FIRSTSERVICE CORPORATION — Earnings Release 2021

Jul 27, 2021

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COMPANY CONTACTS:

D. Scott Patterson President & CEO

Jeremy Rakusin Chief Financial Officer

(416) 960-9566

FOR IMMEDIATE RELEASE

FirstService Reports Very Strong Second Quarter Results

Performance driven by Robust Organic Growth across all Operations

Operating highlights:

Revenues (millions) Adjusted EBITDA (millions) (note 1) Adjusted EPS (note 2) GAAP Operating Earnings GAAP EPS	Three months ended June 30 2021 2020 $ 831.6 $ 621.6 89.9 71.2 1.21 0.86 61.4 44.9 0.83 0.64	Six months ended June 30	Six months ended June 30
	2021	2021	2020
	$ 831.6 89.9 1.21 61.4 0.83	$ 1,542.7 149.6 1.87 95.3 1.32	$ 1,255.4 115.1 1.23 60.9 0.77

TORONTO , Canada, July 27, 2021 – FirstService Corporation (TSX: FSV; NASDAQ: FSV) today reported very strong results for its second quarter ended June 30, 2021. All amounts are in US dollars.

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Consolidated revenues for the second quarter were $831.6 million, a 34% increase relative to the same quarter in the prior year, including 25% organic growth. Adjusted EBITDA (note 1) increased 26% to $89.9 million, and Adjusted EPS (note 2) was $1.21, representing 41% growth over the prior year quarter. During the second quarter, FirstService reported GAAP Operating Earnings of $61.4 million, up from $44.9 million in the prior year period. The GAAP diluted earnings per share was $0.83 in the quarter, compared to $0.64 for the same quarter a year ago.

For the six months ended June 30, 2021, consolidated revenues were $1.54 billion, a 23% increase relative to the comparable prior year period, Adjusted EBITDA was $149.6 million, up 30%, and Adjusted EPS was $1.87, an increase of 52% versus the prior year period. FirstService’s GAAP Operating Earnings were $95.3 million in the current year period, versus $60.9 million in the prior year. The GAAP diluted earnings per share for the six months year-to-date was $1.32, compared to $0.77 in the prior year period.

“The strong results for this second quarter reflect an acceleration of activity in many of our brands and a resumption of amenity services approaching normalized levels in our property management business,” said Scott Patterson, Chief Executive Officer of FirstService. “We are very pleased with our performance in the face of a challenging labour market. Recruitment and adding resources to our talented teams is a focus area for us to further capitalize on the strong market demand,” he concluded.

About FirstService Corporation

FirstService Corporation is a North American leader in the essential outsourced property services sector, serving its customers through two industry-leading service platforms: FirstService Residential - North America’s largest manager of residential communities; and FirstService Brands - one of North America’s largest providers of essential property services delivered through individually branded franchise systems and company-owned operations.

FirstService generates more than US$3.0 billion in annual revenues and has approximately 24,000 employees across North America. With significant insider ownership and an experienced management team, FirstService has a long-term track record of creating value and superior returns for shareholders. The common shares of FirstService trade on the NASDAQ under the symbol “FSV” and on the Toronto Stock Exchange under the symbol “FSV”. More information is available at www.frstservice.com.

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Segmented Quarterly Results

FirstService Residential revenues were $406.2 million for the second quarter, up 20% compared to the prior year quarter, including organic growth of 16%. The strong revenue performance in the quarter reflected a significant increase in labourdriven services, including our amenity management offering which benefited from the reopening of client facilities in the aftermath of the pandemic. Adjusted EBITDA for the quarter was $46.5 million, versus $37.2 million in the prior year period. GAAP Operating Earnings were $40.4 million, versus $32.0 million for the second quarter of last year. Margin expansion in the division during the quarter was positively impacted by an increase in higher margin ancillary revenues, primarily related to continued strong home resale activity.

FirstService Brands revenues during the second quarter grew to $425.4 million, up 50% relative to the prior year period. Organic growth was 36%, with the balance from recent tuck-under acquisitions. Top-line growth was driven by robust home improvement performance, with strong increases both year-over-year and on a sequential quarterly basis. Growth was also very strong in our restoration operations, which benefited from increased weather-related activity and large loss claims relative to last year. Adjusted EBITDA for the second quarter was $48.2 million, versus $35.8 million in the prior year period. GAAP Operating Earnings were $30.7 million, versus $17.4 million in the prior year quarter. Margin compression resulted from the increased contribution mix of restoration operations to the Brands division for the current quarter, as well as reinvestment in our service lines relative to the pandemic-driven cost reductions in the prior year second quarter.

