INDUSTRY GLOSSARY
Tuck-under Acquisition: Small-scale acquisition in an existing business segment to complement current operations or geographic reach.
Restoration Brands: Segment specializing in property damage repair and restoration services, including Paul Davis and First Onsite.
EBITDA Margin: Ratio of EBITDA to total revenue, used to assess operational profitability exclusive of certain accounting adjustments.
Lead Flow: Volume of inbound customer inquiries or sales opportunities generated in a business segment.
Free Cash Flow: Operating cash flow after deduction of capital expenditures, indicating available liquidity for debt reduction, dividends, or reinvestment.
Full Conference Call Transcript
Scott Patterson: Thank you, Marvin. Good morning, everyone. Thank you for joining our Q2 conference call. As usual, I'm on today with Jeremy Rakusin. I'll kick us off with some high-level comments, and Jeremy will follow with more detail. I'll start by saying we're very pleased with the results we announced this morning. Solid performance in an environment with continuing uncertainty and weak consumer sentiment. The results were similar sequentially to our Q1. Total revenues were up 9% over the prior year, driven primarily by tuck-under acquisitions over the last twelve months.
Organic growth was 2% this quarter with gains at FirstService Residential, Century Fire, and our restoration brands, tempered by flat year-over-year results in our home service segment and declines in our roofing operations. EBITDA for the quarter was up 19% to $107 million, reflecting a consolidated margin of 11.1%, up 90 basis points over the prior year. Across the board, our operating teams continue to grind out margin gains. Jeremy will spend time on the margin detail in a few minutes. Finally, our earnings per share were up an impressive 26% over the prior year. Looking at our divisional results, FirstService Residential revenues were up 6% with organic growth at 3%, similar to Q1 and generally right on expectation.
Our net contract wins versus losses continue to improve, and we're comfortable that organic growth will sequentially improve towards our historical mid-single-digit average. Moving to FirstService Brands, revenues for the quarter were up 11%, driven primarily by tuck-unders. Organic growth was low single-digit for the division. Revenues for our two restoration brands, Paul Davis and First On-site, were up by about 62% organically, modestly better than our expectation. We're pleased with the momentum we have in our day-to-day branch level activity with both our US and Canadian operations.
The number of claims is up, and the number of jobs is up, which is a reflection of our efforts over the last few years in signing new national accounts and especially increasing our share of existing accounts, both with national insurance carriers and commercial owners and managers. Storm-related revenues during the quarter were modest and at approximately the same level as the prior year. Looking forward to Q3 and restoration, we expect the momentum in day-to-day activity to continue, which together with a solid quarter-end backlog should lead to revenue that is up mid-single-digit sequentially from Q2.
Relative to the prior year, we're up against a strong comparative quarter, particularly in Canada, that included revenues from two flood events impacting Toronto and Montreal, significant activity related to the Jasper, Alberta wildfires, and a few unusually large claims. At this stage, we expect Q3 revenues to be down 5% to 10% versus the prior year. Of course, as we've seen over the last few years, a weather event between now and September 30 can drive the result up materially. Moving to our roofing segment, revenues for the quarter were up 25% driven by acquisitions, principally the acquisition of Crowder in South Florida, that closed May 1. Organically, revenues declined by about 10% and were modestly lower than expectation.
We continue to see some deferral of large commercial reroofing and new construction projects. Two of our larger branches in particular were at capacity at this time of year last year, with several large industrial reroof projects underway. Activity at those operations slowed in the first half of this year. Our market position and relationships remain strong in those markets, and the demand drivers remain compelling. We see the slowdown as timing-related only, and in recent weeks, have seen a pickup. Our backlog at our larger operations and across our roofing platform is solid and building. We expect a stronger Q3 with revenues up over 10% versus the prior year, and organic revenues approximately flat with the prior year.
Moving on to Century Fire, we had a strong quarter with revenues up over 15% versus the prior year, including better than expected organic growth that hit double digits. Virtually all of the 30-plus branches performed well during the quarter, and again, the results were enhanced by particularly strong growth in repair service and inspection revenues. During the quarter, we announced the acquisitions of TST Fire Protection and Alliance Fire and Safety, two related fire protection companies based in Utah. Operationally and culturally, the businesses are very similar to Century and provide us with an attractive growth platform in the Western US.
The TST and Alliance teams will continue to operate the businesses, and we're excited to add them as partners as we focus on driving growth in adjacent markets. Our backlog continues to build at Century, and we expect strong results for the balance of the year, with organic growth tempering back into the high single-digit range. Now on to our home service brands, which as a group generated revenues that were flat with a year ago, better than our expectation. Consumer sentiment is down significantly since the beginning of the year, which resulted in our lead flow for the quarter being off almost 10% from the prior year.
