Q2 2020 FirstService Corp Earnings Call
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Like or somebody else into the second quarter investors Conference call. Today's call is being recorded legal counsel requires us to advise the discussion scheduled to take place today may contain forward looking statements involve known and unknown risks and uncertainties actual results may materially different from any future results performance or achievements contemplated in the forward looking.
Statements additional information concerning factors that could cause actual results may materially differ from those in these forward looking statements is contained in the company's annual information form as filed with the Canadian Securities administrators and into companies annual report on form 40 dash.
As filed with the U.S. Securities Exchange Commission as a reminder, today's call is being recorded today is July 23rd Twentytwenty I'd now like turn the call over to Chief Executive Officer Mr. Scott Patterson. Please go ahead Sir.
Thank you Jesse.
And welcome everyone to our Q2 earnings call.
Thank you for dialing Ed.
Jeremy Rakusin is on the line with me today.
We last spoke on April 20 Threerd.
At that time, we were all right in the middle of locked down.
About 85% in North America was under some short of locked down or stay at home measure and really there was no clarity around when these measures would be relaxed.
We went through a vigorous reforecasting 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.
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 corridor and then Jeremy will follow with a closer review other 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 reasons for the outperformance was that markets in general opened up more quickly than anticipated, which drove revenue opportunities across both divisions.
At Firstservice residential and celery revenues proved to be more resilient during the quarter.
Particularly transfer and disclosure income.
Which was down less than four cashed in April and May and then spiked in June and was up year over year.
Home sales across the us were up significantly in June and our results reflected the same trend.
At Firstservice brands, our residential property service companies.
Including California, Closets Certapro painters.
Paul Davis.
Floor coverings international and pillar to post.
We are welcomed into homes more readily than expected.
These brands came out early with clear communication around our in home safety protocol, which opened many doors for us.
Our lead conversion and close rates increased across all these businesses.
On the bottom line the aggressive tacked, we took in mid March around cost control set us up to reap the benefits of operating leverage on a stronger than expected revenues.
Performance during the quarter improved sequentially every month with June results should.
Across many of our businesses in regions that we are near 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 Corona virus cases across many states.
We are extremely pleased with how to how the quarter played out relative to early expectations.
Our teams were aggressive around cost containment and incredibly 10 nations 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 in differentiating us from our competition, we feel very confident that we will emerge from this pandemic environment and an improved competitive position.
Looking forward, we are cautiously optimistic of both the back half the year, Jeremy will provide some general direction in his comments, but we will refrain from providing any specific guidance for Q3, where the balance of the year.
The economic outlook in North America remains very uncertain.
And we have some concern that the strength, we sign June across many of our businesses, which 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 20 seconds.
We ended Q1 with debt to EBITDA leverage of 2.4 times, which is right in our target comfort range.
The equity raise took us down to 1.8 times on a pro forma basis.
And gave us confidence that we could withstand anything that pandemic through Atish will also be aggressive in terms of add on acquisitions and strategic investment.
We have since Greenlighted many initiatives that we paused in the early days that pandemic and are driving ahead full steam.
An example was the acquisition of rolling companies.
At the ended the quarter by global restoration.
The second highlight I want to talk about.
Rolling as a leading commercial and larger off loss restoration company in the mid Atlantic region of the U.S.
The acquisition is strategically significant for us in netted expands our geographic reach.
Enhances our competitive position across a number of important verticals.
In bringing some of the top and most experienced restoration professionals in the industry.
Ruling has nine operation centers in the mid Atlantic ne and se of the us, which complement our footprint and improve our ability to serve national accounts.
They bring a diverse client base across healthcare hospitality multifamily education and assisted living verticals.
We've added many new national relationships.
That we believe we can grow and further penetrate.
In particular rolling has built an exceptionally strong healthcare practice.
In the company has been an industry leader supporting healthcare companies and other clients throughout the coded 19 pandemic.
This is an important move for us.
And we're very excited about welcoming Sam Bergman, Mark Petroski and the entire Roland team into the global in first service families.
On that note I will pass the floor over to Jeremy.
Thank you Scott 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 86 cents down 23% from last year's second quarter.
Together with our first quarter results are six months here to date consolidated financial performance is 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.
And adjusted EPS at $1.23.
Down 15% versus $1.45 per share reported during our same six month period last year.
Our adjustments to operating earnings in a GAAP EPS to calculate our adjusted EBITDA and adjusted EPS, respectively had been summarized in this mornings press release and remain consistent with our.
Approach in disclosure in prior periods.
Ill now summarize our segmented conns 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 and similarly revenue declines in areas. We previously called out.
Specifically amenity management that is our management pool aquatic restaurants bond fitness facilities was down in line with forecasts.
Other ancillary services several of which carry a 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, 85% year over year decline.
With an 11% margin.
40 basis points from the 10.6% margin in Q2 of last year.
