FirstService Corp Q2 FY2020 Earnings Call

Welcome to the Second Quarter Investors 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 materially differ 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 these forward-looking statements is contained in the company's annual information form as filed with the Canadian Securities Administration 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 July 23, 2020. I would now like to turn the call over to Chief Executive Officer, Mr. Scott Patterson. Please go ahead, sir.

Thank you, Jessie, and welcome everyone to our Q2 earnings call. Thank you for dialing in. Jeremy Rakusin is on the line with me today. We last spoke on April 23. At that time, we were all right in the middle of lockdown. About 85% of North America was under some sort of lockdown or stay-at-home measure, and really there was no clarity around when these measures would be relaxed. We went through a vigorous re-forecasting exercise based on what we were experiencing in mid-April to provide some direction and forward guidance with our Q1 report. Well, much has changed over the last three months. As you saw in our release this morning, we significantly outperformed our expectations and the guidance we provided. There are a number of factors involved, and Jeremy and I will walk you through them. In terms of agenda this morning, I will start with a summary overview of the results and variances from our forecast. I will then touch on two important highlights from the quarter, and then Jeremy will follow with a closer review of the financial results. Total revenues for the quarter were up 8% over the prior year. Organic revenue declined by 9% year-over-year, but this was more than offset by acquisition growth primarily relating to global restoration and several tuck-unders over the last 12 months. EBITDA for the quarter increased by 10%, reflecting a 20 basis point increase in margins. At FirstService Residential, revenues were down 9% versus our forecast of down 10% to 15%. At FirstService Brands, revenues were up 39% versus our forecast of flat to up 15%. Margins at both divisions were materially higher than forecast. The principal reason for the outperformance was that markets in general opened up more quickly than anticipated, which drove revenue opportunities across both divisions. At FirstService Residential, ancillary revenues proved to be more resilient during the quarter, particularly transfer and disclosure income, which was down less than forecast in April and May and then spiked in June and was up year-over-year. Home sales across the U.S. were up significantly in June, and our results reflected the same trend. At FirstService Brands, residential property service companies, including California Closets, CertaPro Painters, Paul Davis, Flora Coverings International, and Pillar to Post, were welcomed into homes more readily than expected. These brands came out early with clear communication around our in-home safety protocols which opened many doors for us. Our lead conversion and closed rates increased across all these businesses. On the bottom line, the aggressive tactics we took in mid-March around cost control set us up to reap the benefits of operating leverage on the stronger-than-expected revenues. Performance during the quarter improves sequentially every month with June results across many of our businesses and regions that were near a year ago in terms of revenue. We are seeing a continuation of these strong levels of activity into July and have not yet seen any pullback relating to the surge in new coronavirus cases across many states. We are extremely pleased with how the quarter played out relative to early expectations. Our teams were aggressive around cost containment and incredibly tenacious about seizing every revenue opportunity that was presented, and we continue to deliver on our service excellence promise across every brand. Our frontline teams are performing heroically and differentiating us from our competition. We feel very confident that we will emerge from this pandemic environment in an improved competitive position. Looking forward, we are cautiously optimistic about the back half of the year. Jeremy will provide some general direction in his comments, but we will refrain from providing any specific guidance for Q3 or the balance of the year. The economic outlook in North America remains very uncertain, and we have some concern that the strength we saw in June across many of our businesses was driven partially by pent-up demand. Before I hand off to Jeremy, I want to talk about two important highlights from the quarter. The first is the $150 million private placement that we completed with Durable Capital Partners on May 22. We ended Q1 with debt to EBITDA leverage of 2.4 times, which was right in our target comfort range. The equity rate took us down to 1.8 times on a pro-forma basis and gave us confidence that we could withstand anything the pandemic threw at us, while also being aggressive in terms of add-on acquisitions and strategic investment. We have since greenlighted many initiatives that we paused in the early days of the pandemic, and we are driving ahead full steam. An example was the acquisition of Rolyn Companies at the end of the quarter by global restoration; the second highlight I want to talk about. Rolyn is a leading commercial and large loss restoration company in the mid-Atlantic region of the U.S. The acquisition is strategically significant for us in that it expands our geographic reach, enhances our competitive position across a number of important verticals, and brings in some of the top and most experienced restoration professionals in the industry. Rolyn has nine operations centers in the mid-Atlantic, Northeast, and Southeast of the U.S., which complement our footprint and improve our ability to serve national accounts. They bring a diverse client base across healthcare, hospitality, multi-family, education, and assisted living verticals. We've added many new national relationships that we believe we can grow and further penetrate. In particular, Rolyn has built an exceptionally strong healthcare practice, and the company has been an industry leader supporting healthcare companies and other clients throughout the COVID-19 pandemic. This is an important move for us, and we are very excited about welcoming Sam Bergman, Mark Petrovski, and the entire Rolyn team into the global and FirstService families. On that note, I will pass the floor over to Jeremy.

