Good day and thank you for standing by. Welcome to the First Service Corporation Third Quarter Investor Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an audit meeting message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference 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 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 materially differ from those in the 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 40F as filed with the U.S. Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is October 22, 2026. I would now like to turn the call over to Chief Executive Officer, Mr. Scott Patterson. Please go ahead, sir.
Thank you, Michelle. Good morning, everyone. Thank you for joining our Q3 conference call. As usual, I'm on today with Jeremy Rekusen, our CFO. I'll kick us off with some high-level comments, and Jeremy will follow with more detail. We posted solid results this morning that in aggregate met our expectations and highlight the diversification of our business model. Total revenues for the quarter grew by 6% over the prior year with organic growth at 4%. We continue to face headwinds across a number of our businesses and are very pleased to show this level of growth in a tough economic environment. We believe it bodes well for our fourth quarter and into 2027. EBITDA for the quarter was up 3%, reflecting a consolidated margin of 11.1, compared to 11.4% last year, and earnings per share were up 7%. Moving to our divisional results, first service residential revenues grew by 5% over the prior year, reflecting the net of contract wins, less losses. Condo HOA management is a price competitive business, always has been. Our teams at First Service Residential continue to do a great job balancing organic growth with margin. Q3 represents the eighth consecutive margin with some level of margin improvement while averaging mid-single-digit organic growth. Jeremy will speak more on margins in his comments. Looking to the fourth quarter, we expect a similar result at First Service Residential. Moving to First Service brands, revenues for the quarter were up 7% with strength at our restoration brands and Century Fire, supported by solid mid-single-digit growth at our home service brands, partially offset by revenue declines within our roofing platform. Revenues for our two restoration brands, Paul Davis and First On Sight, were up 10% from the prior year, better than expectation. We mentioned during our Q2 call that we had made progress late in Q2, signing work and building our pipeline back to a healthy level. During Q3, we continued to see solid activity levels that were generally broad-based across North America. We're geographically diversified across our two brands. Both Paul Davis and First Onsite have strong market positions in Canada, two of the top three companies by our estimate. Also, First Onsite has a very strong position and is the market leader in Hawaii, which has been hit by a series of storms over the last several months. Activity across Canada and Hawaii helped drive our growth in Q3. Conversely, claim activity in the continental U.S. across the industry has been down year to date at the end of Q3. Notwithstanding, we've been successful in signing a number of large-loss projects on the mainland that will be converted to revenue over the next many months. In terms of named storms, Hurricane Isaias hit the Florida panhandle on October 10 as a Cat 2 storm. It was primarily a wind event with some flooding and, in general, caused less damage than originally feared. Industry insurance claims have been much lower than expected. Our restoration brands have secured some work from the event, primarily mitigation and board up, but not a material amount. similarly we've secured roofing repair contracts through our operations at RCA but again it won't be material to our q4 results we have a solid backlog at our restoration brands heading into q4 and expect to show mid to high single-digit growth for the quarter moving to our roofing segment revenues for the quarter were down four percent on a reported basis and high single digit organically as expected the roofing market continued to be a challenge during the quarter particularly in a few of our larger markets I will say that we did start to see some green shoots across a number of our branches and finish the quarter with with a backlog that was up sequentially and at the highest level we've seen over the last year looking forward to the fourth quarter we expect to show mid single-digit reported growth and organic growth that is flat to slightly down from the prior year as I mentioned we will see some roof repair work in the Florida panhandle from Hurricane Isaias but otherwise the Florida market remains very difficult and is holding us back from showing more improvement in Q4 now on to our home service brands which has a group generated revenues that were up mid-single-digit from the prior year, primarily due to the tuck-under acquisition of the Indianapolis California closets operation in Q1 of this year. Organic growth was positive but modest. Our teams continued to battle headwinds and produce results in this segment. During the quarter, we again improved conversion and close ratios and drove a higher average job size to overcome a year-over-year reduction in leads and activity. Both the housing market and consumer sentiment worsened during the quarter and are at historic lows. Home improvement indices and forecasts are pointing to lower levels of activity in the coming months and we expect to see that in our near-term results looking at Q4 we expect revenues to be flat and aggregate and down low single digit organically and I'll close with century fire where we had another strong quarter in line with expectation revenues were up over 10% versus the prior year including high single-digit organic growth late in the quarter we closed on the acquisition of ANA fire protection based in Greenville South Carolina ANA is a leading provider of fire sprinkler design installation inspection and repair services to commercial customers across South Carolina and into North Carolina and North Georgia Jake Gilstrap president of ANA will continue to lead day-to-day operations. ANA represents another in a long line of exciting partnership transactions at Century Fire that have expanded our geographic footprint and enhanced our service capability. Looking forward for Century, our quarter end backlog ticked up sequentially again and we expect to finish the year with a similarly strong 10% plus revenue growth.