Corporate costs, as presented in Adjusted EBITDA, were $4.8 million in the second quarter, relative to $1.9 million in the prior year period. On a GAAP basis, corporate costs for the quarter were $9.8 million, relative to $4.4 million in the prior year period. The year-over-year cost increase reflects higher compensation expense compared to the prior year second quarter, which included significant COVID-19 expense reductions.

Conference Call

FirstService will be holding a conference call on Tuesday, July 27, 2021 at 11:00 a.m. Eastern Time to discuss the quarter’s results. The numbers to use for this call are 1) toll-free 1-888-241-0551; or 2) for international callers, 647-4273415. The call will be simultaneously webcast and can be accessed live or after the call at www.firstservice.com in the “Investors / Newsroom” section.

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Forward-looking Statements

This press release includes or may include forward-looking statements. Much of this information can be identified by words such as “expect to,” “expected,” “will,” “estimated” or similar expressions suggesting future outcomes or events. FirstService believes the expectations reflected in such forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different from any future results, performance or achievements contemplated in the forwardlooking statements. Such factors include: (i) general economic and business conditions, which will, among other things, impact demand for FirstService’s services and the cost of providing services; (ii) the ability of FirstService to implement its business strategy, including FirstService’s ability to acquire suitable acquisition candidates on acceptable terms and successfully integrate newly acquired businesses with its existing businesses; (iii) changes in or the failure to comply with government regulations; and (iv) other factors which are described in FirstService’s annual information form for the year ended December 31, 2020 under the heading “Risk factors” (a copy of which may be obtained at www.sedar.com) and Annual Report on Form 40-F filed with the United States Securities and Exchange Commission (a copy of which may be obtained at www.sec.gov), and subsequent filings (which factors are adopted herein). Forward-looking statements contained in this press release are made as of the date hereof and are subject to change. All forward-looking statements in this press release are qualified by these cautionary statements. Unless otherwise required by applicable securities laws, we do not intend, nor do we undertake any obligation, to update or revise any forward-looking statements contained in this press release to reflect subsequent information, events, results or circumstances or otherwise.

Summary financial information is provided in this press release. This press release should be read in conjunction with the Company's consolidated financial statements and MD&A to be made available on SEDAR at www.sedar.com.

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Notes

1. Reconciliation of net earnings to adjusted EBITDA:

Adjusted EBITDA is defined as net earnings, adjusted to exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) depreciation and amortization; (v) acquisition-related items; and (vi) stock-based compensation expense. We use adjusted EBITDA to evaluate our own operating performance and our ability to service debt, as well as an integral part of our planning and reporting systems. Additionally, we use this measure in conjunction with discounted cash flow models to determine the Company’s overall enterprise valuation and to evaluate acquisition targets. We present adjusted EBITDA as a supplemental measure because we believe such measure is useful to investors as a reasonable indicator of operating performance because of the low capital intensity of the Company’s service operations. We believe this measure is a financial metric used by many investors to compare companies, especially in the services industry. This measure is not a recognized measure of financial performance under GAAP in the United States, and should not be considered as a substitute for operating earnings, net earnings or cash flow from operating activities, as determined in accordance with GAAP. Our method of calculating adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to adjusted EBITDA appears below.

(in thousands of US$) Net earnings Income tax Other income, net Interest expense, net Operating earnings Depreciation and amortization Acquisition-related items Stock-based compensation expense Adjusted EBITDA	Three months ended June 30	Three months ended June 30	Six months ended June 30	Six months ended June 30
	2021	2020	2021	2020
	$ 44,020 14,280 (888) 3,971	$ 29,917 9,603 (147) 5,530	$ 67,863 22,000 (2,756) 8,158	$ 35,697 11,149 (376) 14,417
	61,383 23,674 (107) 4,903	44,903 23,488 397 2,443	95,265 46,899 (206) 7,690	60,887 46,995 802 6,412
	$ 89,853	$ 71,231	$ 149,648	$ 115,096