Thank you, Scott, and good morning everyone. As you just heard from Scott, we reported financial results that significantly exceeded the expectations we laid out for Q2 during our first quarter call. I will get into more of the specifics around this in a minute, but first, a summary of the consolidated headlines for the quarter. Revenues were $622 million, and adjusted EBITDA was $71.2 million, up 8% and 10% respectively. Adjusted EPS came in at $0.86, down 23% from last year's second quarter. Together with our first quarter results, our six months here-to-date consolidated financial performances are as follows. Revenues of $1.26 billion, an increase of 18% over the $1.06 billion last year. Adjusted EBITDA of $115.1 million, representing 22% growth over the $94.2 million last year with a margin of 9.2%, up from the 8.9% in the prior year period. Adjusted EPS at $1.23 is down 15% versus $1.45 per share reported during our same six-month period last year. Our adjustments to operating earnings and its GAAP EPS to calculate our adjusted EBITDA and adjusted EPS respectively have been summarized in this morning's press release and remain consistent with our approach and disclosure in prior periods. I'll now summarize our segmented financial highlights for Q2. Starting with our FirstService Residential division, second quarter revenues came in at $338 million, a 9% decrease over the prior year period. This decline came in slightly better than the 10% to 15% range we provided Q1. Core management revenues were up modestly but were more than offset by ancillary revenue declines in areas we previously called out, specifically amenity management. That is our management of pool, aquatic, restaurant, spa, and fitness facilities was down in line with forecast. Other ancillary services, several of which carry higher margins, such as transfers and disclosures arising from unit resales within our communities, maintenance, construction, and project management moderated less than expected. EBITDA for the quarter was $37.2 million, a 5% year-over-year decline with an 11% margin, up 40 basis points from the 10.6% margin in Q2 of last year. This margin expansion was unexpected as we anticipated a more significant pandemic-driven fall-off in the quarter in those higher-margin ancillary services I just referenced. With the proactive and meaningful headcount and cost reductions we took in areas with reduced activity levels, it more than offset the negative impact to our top-line, resulting in the improved margins. When you look at the quarter-over-quarter results for FirstService Residential in the face of the unprecedented pandemic, it further reinforces the essential services nature and resiliency of this business. Now into our FirstService Brands division. In the second quarter, we recorded revenues of $283.4 million, a 39% increase over the prior year period driven by contributions from the large global restoration acquisition and partially offset by a 10% revenue decline in the division on an organic basis, excluding acquisitions. This overall division top-line performance well surpassed our expectations of 0% to 15% revenue growth as communicated to you at Q1. While our restoration and fire protection platforms performed as expected, our home improvement service lines significantly exceeded their Q2 forecasts. At the time of our Q1 results announcement in late April, with 85% of North America under some form of lockdown, our assumptions were that these measures would remain in place for most of Q2. The easing of government-mandated restrictions and social distancing measures across many U.S. states occurred much earlier than expected, which allowed our franchise and company-owned operations