Good day, and thank you for standing by. Welcome to the FirstService Corporation Third Quarter 2024 Earnings Conference Call. Please be advised that today's conference is being recorded. Legal counsel requires us to advise the discussion scheduled to take place today may contain forward-looking statements that may 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 differ materially from those of 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 reports to the exchange commission. As a reminder, today's call is being recorded today, October 24, 2024. I would now like to hand the conference over to Chief Executive Officer, Mr. Scott Patterson. Please go ahead, sir.

Thank you, Towanda. Good morning, everyone. Welcome to our third quarter conference call. I'm here with Jeremy Rakusin, and we are pleased to be on the line with you today to report on the strong results we posted this morning. Results that in aggregate exceeded our expectations coming into the quarter. Consolidated revenues were up 25% over the prior year with organic revenue growth at 6%. The growth was driven by our acquisition of Roofing Corp. of America in December and supported by very strong year-over-year growth for our restoration brands. EBITDA for the quarter was up 43% from 2023, reflecting a margin of 11.5%, which is 150 basis points better than the prior year, all driven by increases at our Brands division. And finally, earnings per share were up 30%. Jeremy will spend time discussing the profitability metrics in a few minutes. Looking now at high-level results for our divisions. I'll start with FirstService Residential where revenues were up 4% with organic growth at 3%. We've been guiding to mid-single-digit organic growth, so we finished a bit below expectation. The principal driving factor is something we've been discussing for several quarters and relates to budgetary pressures at our communities from rising costs, including escalating insurance premiums. The pressure is elevated in Florida due to recent legislation requiring boards to fund cash reserves for maintenance and repairs. This is legislation arising from the Champlain Towers collapse in June of 2021. In the past, boards could choose to defer maintenance or reduce cash reserve requirements. Beginning in 2025, that is no longer possible. And in preparation over the last year, Boards have been looking closely at all expense items. It's putting pressure on management fees and on the levels of cited labor. Looking forward, we see organic growth continuing in the low-single-digit range for the next few quarters and then starting to pick back up. The disruption in Florida is temporary. It will normalize. We're starting to see that, and we expect to get back to our mid-single-digit long-term average for this business. Moving on to FirstService Brands. Revenues for the quarter were up 44%, driven primarily by the acquisition of Roofing Corp. of America, but also several tuck-unders within our restoration, fire safety and roofing segments. Organic growth was 10%, led by very strong gains at our restoration brands, supported by solid growth at Century Fire. Our restoration brands, Paul Davis and FIRST ONSITE, together recorded revenues that were up 25% versus the prior year with organic growth north of 15%. This is against a reasonably tough comparative quarter in the prior year, which had $25 million of revenue from Hurricane Ian. The growth was broad-based across our North American branch system, with particularly strong growth in Canada. During July and August, we had separate rainstorms and flooding that impacted Toronto twice and Montreal. We had hailstorms in Calgary that drove a spike in claims and wildfires in Alberta that caused significant damage in Jasper. Paul Davis and FIRST ONSITE benefited from all these events. We own the top two restoration brands in Canada and will always benefit from regional weather events that impact the major urban centers in Canada. We also benefited during the quarter from a number of large loss claims in both the U.S. and Canada that exceeded our experience from the previous year quarter. FIRST ONSITE specializes in commercial large loss and generally has several large loss claims in process, but the number and size of claims can certainly cause fluctuation from quarter to quarter, and we saw that in Q3. During the quarter, we generated less than $10 million of revenue from named storms, primarily relating to some final Hurricane Ian reconstruction work. We generated only a small contribution from Hurricane Helene. Helene hit late September and Hurricane Milton hit October 10. Our restoration brands mobilized around both storms and have secured a number of claims and mitigation contracts in the Carolinas, North Georgia and Florida. We're currently generating revenues primarily from demolition, cleanup and water mitigation. Often, the mitigation work leads to reconstruction, but it is too early to assess or quantify future revenues from these events. Jobs need to be scoped and insurance must be approved before reconstruction contracts can be awarded. We'll have a much better sense by our year-end call, and we'll provide an update on our backlog and the timing of future revenues. In the meantime, we're benefiting from the extensive mitigation work, which will help drive growth for our restoration segment that we expect will be 30% or more in Q4. We've estimated $40 million of storm-related revenue for Q4. Looking now at our Roofing segment. We generated solid results at Roofing Corp of America, which were generally in line with our expectations. Looking to Q4, we expect revenues that are down modestly from Q3 due to seasonality, but again, in line with our due diligence forecast, which is how the first nine months have played out. Crowther Roofing, which we acquired in Q2 of this year, has branches in Sarasota and Fort Myers, and we'll see a modest uptick from Hurricane Milton. We're performing some temporary repair work currently. Reroof opportunities or more significant repairs are more likely to benefit us in the first half of next year. We'll provide more detail on any storm-related backlog in our year-end call. At this point, we expect the storms to be a boost for our Florida branches but not material to our roofing segment in aggregate. Moving to Century Fire, we had a solid quarter that was right in line with expectations. Revenues were up low double digit; half of the growth was organic and half from tuck-under acquisitions. This is against a very strong Q3 last year. We're pleased with the continued growth we're seeing from Century against tough comparative quarters. We expect a similarly drawn quarter sequentially in Q4 for Century, which would imply modest single-digit year-over-year growth against a very strong result last year. And I'll finish with our home improvement brands where we saw revenues decline by a low-single-digit percentage, which is where we guided on our Q2 call. During the quarter, we continued to see reduced year-over-year lead activity, but with some improvement relative to the first six months of the year. In recent weeks, we've experienced further improvement which provides some optimism that we've seen the bottom in home improvement. We expect Q4 to again be down by a low-single-digit percentage, and modest year-over-year declines will likely carry into early 2025. We expect top line improvement as we move through 2025, and we'll provide more clarity at our year-end call. Let me now call on Jeremy to review our results in more detail.