Let me now hand off to Jeremy thank you Scott good morning everyone as you just heard we were pleased with our consolidated third quarter results particularly given the organic top-line performance which exceeded our expectations for the quarter we recorded revenues of 1.53 billion dollars up six percent and adjusted EBITDA of 170 million dollars a three percent increase relative to the prior year period. Our consolidated EBTA margin for the quarter was 11.1%, down modestly from last year's 11.4% level. Adjusted EPS during Q3 was $1.89, resulting in growth of 7% quarter over quarter. For the nine months year-to-date, our consolidated financial performance includes revenues of $4.3 billion up 4% over the $4.1 billion in the prior year. Adjusted EBITDA at $437 million, a 3% increase year-over-year, with our overall EBITDA margin at 10.2%, relatively in line with the 10.3% margin for the prior year period. And lastly, our adjusted EPS year-to-date is $4.57, reflecting 4% growth over the $4.39 reported for the same period last year. Our adjustments to operating earnings and GAAP EPS in providing adjusted EBITDA and adjusted EPS respectively are disclosed in this morning's earnings release and are consistent with our approach in prior periods. Turning now to our segmented performance, I'll start at First Service Residential. In the third quarter, we generated revenues of $633 million, resulting in 5% growth over the prior year period. EBITDA was $71 million, a 7% increase over the third quarter of last year. Our current quarter EBITDA margin came in at 11.3% with the 30 basis points of margin expansion versus the prior year quarter, matching our year-to-date margin improvement as our operating teams further optimize labor costs and find incremental efficiencies. In the fourth quarter, we will see a continuation of these efforts, and together with the seasonal benefit from exiting non-core aquatics operations earlier this year, we expect our First Service Residential Division to show more significant margin expansion than the year-to-date performance. Looking next at our First Service Brands division, we generated revenues of $898 million during the current third quarter, up 7% over Q325. EBITDA for the division was $102 million, matching the prior year level. Our margin of 11.3% compressed 80 basis points compared to the 12.1% margin in last year's third quarter. The lower margin was primarily reflected in our roofing operations, which was impacted by both the declining revenues that Scott noted, as well as gross margin compression due to competitive market pressures at certain key branches. In addition, the division profitability included a modest decline in home improvement margins, partially offset by an uptick in margins at restoration brands on the back of their strong revenue growth in the quarter. Now, provide a summary of our cash flow and capital deployment. During the third quarter, we generated almost $125 million in cash flow from operations prior to working capital, up 6% year-over-year in line with earnings growth. Our cash flow after accounting for working capital requirements was $84 million, with a decline quarter-over-quarter due to higher work-in-process inventories and accounts receivable in conjunction with increased activity and pipeline levels in our restoration brands. Year-to-date, we have generated more than $300 million in operating cash flow at a healthy 70% of EBITDA conversion rate. Capital expenditures during the quarter total $28 million, and spending year-to-date sits at $88 million, below our 2025 levels. We expect full-year CapEx to now come in at approximately $125 million, in line with last year, and lower than our original 2026 budgeted CapEx of $140 million. With modest tuck-under opportunities tempering our acquisition spending at $25 million for the quarter, we focused our capital deployment efforts on buybacks of first service shares. In Q3, we repurchased 2.2 million shares at a cost of a little more than $300 million under our normal course issue bid. Year to date, since the beginning of the second quarter, we have now repurchased $4.1 million or 9% of our outstanding shares. This has contributed to stronger EPS growth in our Q3 results, and we believe that this investment will yield attractive returns over the long term. We currently have remaining capacity to buy back an additional 2.6 million