Our teams across the home service brands have successfully increased our close ratio, and we've experienced an increase in average job size, which together drove solid revenues that were flat with a year ago. We believe we continue to take share in our markets. Looking forward, we expect a similar result in Q3 with revenues flat or perhaps slightly down versus the prior year. As I indicated on our last call, we remain optimistic that pent-up demand is building, and we'll see an increase in activity with interest rate reductions if they occur later this year or early next. Let me now hand it over to Jeremy.
Jeremy Rakusin: Thank you, Scott. Good morning, everyone. We are pleased with our strong Q2 performance, reflecting year-over-year growth in profitability on the back of the same margin expansion drivers we saw in this year's first quarter. I will provide more details in a moment. First, a walk-through of our consolidated financial results. Revenues for the second quarter were $1.4 billion, up 9% year-over-year, and we reported adjusted EBITDA of $157.1 million, up 19% versus the prior year. Adjusted EPS came in at $1.71, a 26% increase over Q2 2024.
Our six months year-to-date consolidated financial performance tracks closely to the strong growth metrics in the second quarter, aggregating to revenues of $2.7 billion, an increase of 9% over the $2.5 billion last year. Adjusted EBITDA of $260 million represents 21% growth over the $216 million last year, a margin of 9.8% year-to-date, up 100 basis points year-over-year, and adjusted EPS for the first half of the year sits at $2.63, a 30% increase over the prior year period. Adjustments to operating earnings and GAAP EPS to calculate our adjusted EBITDA and adjusted EPS, respectively, have been summarized in this morning's release and remain consistent with our disclosure in prior periods.
Shifting to our operating financial performance for the second quarter, I'll start with our FirstService Residential division. Quarterly revenues came in at $593 million, up 6% over the prior year. EBITDA for the quarter was $65 million, an 11% year-over-year increase with an 11% margin, up 40 basis points over the 10.6% margin in Q2 of last year. Margin improvement during the second quarter was driven by the same operating efficiencies noted in our first quarter, principally in areas around client accounting and community resident communications. For the six months year-to-date, our division EBITDA margin sits at 9.6%, up 60 basis points compared to the equivalent prior year period.
Consistent with what we said on our Q1 call, we expect the margin improvement from these efficiencies to moderate in the remainder of the year. Within our FirstService Brands division, we reported second-quarter revenues of $823 million, an 11% increase over the prior year period. EBITDA for the quarter came in at $95 million, up 23% year-over-year. Our margin during the quarter was 11.6%, up 110 basis points from the 10.5% during last year's Q2. The margin expansion within the division saw contribution from the same themes as the first quarter. Our restoration businesses continue to benefit from the optimization of their resources and operating processes, driving superior year-over-year profitability in the face of modest organic growth.
In our home improvement segment, California Closets captured additional margin improvement carry-through from labor cost efficiencies and reduced promotional activities. Turning to our cash flow profile, we generated $163 million in operating cash flow during the second quarter, exceeding our consolidated EBITDA for the period with a contribution of positive working capital trends. Our cash flow was up 25% over the prior year quarter and currently sits at over $200 million year-to-date, an increase of 67% over the same period in 2024.
Our capital expenditures during the quarter were a little over $30 million, and our year-to-date total of $63 million is right on pace with the annual CapEx target of $125 million we provided at the beginning of the year. Acquisition spending during the quarter was approximately $40 million, largely tied to the fire protection tuck-unders, which Scott summarized in his commentary. With the free cash flow surge in the second quarter, we were able to pay down almost $70 million of debt during the period. As a result, our leverage, as measured by net debt to EBITDA, declined to 1.8 times from the two times level at the end of Q1.
With our cash on hand and undrawn bank credit facility balances, our liquidity exceeds $860 million. We are well-positioned with this balance sheet strength to deploy capital when we see the right opportunities. Concluding with our outlook for the year, we remain firmly on track to hit our annual consolidated growth targets we set out at the beginning of the year, which included high single-digit revenue growth and margin expansion driving to double-digit EBITDA growth. For the remainder of 2025, our current line of sight is that the year-over-year growth profiles for Q3 and Q4 will be relatively similar to each other.
As Scott noted, our FirstService Residential division will revert back towards its mid-single-digit organic revenue growth rate and high single-digit overall growth when accounting for recent tuck-under acquisitions. Our FirstService Brands division revenues are expected to be slightly up versus the prior year, with restoration facing the headwinds of a strong back half of 2024, without assuming any significant weather activity that could materialize in the remainder of 2025. Consolidated revenue growth will settle in at mid-single digits, absent the closing of any meaningful tuck-under acquisitions during the balance of the year. From an operating profitability perspective, I mentioned the tapering of FirstService Residential margin expansion for the remaining quarters down to levels modestly higher than the prior year.