Thank you, Scott. Good morning, everyone. I'll start off by recapping highlights from the very strong financial results for the current third quarter. During the period, we recorded consolidated revenues of $1.4 billion, up 25%, driving to adjusted EBITDA of $160 million, a 43% increase relative to the prior year period. Our consolidated EBITDA margin for the quarter was 11.5%, up 150 basis points over last year's 10% level. Adjusted EPS during Q3 was $1.63, up 30% quarter-over-quarter, even with an almost doubling of interest expenses in the current quarter. For the nine months year-to-date, our consolidated financial performance includes revenues of $3.85 billion, up from $3.26 billion in the prior year period, an increase of 18%. Adjusted EBITDA at $376 million, a 20% increase year-over-year, with our overall EBITDA margin at 9.8%, up 20 basis points versus a 9.6% margin for the prior year period. And lastly, our adjusted EPS year-to-date is $3.66 exceeding the $3.56 reported for the same period last year, notwithstanding significantly higher interest expenses throughout the current year. Our adjustments to operating earnings and GAAP EPS and providing adjusted EBITDA and adjusted EPS, respectively, are disclosed in this morning's earnings release and are consistent with our approach in prior periods. I'll now provide a segmented review of the third quarter performance within our two divisions. At FirstService Residential, we generated revenues of $560 million and EBITDA of $58.6 million, both representing a 4% increase over the prior year period. Our current quarter EBITDA margin yielded 10.5%, matching the level last year. Our teams are focused on operating with an efficient cost structure and achieving healthy profitable growth in serving our community association clients even in the face of some market headwinds, which Scott touched on. This has allowed us to maintain in-line margins year-to-date and in similar fashion, we expect to finish the year with annual margins comparable to 2023 levels. Turning now to our FirstService Brands division. We generated revenues of $836 million during the current third quarter, up 44% versus the prior year period. EBITDA for the division increased by 74% to $105.8 million with a 12.6% margin, up more than 200 basis points compared to the 10.5% margin in last year's third quarter. Two factors drove the significant margin expansion. First, as Scott described, our restoration operations benefited from higher activity levels and significant revenue growth over the prior year period, and this dropped strong top line growth drove operating leverage. Second, our home improvement brands have continued to show resilience and capture market share to sustain a solid top line in a challenging macroeconomic environment, while at the same time, taking action on the cost side. During Q3, we maintained our tactical shift from the previous second quarter of dialing back promotional and marketing activity. In addition, our company-owned operations within home improvement realized operating efficiencies, primarily from improved labor productivity. Walking next through our cash flow profile. We delivered $110 million in cash flow from operations prior to working capital movements and $77 million in operating cash flow, including changes in working capital. Year-to-date, we have generated almost $200 million in operating cash flow, up 17% year-over-year and tracking almost in line with our EBITDA growth. Capital expenditures during the quarter totaled $27 million and spending year-to-date is at just over $80 million. We expect to be at or slightly lower than our $115 million of annual all-in CapEx for 2024, which was our target established at the beginning of the year. Acquisition investment during the quarter was negligible, but year-to-date, we have deployed almost $160 million in capital, primarily relating to the Florida-based roofing acquisitions in the second quarter. Our balance sheet at quarter end included net debt of almost $1.1 billion, resulting in leverage at 2.1x net debt-to-trailing 12 months EBITDA, down from the 2.3x level for the previous second quarter and back in line with 2023 year-end. We also have more than $350 million of total cash on hand and undrawn availability under our credit facility. Our conservative balance sheet, financial flexibility and ample sources of liquidity put us in a strong position to be assertive in seizing growth opportunities that fit with our strategy. Finally, to wrap up our prepared comments, the following are some indicators around our outlook to close out 2024. We expect that our revenue growth for the fourth quarter will exceed 20%. In terms of Q4 profitability, I mentioned earlier that at FirstService Residential, we anticipate relatively flat margins. While at FirstService Brands, we reconfirmed from our last Q2 call, the expectation for higher year-over-year margins. For the full 2024 year, we will deliver stronger financial performance than previously anticipated at the end of the second quarter, driven largely by the outperformance during this current third quarter. Annual consolidated revenue growth should approach 20% and together with an incremental improvement in our consolidated annual EBITDA margin should drive to EBITDA growth north of 20%. Our outlook beyond the next quarter into 2025 will be outlined during our February year-end earnings call. And that now concludes our prepared comments. Operator, please open up the call to questions, and thank you.