shares under our existing normal course issuer bid, which expires in late August 2027. We will continue to judiciously balance our share repurchases after taking into account other factors, including our acquisition pipeline opportunities, the market valuation of our first service shares, and balance sheet, all with the intention of driving long-term value for our shareholders. And on the topic of our balance sheet, we ended Q3 with net debt of $1.4 billion, resulting a leverage of 2.4 times net debt to trailing 12-month EBITDA and up sequentially from 1.8 times at the end of the previous second quarter, largely due to our share buyback activity. This capital structure remains conservative and well within our comfort level, given the strong free cash flow model of our enterprise. We also have approximately $500 million of total cash and credit facility capacity, providing us with ample financial flexibility and liquidity wrapping up with our balance of your outlook the aggregation of the brand by brand top line indicator Scott has provided will drive to similar mid single-digit consolidated revenue growth for our upcoming fourth quarter as we delivered in the third quarter this will also culminate in mid single-digit growth in consolidated annual revenues for the full year and at the upper end of the range we expected at mid-year. On the EBITDA line for Q4, we expect consolidated margins to be slightly higher than prior year driven by first service residential, as noted in my earlier comments. For the full year, we are maintaining our target provided at the end of Q2 of mid-single-digit consolidated annual EBITDA growth and margins relatively in line compared to prior year. During our February year-end earnings call, we will provide more details on our outlook for 2027. And that now concludes our prepared comments. Michelle, you may now open up the call to questions.
Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by it while we compile our Q&A roster. Our first question is going to come from the line of Erin Kyle with CIBC. Your line is open. Please go ahead.
Hi, good morning. Thanks for taking the questions, and congratulations on the strong quarter. It's good to see brands' organic growth return in the quarter. I just want to ask a question on the margin, so I appreciate you touched on it there, Jeremy, on the roofing. But are you able to break out how much of that pressure in the roofing business is truly competitive pricing pressure versus lower volume? And then as it relates to that, just with competition pressure continuing to increase or at least remain consistent, do you expect the margin profile in that business can recover before the roofing volumes return?
Yeah, it's hard to parse out how much of it is due to top-line declines versus margin compression. Both are contributing factors, and we're obviously taking the approach in this competitive environment to make sure we're being competitive to get enough projects in the hopper and protect the top-line as best as possible. Well, we expect these competitive pressures to be there for, you know, a decent period of time. It's mainly concentrated in Florida, but it is in some other locations across our branches as well. But, you know, equally meaningful contributions due to the decline in revenues as well as the gross margin impact. Scott, I don't know if you want to provide any further outlook on the top line competitive pricing dynamics.
No, I think certainly in terms of line of sight, we expect it to continue to be very, very competitive over the near term.
Maybe just to follow up on that, how much visibility would you say that you have into this business? Because I appreciate there are several branches kind of spread across several states. What would you say in terms of your visibility into the next 12 months?
Listen, we have – we're just starting on our ERP implementation. So right now we're working on off 12 different systems. So our visibility relative to our other businesses is limited. The visibility we have is related to our backlog and then coming up with our – in our bid activity, and then trying to assess timing around converting that backlog into revenue. And honestly, we've had difficulty forecasting that the last several quarters. So we're implementing this system. It will improve our information, data, and visibility markedly. So we'll be through that in 2027.