Margins within the FirstService Brands division will also aggregate to be roughly in line with the prior year. As a result, our consolidated EBITDA should increase slightly more than our revenue growth during the balance of the year. That concludes our prepared comments. Marvin, you may now open up the call to questions. Thank you.
Operator: Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 1 again. Our first question comes from the line of Stephen MacLeod of BMO Capital Markets. Your line is now open.
Stephen MacLeod: Thank you. Good morning, guys. Just had a couple of questions with respect to the outlook. Starting with the residential business, can you just talk about your confidence in the return to mid-single-digit organic growth in the back half of the year with respect to some of the community budgetary pressures we've seen? Are you seeing those already beginning to reverse?
Scott Patterson: I wouldn't say reverse, Stephen, but they're starting to normalize. It was most acute last year. We started to see it normalize, I guess, towards the end of last year and through the first six months. So it's really playing out as we've described in our last few calls. We expected Q4, Q1, and Q2 to be tougher organic growth quarters. There is still some disruption, as many communities in Florida are still underfunded and work towards increasing monthly maintenance fees or implementing a special assessment. We're working closely with our boards, so there will continue to be some disruption, but we don't expect it to significantly impact our organic growth going forward.
And as I said in my prepared comments, we expect to sequentially improve and move towards that mid-single-digit number, and we'll start to see that in Q3.
Stephen MacLeod: Okay. That's great. Thank you. And then just moving to the FirstService Brands business, you gave some color on the outlook, which is very helpful. The margin in the quarter was quite strong even despite organic sales growth being more modest in that business. So, you know, obviously, you're getting some margin improvement based on the efficiencies that you put in place. This, you know, if we when we see organic growth beginning to accelerate at some point in time, do the plans you've put in place lead to a higher margin profile for the business overall over the long term?
Jeremy Rakusin: Yes, Stephen. I'll take that. It's Jeremy. For sure. I mean, both those businesses would benefit from traditional or natural operating leverage if we get, you know, accelerating top-line growth. You know, home improvement, we've been in a sort of flat to slightly down realm, and an acceleration there would help. In the case of restoration, which is the other area where we've seen significant margin improvement, that, again, is a function of top-line performance, and we've spoken at many times around the weather-driven activity levels that can create a more volatile quarterly performance. So it really depends on activity levels there.
That's why in the back half of this year, with the strong prior year comparable, we're not expecting margin improvement unless we get, you know, a matching or better level of weather-driven activity.
Stephen MacLeod: Okay. That's great. And then maybe just finally on the brands business, with the roofing on the roofing side of things, you know, Scott, you mentioned in your prepared remarks that over the last few weeks, you've seen some improvement. Just wondering, like, what's the backdrop you need to see? Is it more macro-driven, or is it just people getting people who are making these large investment decisions getting more comfortable with the tariff situation? Like, what exactly do you need to see in order to kinda get that backlog moving? Get those deferrals moving?
Scott Patterson: I think it's all of the above. I mean, the tariff uncertainty, I think the expectation that interest rates would start moving down, and that has not happened. And it's, you know, pushed out to later this year or next. I think all of that is causing hesitation, the prospect for perhaps some inflation. So a number of large commercial customers continue to sit on contracts. But even with that slowness, we have started to book work, as I said, and it's picking up for us. The bidding activities remain strong throughout. But we're seeing more commitment. But there still is some deferral. But we, you know, we expect to see some improvement in Q3.
Stephen MacLeod: Okay. That's great. Thanks, guys. Appreciate it.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Stephen Sheldon of William Blair. Your line is now open.
Stephen Sheldon: Hey. Thanks. Congrats on the great results here. Starting in Restoration, I guess you talked about some of the progress with national accounts and gaining share with more day-to-day work. As that continues, do you think restoration will become less reliant on large storm activity, which I think you talked about potentially being a swing factor 20%, give or take, in any given year? And potentially make this a business with slightly less volatility quarter to quarter and year to year than at least you've seen historically. I guess, if that continues, could it change the profile of the business?
Scott Patterson: I'm not sure that's true, Steven. Because as we gain ground with national accounts and as we improve our positioning and gain more wallet share, that will translate during cat events also. We'll take on more work. I think it just improves our ability to drive more revenue in moderate weather conditions and sets us up to win more during cat events also.
Stephen Sheldon: Got it. That makes sense. And then on brands, just following up on the margins there. Just, I guess, high level as you think about the individual segments and businesses within brands, can you just remind us where you still see the biggest room for margin improvement over the coming years? And within Restoration, do you think there are multiple years of margin expansion just from the better resource optimization using the tech platform that you guys have built out there?