to get into homes, complete jobs, and drive increased sales activity. EBITDA for the brand segments during the quarter came in at $35.8 million, up 26% year-over-year and yielding a 12.6% margin, lower than the 14% margin in last year's second quarter. The year-over-year margin decline is due to acquisition mix, reflecting the addition of global's lower margin this quarter to the higher Q2 margin profile for the balance of the division. The current quarter margin, as with the top-line performance, significantly exceeded the expectations we provided on our Q1 conference call. The early reopening of many markets blunted our forecasted decline in system-wide sales and revenues within our home improvement brands, and our operators were nimble in re-accelerating their activity levels in markets where governments and homeowners permitted access. This more modest impact to the top-line, together with preemptive and aggressive cost reduction initiatives, drove the Brand's division to solid profitability in a challenging environment. Free cash flow was also exceptionally strong during the quarter. Operating cash flow before working capital changes more than doubled to $53 million over the prior year quarter. With increased focus on cash management and working capital, we saw a very strong surge in cash flow after working capital changes to $113 million. For the six months year-to-date, we have delivered $153 million of operating cash flow, up significantly over the prior year period. We previously also communicated on our Q1 call the intention to trim our CapEx for the balance of the year. This was reflected in our results with $7 million invested during the second quarter and $22 million year-to-date, thus tracking to our reduced full-year CapEx estimate of approximately $45 million. The strong internal cash flow performance helped keep our balance sheet in very good shape throughout the quarter, and then, as Scott highlighted, we further fortified our financial position with a $150 million equity private placement, allowing us to pivot from defense to offense as we gain greater confidence from our own financial performance and better visibility around tuck-under target prospects. We exited the second quarter with our net debt at $400 million, down significantly from over $630 million at Q1. As a result, our leverage as measured by net debt to EBITDA is now at 1.5 times, a decline from the 2.4 times level in the first quarter. Our liquidity, reflecting total undrawn availability under our revolver and cash on hand, was $625 million at quarter end and remains at a record level even after the capital deployed for the Rolyn acquisition post-Q2 which Scott earlier described. Maintaining financial flexibility to further pursue our growth objectives is a cornerstone of our business model, and we are as well-positioned as ever to drive forward on these opportunities. We are very pleased with our overall results to date in the face of COVID-19, and we maintain a positive yet cautious stance on the outlook for the back half of the year. There are obviously many uncertainties around the path of the pandemic with numerous possible outcomes. However, if the current macro environment remains largely intact, we believe that for the current full year we will be down modestly year-over-year on an organic basis on the top line, but with the full year contribution of global restoration versus half year in 2019, our revenues are expected to marginally exceed the 2019 reported level. We also anticipate that our consolidated EBITDA margin will be largely in line with prior year. That now concludes our prepared comments. I would ask the operator to please open the call to questions. Thank you.