Thank you. And maybe just one more from me on the restoration business. Just as we think to Q4 and the impact from Hurricane IESIS, sounds like from some of your prepared remarks, the impact of first service might have been a bit lower than we had anticipated. So any color you can give us there in terms of how we should think about modeling name storm revenue for Q4 would be helpful.
Yeah, it will be immaterial to our results. We have a lot going on in restoration, but it's not really tied to the recent hurricane. I mean, we've learned over the years that every storm is different. It depends on, you know, Hurricane Isaias sort of tempered quickly as soon as it hit landfall. and the water damage wasn't near what was feared. So there were strong winds. We do have some roofing repair work, some restoration work, but it's not material and doesn't form a big part of our backlog at all.
That's helpful. Thanks, Scott. I'll pass the line.
Thank you. And one moment for our next question. Our next question will come from the line of Stephen McLeod with BMO Capital Markets. Your line is open. Please go ahead.
Thank you. Good morning, guys. I just wanted to follow up on the residential business. I mean, maybe just specifically on restoration. I guess notwithstanding the fact that the hurricane, I say, is not that material to the backlog. Can you just talk a little bit about what your backlog sort of looks like right now and whether you saw it grow from what you had referred to or what you had talked about at the end of Q2?
It's about the same level as Q2, Stephen. During Q3, what we did see is more water mitigation work than was visible at the time of our Q2 call. And mitigation really never hits our backlog. It's quick turn work and some of the activity I described in Hawaii and across certain regions in Canada comprised a healthy level of mitigation, and that was a big driver for us in Q3.
Okay, that's helpful. Thanks, Scott. And then maybe just on the Q4 margin outlook, you gave a lot of color, specifically on the residential business, you gave a lot of color around the top line expectations for Q4. I'm just curious, would you expect that the margins will continue to remain under pressure in the residential business into Q4?
When you say the residential business, they're going to be...
Oh, sorry, I meant to say brands.
Yeah, brands margins will be modestly lower. We're going to grow EBITDA in our mind, but the margin will be down, again, largely due to the same dynamics as in Q3 with roofing margins down and every other business sort of roughly in line to partially offsetting that.
Right. Okay. Okay, that's great. And then just, go ahead.
No, I was going to say, the full year indications I gave for consolidated margins being in line with us growing mid-single digits should get you to be able to sort of fill in the missing piece for Q4.
Yeah. Okay. Okay. That's great. Thanks, Jeremy. And then maybe just finally, you know, on the NCIB, you've obviously been very active. You still have the 10% NCIB out there with $2.6 million, $2.6 million shares of capacity.
I mean, you know, barring any other change in the acquisition pipeline, would you expect to continue to be sort of very active on that NCIB? we'd be active but not as active as we have been you know it's starting at the beginning of q2 we started with a much lower leverage level i think right now it's going to be in lockstep with generating free cash flow which our businesses always collectively do and and we'll be you know using free cash flow to buy back shares assuming that they're the stock prices at levels that we feel are attractive to be doing that and as and as also qualified as you said by our acquisition pipeline opportunities yeah okay that's great thanks guys appreciate it thank you and one moment
for our next question our next question will come from the line of steven sheldon with william blair your line is open please go ahead hey thanks i wanted to ask a follow-up question on roofing margins.
It's great to hear that the backlog there is improving, but curious, I guess, are the competitive pressures getting any better or worse than you've seen in the prior few quarters?