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2. Reconciliation of net earnings and diluted net earnings per share to adjusted net earnings and adjusted net earnings per share:

Adjusted earnings per share is defined as diluted net earnings per share, adjusted for the effect, after income tax, of: (i) the noncontrolling interest redemption increment; (ii) acquisition-related items; (iii) amortization expense related to intangible assets recognized in connection with acquisitions; and (iv) stock-based compensation expense. We believe this measure is useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company and enhances the comparability of operating results from period to period. Adjusted earnings per share is not a recognized measure of financial performance under GAAP, and should not be considered as a substitute for diluted net earnings per share, as determined in accordance with GAAP. Our method of calculating this non-GAAP measure may differ from other issuers and, accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to adjusted net earnings and of diluted net earnings per share to adjusted earnings per share appears below.

(in thousands of US$) Net earnings Non-controlling interest share of earnings Acquisition-related items Amortization of intangible assets Stock-based compensation expense Income tax on adjustments Non-controlling interest on adjustments Adjusted net earnings (in US$) Diluted net earnings per share Non-controlling interest redemption increment Acquisition-related items Amortization of intangible assets, net of tax Stock-based compensation expense, net of tax Adjusted earnings per share	Three months ended June 30	Three months ended June 30	Six months ended June 30	Six months ended June 30
	2021	2020	2021	2020
	$ 44,020 (1,596) (107) 10,408 4,903 (3,981) (177)	$ 29,917 (3,326) 397 10,864 2,443 (3,460) (298)	$ 67,863 (5,363) (206) 20,420 7,690 (7,309) (352)	$ 35,697 (5,081) 802 22,225 6,412 (7,446) (520)
	$ 53,470	$ 36,537	$ 82,743	$ 52,089
	Three months ended June 30		Six months ended June 30
	2021	2020	2021	2020
	$ 0.83 0.13 - 0.17 0.08	$ 0.64 (0.01) 0.01 0.18 0.04	$ 1.32 0.09 - 0.33 0.13	$ 0.77 (0.04) 0.02 0.37 0.11
	$ 1.21	$ 0.86	$ 1.87	$ 1.23

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FIRSTSERVICE CORPORATION

Condensed Consolidated Statements of Earnings

(in thousands of US dollars, except per share amounts)

Revenues Cost of revenues Selling, general and administrative expenses Depreciation Amortization of intangible assets Acquisition-related items (1) Operating earnings Interest expense, net Other income Earnings before income tax Income tax Net earnings Non-controlling interest share of earnings Non-controlling interest redemption increment Net earnings attributable to Company Net earnings per common share Basic Diluted Adjusted earnings per share (2) Weighted average common shares (thousands) Basic Diluted	Three ended	months June 30 2020 $ 621,597 412,010 140,799 12,624 10,864 397 44,903 5,530 (147) 39,520 9,603 29,917 3,326 (531) $ 27,122 $ 0.64 0.64 $ 0.86 42,397 42,710	Six months ended June 30	Six months ended June 30
	2021 $ 831,630 554,676 192,004 13,266 10,408 (107) 61,383 3,971 (888) 58,300 14,280 44,020 1,596 5,725 $ 36,699 $ 0.84 0.83 $ 1.21 43,830 44,365		2021 $ 1,542,696 1,045,488 355,250 26,479 20,420 (206) 95,265 8,158 (2,756) 89,863 22,000 67,863 5,363 3,910 $ 58,590 $ 1.34 1.32 $ 1.87 43,764 44,287	2020
				$ 1,255,428 847,159 299,585 24,770 22,225 802
				60,887 14,417 (376)
				46,846 11,149
				35,697 5,081 (1,791)
				$ 32,407
				$ 0.77 0.77 $ 1.23
				41,977 42,322

Notes to Condensed Consolidated Statements of Earnings

(1) Acquisition-related items include transaction costs, and contingent acquisition consideration fair value adjustments.

(2) See definition and reconciliation above.