Thank you. Your first question comes from George Doumet with Scotiabank. Your line is open.

Yes. Good morning, guys. Congrats on a very resilient quarter.

Thanks, George.

Scott, I wanted to touch on your comments that you mentioned earlier. You said there's a possibility for some pent-up demand, but your comments also said that there was a really strong momentum that continued into July. So can you maybe help us understand where you see that potential for that pent-up demand? Is it the lead orders at California Closets or maybe anything around the commentary there?

Well, we improved sequentially from April, May, to June, and June was particularly strong in terms of leads and book sales. I think that while we have seen it continue, I think there is a feeling that it will be tough to sustain through the balance of the year at current levels. We may see it sustained, but with the surge in cases and from reading economic reports from other industries generally, I think we share some of the concerns that are out there that we might see some pullback in the economy. In addition, we're watching closely the $600 a week unemployment benefit and when that might end and whether that's propping up some of the home improvement spending.

Okay. Great. Last quarter, I believe the number for furloughed employees was around 3,200. Do you guys have that number, where we sit today? And as those folks come back to work, just kind of wondering how we should think of the evolution of maybe the margins this year and next?

Yes, George, I'll take that. Yes, furloughs reduced terminations; in aggregate, you're right, it was over 3,000 at Q1. We've got roughly a third of those back, and incrementally we see more coming back as activity levels continue to increase. If we see the opening up of a lot of our amenity-related services at FirstService Residential, for example, particularly in areas like the Northeast where pools and aquatic areas still remain closed. As for the margin outlook in conjunction with that, a lot of the cost savings that we realized should remain in place. Some of those costs we're learning through this pandemic to manage with fewer resources for a given level of revenue than we had before, and we think some of those efficiencies and cost reductions will be permanent. Parsing out how much is permanent and how much is going to come back, that's too early to tell, but we think there will be some permanent cost reductions that will be reflected in margins going forward.

Okay. Great. Just one last one if I may, Jeremy, on the working capital. It was a really big source of cash halfway through the year. Do you expect that to, I guess, to revert to a typical drag of 1% to 2% of revenue that we've seen a lot in the last few years?

Yes. I mean the two biggest areas of the pickup in the working capital piece of the cash flow statement were focused collection and AR collection, particularly in this environment, and obviously with a bit slower growth you're not investing as much on that front, and you're more collecting and harvesting off the revenues that have previously been generated, but also on tax some of the government stimulus packages on both sides of the border afford us the opportunity to defer taxes, which will be paid in their normal course in the back half of the year. So I would say Q2 is an anomaly on the working capital pickup, but it did help us with the balance sheet and our financial position.

All right, guys. Thanks for the answers and good luck.

Thank you.

Your next question comes from Frederic Bastien with Raymond James. Your line is open.

Thank you. Jeremy, you touched on some of the costs that you believe you'll be able to permanently take out of the equation. Can you provide a bit more color on where this is coming from? Is that corporate level? Are you able to squeeze some costs out of every brand and across the organization?

Yes. I mean it's areas like marketing, legal, finance, HR, so a lot of those support functions. We're just working with leaner costs, but there's going to be a lot less travel, whether it's business development, air travel; a lot more virtual business development. But even executing on work Cal Closets as an example, our designers are able to do a lot more virtual consults versus spending time going home to home. So it's just efficient; they're getting a lot more done in a given day, a lot more productive and without the associated travel costs. Those are some of the examples. Even in the ancillary services side at FirstService Residential, again, the teams found ways to optimize the cost structure, and I think they're going to be able to generate as much or more revenue with fewer resources going forward.

I would add, I think this situation has enabled all of our businesses to reevaluate and redefine their staffing models. I don't know that there's going to be any particular area that we can pinpoint with accuracy going forward, but this will be a very interesting budgeting season for us as we take a fresh look at how we staff.

Thanks for that. My other question relates to your comment about going from defense to offense. Obviously, we saw that with the Rolyn acquisition. As we look into the second half leading to next year, I mean how's your appetite right now for acquisition? Do we see you continue the growth as global and into more restoration businesses, or are we going to see active in other market segments?

Well, the appetite is definitely there, and as you heard, we have the liquidity; we have the balance sheet. So we're prepared to be aggressive, but not necessarily more aggressive than we have been over the last several years, but we're not slowing down as a result of the pandemic or pausing in any way. We've restarted all of our significant strategic initiatives; a lot of them are part of the restoration strategy, the rebranding, and the investment in the infrastructure; and then we continue to work on our acquisition pipeline. Again, certainly restoration is part of that, but we have opportunities in really every other platform as well that we're working on.

Thank you. Very impressive quarter. Well done.

Thanks, Frederic.

Your next question comes from Stephen MacLeod with BMO Capital Markets. Your line is open.

Thank you. Good morning, guys.

Good morning, Steve.

Good morning. I just had a couple of questions specifically around the outlook. Jeremy, you gave some consolidated color. I just wanted to confirm or clarify, does the top line impact include the Rolyn acquisition? And secondly, with respect to the outlook, are you able to give some sort of broad strokes outlook as to how that second half view or full year view is supported by the FirstService Residential and FirstService Brands divisions?