I guess, how would you, has there been any changes, I guess, in bidding activity and what that could mean for margins as we think about fourth quarter and early next year? we think that the margins will continue to be under pressure as I said definitely to Q4 we'll go through budget with the as we do with all of our brands for the balance of the year and have a better outlook for 2027 but I think any green shoot that Scott articulated in his comments will be slow
to materialize and I think we'll have more to say on the margin profile for our brands collectively with with with indicators for each in our February call got it um and then just to follow up on residential sounds like you're expecting similar growth there in the fourth quarter is the third wanted to specifically ask about I guess the new business pipeline you know how that's shaking out to win new contracts and support new new communities and then I guess kind of you know and what that means I guess for your visibility into into growth for
next year Stephen when you say new communities are you talking about new development new customers so whether it's new development new customers competitive wins against yes yeah I mean we have a we have a strong sales pipeline in that business working on it all the time you know I did say in my prepared comments we're trying to balance price and margin organic growth and margin and because these these situations are always very price competitive so our focus is on larger more complex management opportunities high-rise and master-planned. Historically, we have benefited from new development and that is slower in this environment. So there's a higher proportion of our new winds coming from existing communities. So I would say it's solid and similar to, you know, the level it's been at the last several quarters, which is, I guess, reflected in a stable organic growth rate that you're seeing.
Thank you. And one moment for our next question. Our next question comes from the line of Himanshu Gupta with Scotiabank. Your line is open. Please go ahead.
Thank you. And good morning, everyone. So just on roofing, first question, what is the preference or strategy here? I mean, are you looking to preserve margins or, you know, go after organic revenue growth? And are you, like, open to take low-margin business in the roofing side?
Yeah, I mean, I mean, it's true. It's not dissimilar to my comments on residential. We're trying to find that balance. I mean, we are certainly choosing not to bid in certain situations. But in others, with long-term relationships, with strategic relationships, we are adjusting our pricing methodology to be competitive for important customers and relationships. So we're picking our spots, and that's really – those decisions are being made at the local level and and the situation is very different from branch to branch and and market to market we talked about Southwest Florida we talked about Vegas those are those are somewhat unique situations but it is the strategy a little bit different market to market depending on the competitive situation thank you and then just talking about market to market here how many branches in roofing do you think are showing negative growth on organic growth basis so I mean just trying to see that how widespread is the pocket of weakness beyond Florida and Las Vegas yeah it's I mean we are overweight in Florida just as a percentage of our revenue if you will and an opportunity And so that does weigh on us. You know, if you ex-Florida, let me put it to you this way, ex-Florida Q4, we would show, you know, single-digit organic growth. so we have a few branches that are still showing showing weakness but the majority of them are are looking to grow in the next quarter and certainly next year and you know it's part of that is we're coming up against weaker comps also but the majority of them are growing that's that's very helpful and
And one follow-up now, you mentioned roofing backlog has improved on a quarter or quarter Is the improvement led by re-roofing business, or are you starting to see some backlog from new construction as well?
We're seeing a little from new construction. It's heavily weighted to re-roof, but we are seeing some wins recently, new construction Okay.
And is that the reason you mentioned like the green shoots, the mention of green shoots, because starting to see some new construction as well?
It's part of it, but it's really just the pickup that, which is, by the way, it's modest, right? But it is an increase in activity. And new construction is part of that, but we're also seeing it in other areas also.
Okay, thank you. Maybe last question now on restoration. On restoration, I think I just want to clarify, you mentioned backlog in Q3 is similar to Q2, but pipeline is stronger. Is that fair to say that?
And eventually we'll see that translating from pipeline to backlog. so there's a few let me approach it a few ways we're still working on a number of jobs that involve mitigation quick turn mitigation that that never really hits our backlog so while the backlog is at a similar level we are very active on a number of different projects and and then to your pipeline comment we do have some activity that that could lead to some some larger projects that will that will hit the backlog and see it tick up by the end of Q4, but that's certainly not a certainty at this point. There's a lot that depends on that.
Got it, yeah. I think that's helpful. And maybe just one last question on capital allocation. Is there a target leverage here in the context of you being very active on buyback? Would you do more buyback and increase the leverage here?
No, and that's syncing up with my earlier comments on a prior question, you know, mid-twos of leverage, we're at 2.4, so we're in the zone of still at our comfort level, but don't want to go much higher than that except for a very temporary period. So that's why, you know, I think our buyback activity will be, again, more judicious and in lockstep with free cash flow generation.