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Condensed Consolidated Balance Sheets

(in thousands of US dollars)

Assets Cash and cash equivalents Restricted cash Accounts receivable Prepaid and other current assets Current assets Other non-current assets Fixed assets Operating lease right-of-use assets Goodwill and intangible assets Total assets Liabilities and shareholders' equity Accounts payable and accrued liabilities Other current liabilities Operating lease liabilities - current Long-term debt - current Current liabilities Long-term debt - non-current Operating lease liabilities - non-current Other liabilities Deferred income tax Redeemable non-controlling interests Shareholders' equity Total liabilities and equity Supplemental balance sheet information Total debt Total debt, net of cash	June 30, 2021 $ 176,616 30,805 466,091 213,533 887,045 16,349 133,073 156,858 1,119,131 $ 2,312,456 $ 364,053 141,297 37,826 56,755 599,931 515,590 130,098 101,606 40,507 201,229 723,495 $ 2,312,456 $ 572,345 395,729	December 31,2020
		$ 184,295 24,643 418,890 191,488
		819,316 14,970 126,569 153,185 1,082,500
		$ 2,196,540
		$ 349,692 102,266 35,315 56,478
		543,751 533,126 128,793 96,093 41,345 193,034 660,398
		$ 2,196,540
		$ 589,604 405,309

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Consolidated Statements of Cash Flows

(in thousands of US dollars)

Cash provided by (used in) Operating activities Net earnings Items not affecting cash: Depreciation and amortization Deferred income tax Other Changes in non-cash working capital Accounts receivable Payables and accruals Other Net cash provided by operating activities Investing activities Acquisition of businesses, net of cash acquired Purchases of fixed assets Other investing activities Net cash used in investing activities Financing activities Increase in long-term debt, net Proceeds received on common share issuance Purchases of non-controlling interests, net Dividends paid to common shareholders Distributions paid to non-controlling interests Other financing activities Net cash provided by (used in) financing activities Effect of exchange rate changes on cash Increase (decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash, beginning of period Cash, cash equivalents and restricted cash, end of period	Three months ended June 30 2021 2020 $ 44,020 $ 29,917 23,674 23,488 (981) (2,149) 5,024 1,845 71,737 53,101 (46,938) 11,911 18,552 28,814 36,661 19,396 80,012 113,222 (37,082) - (15,766) (6,733) (2,210) (603) (55,058) (7,336) 19,748 (105,072) - 150,008 (2,009) (11,316) (7,999) (6,867) (5,286) - 264 (1,164) 4,718 25,589 323 626 29,995 132,101 177,426 133,184 $ 207,421 $ 265,285	Six months ended June 30	Six months ended June 30
	2021 $ 44,020 23,674 (981) 5,024 71,737 (46,938) 18,552 36,661 80,012 (37,082) (15,766) (2,210) (55,058) 19,748 - (2,009) (7,999) (5,286) 264 4,718 323 29,995 177,426 $ 207,421	2021 $ 67,863 46,899 (1,730) 7,998 121,030 (38,686) (8,368) 32,747 106,723 (39,603) (29,103) (4,276) (72,982) (17,905) - (5,400) (15,191) (7,156) 9,861 (35,791) 533 (1,517) 208,938 $ 207,421	2020
			$ 35,697 46,995 (4,205) 5,669
			84,156 32,893 18,335 17,657
			153,041
			- (22,081) (786)
			(22,867)
			(121,924) 150,008 (15,067) (13,091) (50) 1,228
			1,104
			(284)
			130,994 134,291
			$ 265,285

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Segmented Results

(in thousands of US dollars)

Three months ended June 30 2021 Revenues Adjusted EBITDA Operating earnings 2020 Revenues Adjusted EBITDA Operating earnings Six months ended June 30 2021 Revenues Adjusted EBITDA Operating earnings 2020 Revenues Adjusted EBITDA Operating earnings	FirstService Residential	FirstService Brands	Corporate	Consolidated
	$ 406,221 46,494 40,404 $ 338,153 37,245 31,980 FirstService Residential	$ 425,409 48,171 30,749 $ 283,444 35,844 17,364 FirstService Brands	$ - (4,812) (9,770) $ - (1,858) (4,441) Corporate	$ 831,630 89,853 61,383 $ 621,597 71,231 44,903 Consolidated
	$ 756,701 75,901 63,648 $ 677,816 61,135 49,404	$ 785,995 81,578 47,255 $ 577,612 57,790 22,271	$ - (7,831) (15,638) $ - (3,829) (10,788)	$ 1,542,696 149,648 95,265 $ 1,255,428 115,096 60,887