Yes, it does include Rolyn, so that would be my comments around us being higher versus reported 2019 with global in there down on an organic basis, but including global and its tuck-unders. That would be in those numbers. Not too much to say on parsing out the divisions. I mean I would just say that the back half of the year is largely pretty flat profile on the top line. FirstService Residential is flat, is slightly down most likely, and FirstService Brands would be down without the global contribution. If you add in global, it would be relatively flat. So consolidated flat on the back half of the year on the top line, and again the margins are not going to materially differ when we finish the year from last year.

Okay. That's helpful. Thank you. And then I just wanted to talk just clarify kind of the outlook on the FirstService Brands division. Did I understand correctly that you did see momentum continue into July, but then you're sort of feeling a bit more cautious from kind of July onwards? Is that the way to think about how you're expecting the back half of the year in the FirstService Brands division?

Well, we saw, specifically speaking about the home improvement brands, we saw a strong June, strong activity in July, but recognize that June was still down year-over-year, just significantly better than April and better than expectation. So if we sustained at these levels, it's still down year-over-year on the home improvement side, and then restoration and fire are part of that division also.

All right. Okay. And that brings it to my final question. On restoration and fire, I think you sort of cited that the trends were in line with what you have expected for the broader brands division in Q2, but did you see any impact around deep cleaning or sanitization on the Paul Davis or global side?

Yes, we did. Both platforms benefited from the COVID work. Global, maybe I can start there; generally in line with expectation, as you suggest it was up modestly over the first quarter. Interestingly, it was up organically over the prior year, a period when we didn't own it. But commercial property claims we believe are down at least 20% in North America, in part due to COVID, in part due to weather, and so for global to show growth year-over-year is something we were very pleased about. Part of the reason is the COVID-related work; it's thousands of different discrete jobs that we performed, they tend to be smaller jobs, lower revenue, but it did fill that gap for us and enabled us to show some growth year-over-year where otherwise we might have been down. We have a strong hospitality practice at global, and that was down materially because of COVID. So it definitely benefited, and it also importantly opened up doors for us and enabled us to engage with new clients that we have since leveraged into national accounts and mitigation work. Paul Davis, similarly, was down only slightly from the prior year; we expected it to be down more dramatically due to shutdowns and inability to access homes, but as we discussed the markets rebounded. Paul Davis was able to get into homes and perform work, and then the COVID definitely helped it claw its way back to near year ago. So it has certainly been part of the quarter for us, and on the FirstService Residential side, we are obviously doing janitorial as part of that service offering. So the protocols have all changed, and we're obviously performing COVID cleaning for our communities. It doesn't drive top-line revenue, but it's certainly part of their service offering now.

Okay. Yes, that's great. And maybe just one more if I could with respect to Rolyn. You talked a lot about the global sanitization work. Can you talk a bit about, I need to know in it for in the quarter, but do you have any insight or any data you can provide around how Rolyn has done with their healthcare exposure?

Similar to global. They, otherwise, would have been perhaps down year-over-year, but the COVID gave it a real boost, probably more so with Rolyn on a pro-rata basis than global.

That's very helpful. Thanks, guys, and congratulations on the quarter.

Thanks, Steve.

Your next question comes from Stephen Sheldon with William Blair. Your line is open.

Hi guys. Thanks. With some economies reopening and then shutting back down, I wanted to ask how it impacted community plans for some of the amenities you operate in the residential segment like pools, gyms, and spas. Is there any way you can frame roughly what percentage are open now, and how do you expect trends to play out over the rest of the year with the visibility that you have at this point?

Yes, Stephen, I can't give you a percentage accurately. I can sort of talk regionally; the amenity spaces are still shut down here in Ontario and in the Northeast, particularly New York City and in a number of other pockets and jurisdictions around North America, but otherwise, they are open and operating. I think our expectation at this point is that they will stay open. The safety protocols may change in terms of utilization of the amenities, the capacity restrictions may change, but we have not seen any rollback of the amenities at this point. I think once they open within the community, it might be tough unless it's legislated, but that hasn't happened yet.