Our first question comes from the line of Stephen Sheldon with William Blair.

First, I just wanted to ask on the residential side on the HOA budgetary environment, how long could that remain challenged as we think about segment growth there over the coming years? And on the flip side, are there any ulterior benefits from this that you could see in terms of maybe driving more HOA properties to look to outsource services where you can help them procure lower insurance rates than they'd often get on their own? I guess, how long do you think is the duration of the impact of that? And are there any ulterior benefits?

Over the last year, Stephen, we're seeing Boards ask for concessions, go out to bid, looking for lower pricing. We're also seeing many Boards reducing cited staff, janitorial, pool deck, food and beverage, and so on, which in turn reduces our revenue on those accounts. The reality is Boards have been trying to avoid increasing monthly maintenance fees or being responsible for special assessments. But in many of these communities, that's what's necessary. And we're seeing that happen as we get closer to 2025. So it is normalizing; we're seeing it normalize. We're in a little bit of an air pocket that I think will carry through the first couple of quarters in 2025. But we fully expect to get back to our long-term average in this business of mid-single digit. In terms of opportunity, I mean, this legislation in Florida is driving a number of maintenance, repair, and renovation projects at communities. And certainly, one of the services that we provide is facilitating loans to Boards. So that is increasing and has been over the last six months. We also provide project management services. And so we're seeing an increase in that area. I mean, we're collaborating very closely with our Boards to bring value wherever we can. So there is incremental opportunity, but it's incremental, Stephen.

Got it. That's really helpful. And then just as a quick follow-up, would just love to get some updated commentary on what you're seeing in the M&A pipeline. Are there certain businesses where you'd expect to deploy capital more than others as we think about the next year or so? And curious, specifically, what does the pipeline look like in roofing as well?

Yes. I think that’s the area that’s most active; is roofing, and it’s really driven by the consolidation that’s taking place in the market and the number of private equity-backed platforms that exist that are out searching for growth. So the pipeline is active. The market is more active than it has been, certainly than it was a year ago. A lot of that is driven again by private equity firms that have been sitting on assets for a number of years that are now putting those assets up for sale or prepping to put them up. And I’ll add that it’s a hypercompetitive environment. Multiples are very high, as high as I’ve seen them. So certainly in an environment like this, we’ve been at this a long time. We’ll be very careful and pick our spots.

Our next question comes from the line of Stephen MacLeod with BMO Capital Markets.

I just wanted to follow up on your last answer, Scott, about mergers and acquisitions and multiples. Were you specifically talking about roofing, or are you noticing elevated multiples in other areas of your business where you might consider making acquisitions as well?

Yes, they are high across the board with a lot of activity, but valuations are very elevated as rates decrease. I believe valuations have increased, and there is more product being marketed. We fully expect to be active in the next year; we are just being selective about our opportunities.

It sounds like roofing would continue to be your favorite vertical.

I wouldn't say favorite, but it's happening now. It's consolidating. And so we need to be at the table.

Okay. That's helpful. I just wanted to turn to the brand's margin, which was quite strong in the quarter. Is there any way to quantify how much of the year-over-year growth was driven by strong operating leverage within the restoration business as compared to just sort of the home improvement or home brand's margins improving based on your repositioning around promotional activities and other things like that?

Yes, Stephen, they're both meaningful contributors, but the restoration-driven higher revenue and activity levels driving operating leverage was more than half of the impact.

That's great. Regarding the brand's outlook, you provided some good insights. Specifically about Hurricanes Helene and Milton, you mentioned around $40 million in storm-related revenue in Q4. Is there a possibility for that number to increase, or do you anticipate that any additional revenue might be seen in 2025 as you continue with the initial mitigation efforts?