Jeremy Rakusin: Yes, Steven. So home improvement would really be dependent on the gain that reacceleration and remodeling spend, you know, the macro factors that drive the top line. Because, you know, we've been at it in terms of the labor efficiencies and reduced promotional activity for a year now. So we're always tweaking and trying to get more efficient and reducing overtime hours and return visits, optimizing our labor, all that. But I really think it'll be a function of, you know, improved top-line growth when the macro conditions improve. And then restoration, it's a multiyear effort. The teams have made major strides. We've cemented a lot of the labor-driven efficiencies there. And, yeah, there will be more opportunities.
It's just not gonna be in a straight line big game because it is dependent on activity levels and revenue performance in that business as well.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Scott Fletcher of CIBC. Your line is now open.
Scott Fletcher: Good morning. I wanted to ask about the fire protection business. It seems to be outperforming now a few quarters in a row. Could you just dig into why? What are some of the dynamics that let that business outperform relative to some of the other brands given they're facing the same macro? Just curious if it's something to do with the mix of commercial or some idiosyncratic factors.
Scott Patterson: Yeah. I think primarily the growth in repair service and inspection part of their business. It was a big driver in Q1, and particularly in Q2, and it's been a multiyear effort around the service side of the business. We made it a priority when we partnered with the Century team to balance the business and drive up the service work to create more of a fifty-fifty installation versus service. So it's definitely been a strategic priority. And then the investment has followed that. So investing in sales service techs, and there's been a particular focus on collaborating with the installation teams to convert new installs into ongoing service work.
And then the last, I'd say, twelve to eighteen months, a big push on driving inspection sales and inspection work that drives service work. And so all of those factors continue to sort of drive the service side of the business, which has been pulling along the installation side the last few quarters.
Scott Fletcher: Okay. Great. That's interesting color. And then I wanted to ask on the M&A front. You know, at the end of the year, given where leverage is now, you're tracking to sort of get leverage back down to the levels that it was when you did the Roofing Corp deal. Are you, given the current macro, is it still an are there opportunities for deals as leverage ticks down, or is tuck-unders maybe more of the focus given the uncertainty?
Scott Patterson: Yeah. You know, our leverage is always at a modest level. I don't know that we've very often been in a position where we haven't been able to be opportunistic around a large deal. So we think about the leverage when we're looking at opportunities, but it doesn't influence us one way or the other. If there's a strategic fit, a larger opportunity, we'll figure out the balance sheet side of it. So I think there's certainly an opportunity for larger acquisitions. You know, the definition of new platform is not something we're seeking out. We have opportunities across the platforms we have. So I would expect that our activity will be focused on the areas that we service today.
Operator: Okay. Thank you for the color. I'll pass the line. Thank you. One moment for the next question. Again, as a reminder, to ask a question, you'll need to press star 11 on your telephone. Our next question comes from the line of Daryl Young of Stifel. Your line is now open.
Daryl Young: Hey, good morning, everyone. First question is on home improvement. The environment's obviously been very tepid. But there does seem to be a big divergence between the high income and the low income consumer. And I'm just curious if you can give us a bit of color on where your market positioning is in terms of your products and if you're seeing any indication that may be true and holding your business in better than maybe some of the broader economic indicators might indicate.
Scott Patterson: I think there's something there. You know, our largest brand within our home service group is California Closets, which caters to a broad spectrum of consumers. But it does have a big part of their growth and history, the brand has been around a more affluent customer. And that has been helpful. You know, I mentioned that we'd seen our average job size increase, and I think that has been weighted towards affluent consumers, which has influenced our group. I do believe that's true.
Daryl Young: Got it. Okay. And then on the roofing business, wondering if the sort of quarterly volatility in results that you're seeing stacks up with what you would have seen in your due diligence on the asset. I guess I'm just trying to figure out if we're going through a unique period of time for roofing today or if weather and starts and stops on projects is something that, you know, was part of the expectation when we got into this business?
Scott Patterson: No. I think that, you know, we're in an environment that has influenced roofing. We're certainly not alone. I think we're holding our own in roofing and perhaps doing better than the market. You know, we have operations that have historically relied on large industrial reroof work, and that, and some new construction, and that has been slower. And as I said, we're starting to see a pickup. So no, I'm not sure we identified any volatility. In fact, it's, you know, the demand drivers in roofing are very compelling, influenced by weather, but also the aging built environment. It's gonna be a big driver in this market. We think we're very well positioned.
We've got a strong team, great partners, and a solid footprint. So I think we're in an environment that's sort of macro-driven. But feel very good about where we're at and where we're going.
Daryl Young: Okay. That's great color. Thank you.
Operator: Thank you. I'm showing no further questions at this time. I'll now turn it back to Scott Patterson for the closing remarks.
Scott Patterson: Thank you, Marvin, and thank you, everyone, for joining us today. In October, we'll be on a Q3 call. Enjoy the rest of your day.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.