That's helpful.

Yes, okay.

Yes. That's perfect. And then wanted to ask about the new contract side for residential. Any signs that activity there could pick back up again like it did in late 2018 and early 2019, or are most property owners kind of remaining in maintenance mode and hesitant to switch providers right now? I guess that's also a boost or retention, but just curious about the new contracts.

Yes. We had thought that our sales would decline in the quarter, and it did. The boards of HOAs and condos today are under incredible pressure in this environment just trying to gain resident alignment around safety protocols and rules within the community, whether they're too stringent or not stringent enough. They are under pressure and are generally not focused on changing out management companies. So it's been hard to get attention in what we do. We're staying on it, and we do expect improved sales the balance of the year. That's our hope.

Great. Thank you guys.

Thanks.

Your next question comes from Stephanie Price with CIBC. Your line is open.

Good morning.

Hi, Stephanie.

I wanted to ask maybe that amenity question a little more broadly, and just wondering what you've seen in areas that have seen COVID spikes across both divisions and what the environment has been like post-Q2?

Those amenities have remained open, Stephanie, and they're a very important aspect of the community. There was pressure within really all the communities to open amenities as soon as possible, and then residents can make their own decision around whether they want to use them or not, but again, we haven't seen any pullback and aren't aware of any changes in terms of capacity restrictions or even utilization, whether they're less active than they were. We just haven't seen any change yet.

Okay. And then what about on the brand side in terms of areas that are seeing COVID spikes? Have you seen any change in activity there?

We get leads and metrics every day, and it's holding steady.

Okay. Great. And in your prepared remarks, you mentioned the possibility of market share gains for the year. Just wondering if you could talk a bit about the competitive environment and where you're seeing the possibility for these types of gains?

I don't have any concrete data on whether we're gaining market share, but I believe we are performing well and positioning ourselves effectively to capture more share. I think we are fulfilling our commitments, and I take pride in how we are delivering on those promises. I'm not certain that our competitors are delivering in the same manner. So, this is more my hypothesis than anything else.

Fair enough. All right. Well, results this quarter were definitely above expectations. So thank you very much.

Thanks.

Your next question comes from Daryl Young with TD Securities. Your line is open.

Good morning, guys. Just a couple quick ones for me. On the residential side, has there been any increase in opportunities for M&A as a result of some of the other smaller residential providers maybe struggling through this environment?

We have not seen it, Daryl. Not yet, and I'm not sure we will honestly. This is a recurring revenue model, and it is for all our competitors. So I think they'll be fine.

Okay. And then just in terms of storm activity. Is it correct that in 2019 basically restoration had almost zero benefit from storm activity?

Early in the year, we had some hangover from the fourth quarter of 2018, but year-to-date in 2020, almost nil.

Okay. And as we head into the back half of the year then that could potentially provide some upside to the outlook as well, if everything lines up on that front.

Yes, definitely.

And just one last one. So would Rolyn, given their niche focus on healthcare and whatnot, would they still have the same benefits from storm activity as global does?

They would because they have national accounts and relationships. So if a storm were to impact any of their customers, then we will benefit.

Okay. Great. Thanks very much, guys.

Thank you.

Your next question comes from Marc Riddick with Sidoti. Your line is open.

Hi, good morning.

Good morning, Marc.

I wanted to just go over, if you could talk a little bit about the evolution of the investments plans as we are ending last year going into this year. There were the announced plans of investing behind global and some other initiatives, and some IT spending, what have you, and then that got postponed obviously, or at least some of it did. I was wondering if you could talk about now if you're, it sounds as though you're going to be re-accelerating that, and then putting that investment to work going forward. I wonder if you could talk about how maybe what those investments are and how that's evolved from the way you might have been thinking at the end of last year as far as dollar amount? Is it different? Is the scope and scale different? Or is it kind of similar to what you already had planned and now everything just kind of shifted to the right for a couple of quarters?