Right. I mean, the mitigation can lead to reconstruction, and the reconstruction phase of these projects can significantly increase revenue potential and stretch the tail through 2025. But there’s a lot of uncertainty at this point. The projects we’re working on need to be scoped, insurance needs to be confirmed. And then we need to win the reconstruction piece. So it’s – we will have more clarity on our next call. It’s very murky right now, I would say. But we’re going to get work for 2025, let’s be clear. It’s just timing and amount.

Our next question comes from Daryl Young with Stifel.

You gave some great color on the private equity impacts on valuations for roofing and restoration businesses. But I'm just curious, are you starting to see any impacts on organic growth from that competition that's coming to market? I know we've gone through a bit of a land grab exercise in a lot of these verticals. So is that impacting your discussions with your commercial customers? Or how competitive is it?

It's competitive. I don't think that it's impacting our core business model or our approach. We're delivering customer service and driving repeat and referral. So no, we feel good about our organic growth opportunity.

Our next question comes from the line of Himanshu Gupta with Scotia Bank.

On SSR, I mean, residential organic growth, it moved from 7% last quarter to 3% this quarter. Can you quantify how much was due to the pricing pressure? And how much was it due to reduced scope of work?

Can you hear me, Himanshu? No, it's Scott. I think I went off track a bit on my last response. So Daryl, if you want to revisit that, we can discuss it again. I'm not sure how much you missed. We went from 6.5% last quarter down to 3%. This was influenced by how the pricing came in from contracts that had concessions or the net effect of wins versus losses. It just played out a certain way in terms of timing. Our seasonal amenity services remained flat year-over-year, which moderated organic growth, but I would say it had a mild impact.

Right. Okay. And then one more thing. I think you were highlighting the change in legislation in Florida. So the slowdown in organic growth, is this mostly like a Florida problem? Or do you see that happening in other markets as well where you see pushback?

Yes. We don't see the legislation in other markets. So it's certainly focused on Florida, the impact, but the rising costs in general and in particular, insurance that has impacted our communities and the high-rise environment is causing similar, not as elevated, but some pressure. And so we're experiencing the pricing pressure elsewhere, but it's focused on Florida. But again, we've been at this a long time, and we've seen this before in different ways, and our historical organic average per service residential is sort of 5% to 6%. And we believe that's reflective of our go-forward average organic growth.

Okay. And then just on the restoration revenues. I think you mentioned $40 million expected in Q4. What EBITDA margin do you get on storm-related revenues? I would assume it will be a bit higher than the usual.

Yes, Himanshu, it's difficult to pinpoint an exact figure because it largely depends on the type of work and the clients we are engaging with, but it would certainly be higher than our platform margin. If I had to give a rough estimate, I'd say it would be around a 20% incremental EBITDA margin. However, this can vary based on the specifics of the work and the clients involved.

Got it. Okay. And then based on your experience of previous hurricanes, would you say that Q4 is the strongest? And then the spillovers are in Q1 and Q2? Or would you see that this run rate can continue for Q1 and Q2 as well?

I can’t answer that at this point, Himanshu. I don’t know.

We have a follow-up from a question of Daryl Young.

Sorry about that, everyone. I seem to have been disconnected from the call. Regarding the residential sector, do you anticipate any long-term competitive adjustments arising from the current challenges? Moreover, for a larger operator like yourself, does this situation provide a long-term competitive advantage?

I don't think so. No, I don't see that, Daryl. A lot of small, very small management companies that are incredibly resilient in this market. So I don't see it.

Okay. And then just one last one. The labor productivity on the home improvement side of things. Is that something that you can continue to see incremental upside from going forward? Or is that sort of running very lean in a tough market and maybe above normal margins you're seeing there?

No, it's sustainable, Daryl. It's something that the team has been working on for some time, and the current macro environment with the keeping, taking share, but in a challenging environment provided a little more urgency. It's really around our staffing levels, reconfiguring our teams, reducing the number of return visits, reducing overtime, and reducing labor hours. It's sustainable. We're not running lean. We're just doing work better and at a more productive rate. And I think we'll continue to see margin benefits into the first part of next year, and then we will hold or maybe incrementally continue, but we're definitely not going to fall back from sort of temporary measures that we've taken running lean.

And congrats on a good quarter, guys.

Ladies and gentlemen, I am showing no further questions in the queue. I would now like to turn the call back over to Scott for closing remarks.

Thank you, Towanda, and thank you, everyone, for joining. We look forward to providing more clarity around our 2025 outlook on our year-end call. Thank you. Have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.