Thank you so much, and I'll turn it back.
Thank you. And one moment for our next question, which will come from the line of Tim James with TD Securities. Your line is open. Please go ahead.
Thanks very much. Good morning. I just want to think about the roofing business and how it relates to your M&A strategy. Has any of your learnings or observations around the competitive environment, kind of the dynamics between re-roofing and new construction, your kind of geographic footprint, how does that come into play as you think about your M&A approach with roofing going forward?
Yeah, I mean, certainly all of those, many of those factors come into play, Tim, but our focus on roofing acquisitions really hasn't changed from the beginning. So we're focused on re-roof, we're focused on commercial, and we're focusing on partnering with founders and longtime owners and continuing to grow the business with them in partnership. And so that hasn't changed. When we partnered with the RCA team we bought a number of branches we were 70% re-roof 30% new construction we would like to tilt that more towards re-roof as we move forward with acquisitions and also significantly increase the service component which we've been successful at doing in Century Fire and we're we're very focused on at RCA thank you if I could just kind of follow up on that you know in terms of your you mentioned overweight to Florida and you know I think some of the types of customers maybe
less data centers government etc does that does your kind of exposure or lack of exposure in some regions make you that much more incentivized to kind of expand your footprint or diversify your footprint, diversify your customer base? Or does it really just come back down to the economics and finding a business that fits regardless of kind of where it is across the country?
No, I mean, that's a good point. And I should have added that, that certainly we're focused on expanding our geographic footprint, and we have a particular focus on white space areas for us where we want to be. So we won't buy the businesses we own in local markets. Those are our partners. We're not going to double down in those markets. So yes, we have priority white space that we're focused on.
Thank you very much. Those are all the questions I had.
Thank you. One moment for our next question. Our next question will come from the line of Frederick Bastien with Raymond James. Your line is open. Please go ahead.
Hi. Good morning, guys. Competition for M&A targets has been quite intense for some time. Are you seeing any signs that the recent rise in interest rates is making financial buyers a bit more cautious and potentially easing competition for you guys, creating maybe a more favorable acquisition environment?
It would be modest, Frederick. You know, multiples remain very high. I think there are fewer bidders on average for situations we're seeing. but our focus is really on developing relationships with talk like the ANA fire dealer we announced this week you know that's a family owned business they're familiar with century fire familiar with the centuries reputation familiar with other companies that have achieved great success post partnership with century So we're trying to really differentiate ourselves in situations like that rather than competing on opportunities that are being widely marketed, if you will. So honestly, I don't see the competition reducing right now.
What do you think needs to change for this environment to become more favorable?
Well, I think that we will see in roofing, in restoration, we will see private equity-owned companies that, you know, fail. It's a tough environment in both restoration. I mean, I think we're sort of breaking the mold a little bit because claims have been down for a few years. There haven't been gulf storms, you know, we had one recently. So a lot of companies really depend on that activity, and in roofing it's just a very weak demand environment, and we're seeing distressed situations, we're getting lots of calls from folks inquiring about joining our platform. I think, you know, it's going to have to be an extended period of weakness here just to see some of these things. But I think the multiples in roofing are probably coming down a bit we're not seeing it in fire or first service residential uh residential property management but uh i think in roofing we are seeing multiples uh come down a bit thanks thank you one moment for our next question our next question will come from the line of daryl young with stifle your line is open please go ahead good morning everyone i just wanted to on the restoration business, if the new large contracts that you have in the pipeline,
would these be traditional jobs that you would have worked on in the past, or are these new construction with a different, I guess, revenue and earnings profile to them? Are you taking on more execution risk and fixed-price contracts to grow that pipeline?