It's everything we had planned, but it's being stretched out over a longer period of time. We have continued to nurse these initiatives along March and April, May, and then when we started to see our results come in when we did the private placement, it gave us confidence to start to accelerate them again. The rebranding, for one, is now scheduled for the first quarter of 2021, but we are continuing the work on the national infrastructure and the systems that we need to support that unified brand; sales, CRM, HR, enterprise-wide platform, consolidated financial system, that sort of thing, which will, a lot of that would have taken place in 2020; now it's all being sort of over the next 12 months to 18 months, I would say, but the dollars are the same.

Okay. That makes sense. I appreciate that. Thank you. And then the last thing for me is I was wondering if you could talk about the pricing dynamics in both Residential and Brands? If there was anything notable or any changes, or if it's been steady issues as far as general pricing dynamics that you're seeing. Thank you.

I think the pricing has been steady. We are sort of looking forward to renewals at FirstService Residential and budgets for our communities at FirstService Residential and whether there will be a heightened sensitivity around pricing in this environment if that's even possible because it has always been a very price-sensitive business. But I would say we haven't seen anything yet.

Okay. Great. Thank you very much.

Thanks, Marc.

Your next question comes from Matt Logan with RBC. Your line is open.

Thank you and good morning.

Good morning, Matt.

Following up on some of your same-store sales figures within the brands division, can you talk about your non-restoration brands such as Century Fire, Cal Closets, and CertaPro and maybe just give us a sense for how those are performing?

Century was up year-over-year modestly for the quarter, primarily relating to its installation business, which is largely tied to new construction. Early on in the quarter, here were construction sites that were shut down, but only for a very short time, and so they entered the quarter with a strong backlog and were able to generate solid revenues through the period, and the backlog remains solid, but I think we generally expected that. So they might have been a bit better than our expectation, and the other part of the business is the service and repair business, which was down and is down, and we expect it to slowly claw its way back to year-over-year over the balance of the year. The home improvement brands, rather than slice and dice between Cal Closets and CertaPro because they're all very similar as a group, they were down 20% for the quarter. We expected them to be down much more significantly, but a big improvement as the quarter went on, as I said earlier. Jeremy, I don't know if you have anything to add to that or?

No. I think that's exactly right, Scott. 20% down versus more than 50% to 60% expectations. So that's really where the pickup was, and Fire, as you characterized it, the two segments performing.

And following up on some of the questions with regards to storm activity. Can you help us frame the potential upside from a normalization in weather patterns? Like when we look at your H2 guidance A) would that be included? And if we looked at revenue from restoration over the past 12 months, what would that figure be, both on an actual basis and on a normalized basis?

Jeremy, I want to leave that to you.

Yes. So Matt, regarding the guidance, I mentioned earlier that we do not anticipate any significant storm activity impacting those numbers. While it's challenging to predict, typically, as we've noted before, a normal level of activity would usually occur in the latter half of the year. Over the past 5 to 10 years, storm activity has contributed in the high teens percentage, often skewed towards the end of the year. In a typical year, we would expect around 10% contribution from storm or CertaPro-related activities in the first half, but this year it's essentially zero. Did I address all your questions, or is there something else I missed, Matt?

That helps, Jeremy. Appreciate that. But in terms of the high teens contribution, what percentage would that be out of restoration or the total piece of revenue?

So that would be out of global restorations numbers.

Sort of global restoration. So what percentage did global represent over the last 12 months?

I mean we bought them; they had 400 plus in revenues. They've done roughly that.

Okay. That certainly helps in terms of framing the potential upside. So I'll leave it there. I appreciate the color.

Okay.

And there are no further questions at this time.

Thank you, Jessie, and thank you everyone for joining. Once again, we're very pleased with the quarter. Extremely proud of our teams and how they have executed. We look forward to communicating next in October around Q3. Thank you.

Ladies and gentlemen, this concludes the second quarter investors conference call. Thank you for your participation, and have a nice day.