No, we're not taking on or looking at any fixed-price contracts or any sort of different type of contract that would not, that we would not be deploying our sort of expertise, typical expertise, so there's no additional execution risk. It's a balance that we have in the last few quarters started to look at opportunities that are with the same customer base and in the same verticals, but involve more capital improvements and new construction. We've been asked to bid, submit bids, really based on our experience and reputation. So we do have a few wins, and we're waiting to hear on other opportunities. But it would be very similar to what we do in a large loss restoration job. Got it. Okay, thanks. I don't know if I answered your question.
No, that's helpful. That's helpful context. And then just one last one in terms of roofing in Florida. Is there a dynamic where we had a whole lot of storms five and six years ago and then no storms the last couple of years? Do customers defer and wait for the next storm to make it an insurance claim as opposed to paying to reroute now? Or is that a dynamic that's at play that you see at all?
No, I think what really happened was the re-roof work got pulled forward with Hurricane Ian. So, you know, that sort of pulled forward a few years of re-roof work, and really more so than we even understood. and so while our benefit our businesses benefited at the time and have have you know even at this time last year had some hurricane in and the backlog the fall-off has been pretty significant since then so they're not waiting it's just got it the storm basically created all the rear roof work at a point in time.
Okay, that's helpful. That's all for me. Thanks very much.
Thank you. As a reminder, to ask a question, please press star 11 on your telephone. Our next question comes from the line of Saiza Alwai with Deutsche Bank. Your line is open. Please go ahead.
Yes. Hi, thank you. So I wanted to ask about margins in the residential business. I think, Jeremy, you mentioned that you expect to see, you know, more significant margin expansion in the fourth quarter than the year-to-date performance? And I think you mentioned exiting the non-core aquatics operation. So just, could you just double-click on that and give us a bit more color on the impact there?
Yeah, I mean, we've been run rating for the year at around 30 basis points of margin improvement, So that's kind of core and expect that to continue for Q4. And then overlaying on top of that would be, again, not having this residential aquatics business that typically loses money in the seasonal trough period of Q4, not in our numbers. So I'm not going to put a precise number on where we'll get to our margin improvement, but I'm going to say at least double the 30 basis points that we've seen year to date.
Okay, great, that is very helpful. And then just on the brands, on the home service brands business, I think you talked about positive organic growth and, you know, sounds like you're expecting a modest decline for 4Q, which makes sense given the environment. But I was just curious on margins there, because I think you said there were some margin headwinds, but I'm not sure if that was just sort of M&A dilution, because you make an acquisition there and sort of how should we think about, you know, margins in that business and in 4Q if that's decelerating?
Within the brands division overall or one of the particular business?
I was just curious on home service brands if there's, you know, any, if it's just a, you know, top line or if it's more of an M&A impact that's going to make margins, you know, worse or better?
No, home service brands will be, our expectation is they've been down the last couple of quarters you know combination of flat to flat revenues lower volumes and marketing spend to support the top line but we'll be roughly in line in Q4s again depending on how we you know address the we're always tweaking the dial there around our marketing and promotional activity to support the top lines and we're looking at that in the context of our lead flow and other front of the funnel indicators but home services margin should be roughly in
line with with Q4 last year in the upcoming quarter okay perfect and then just last one I know you've made a bunch of like small talk under acquisitions so I'm wondering if you could give us a sense of you know as we look ahead to 2027 like what's the net impact of M&A that's already been announced on on the top line so far for next year ah there's not a lot I mean we've only spent 25 million of spend in the current quarter you know it's going to be on a on a
quarterly basis we're talking about you know mid single digits of revenue some of the other acquisitions that we that we did were a lot earlier in the year so we'll be lapping most of that next year so most of our growth into 2027 again we'll give more color uh in february is going to be organic unless we close uh other acquisitions in the you know in the balance of the fourth quarter.
Great. Thank you so much. Thank you. And I am showing no further questions at this time. This will conclude today's question and answer session. Ladies and gentlemen, this will also conclude today's conference call. Thank you for participating and you may now just connect. Everyone have a great day.