This margin expansion would unexpected as we anticipated a more significant pandemic driven falloff in the quarter in those higher margin ancillary services I just referenced.
With the proactive in meaningful head count and cost reductions, we took in areas with reduced activity levels.
It more than offset the negative impact to our topline, 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 central services nature and resiliency of this business.
Now, it's our first service brands Division.
In the second quarter, we recorded revenues of $283.4 million, a 39% increase over the prior year period, driven by contribution 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 topline performance, well surpassed our expectations of zero to 15% revenue growth.
As communicated to you at Q1.
While our restoration and fire protection platforms performed as expected.
Home improvement service line 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 where that these measures would remain in place for all or most of Q2.
The easing of government mandated restrictions and social dispensing measures across many use states occurred much earlier than expected.
Which allowed our franchised and company owned operations to get into homes complete jobs and drive increased sales activity.
EBITDA for the brand segment 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 globals lower margin this quarter to the higher Q2 margin profile for the balance of the division.
The current quarter margin as with the topline performance significantly exceeded the expectations. We've provided on our Q1 conference call.
The early reopening of many markets blunted.
Our forecasted decline in system wide sales in revenues within our home improvement brands.
And our operators, we're nimble in re accelerating their activity levels in markets, where governments in homeowners permitted access.
This more modest impact to the topline together with preemptive an aggressive cost reduction initiatives.
Drove the brands 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 in 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 called the intention to trim, our capex for the balance of the year.
This was there was reflected in our results with $7 million invested during the second quarter and $22 million year to date.
Thus tracking to off 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 dollar equity private placement.
Allowing us to pivot from defense to offence as we green 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.
I look quickly, reflecting total undrawn availability under our revolver and cash on hand.
With $625 million at quarter end and remains at a record level, even after the capital deployed for their role in 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're very pleased with our overall results to date in the face of Cobot 19, and we maintain a positive yet cautious stance on the outlook for the back half of the year.
They 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 topline.
But with the full year contribution of global restoration versus half year in 2019.
Our revenues are expected to marginally exceed that 2019 reported level.
We also anticipate that our consolidated EBITDA margin will be largely inline with prior year.
That concludes our prepared comments.
I would ask the operator to please open the call to questions. Thank you.
Thank you at this time I'd like to tell everybody in order to ask a question. Please press Star then one of your telephone keypad to Q4 question.
To address your questions press the pound key we'll pause just smell would tick pilot acuity roster.
Your first question comes from George document with Scotiabank. Your line is open.
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 theres a possibility for some pent up demand, but he also your comments also said that there was a really strong momentum but continued into July. So can you maybe help us understand and maybe where you see that potential for that pent up demand is it.
The lead orders of California, closets read anything around around commentary there.
Well we improved.
Sequentially April May June.
In June was particularly strong in terms of in terms of leads.
And book sales and I think that well we have seen at 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.
We may see it sustained but with the with the surgeon cases.
And and reading economic reports from other industries and generally I think we share some of the concern that's out there generally that that we might see some.
Some pullback in the economy.
In addition, we're watching closely.
$600 per week, unemployment benefit and when that might and whether thats.
Propping up.
Some of the home improvement spend.
Okay great.
Last quarter I believe the the number are for Lloyd furloughed, sorry employees around 3200.
You guys have that number where we sit today and and as those folks come back to work just kind of wondering how we should think of of the evolution of maybe the margins.
Your next.
Yes, George I'll take that yes, furloughs reduced as terminations in aggregate the rights over 3000 that Q1, we've got roughly a third of those back.
And incrementally we see more coming back as activity levels continue to increase or if we see the opening up of.
A lot of our manatee related services at Firstservice residential for example, particularly in areas like the northeast swear pools and aquatic areas is still remained close.
As to the margin.
You know outlook in conjunction with that.
A lot of the cost savings that we realized.
Sure remain in place.
Some of those costs will learning.
Through this pandemic to manage.
With less resources.
For a given level of revenue than than we have before and so is that 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 that's too early to tell but we think there'll 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 with a really big source of cash operating through the year do you expect that to I guess to revert to a typical I guess, 1% to 2% of revenue drag that we've kind of seen on lots 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 was.
Focus collection in a our collection, particularly in this environment.
And obviously with a bit slower growth, you're not investing as much in that front in the new more.
Collecting and harvesting.
Off the revenues that had previously been generated.
But also on tax some of the government stimulus.
Packages on both sides of the border afford us the opportunity to deferred taxes.
Which will be paid in the normal course in the back half of the year, So I would say.
Q2 is anomaly on the on the working capital pickup it did help us with the balance sheet.
And our financial position.
Hi, guys. Thanks, your answers and good luck.
Thank you.
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Your next question comes from Frederic Bastien with Raymond James Your line is open.
Thank you Jeremy you touched on some of the cost.
You believe you'll be able to permanently take out of the equation can you provide a bit more color on sort of.
Where's that coming from corporate level are you you pull to squeeze some costs out of every brand and across the organization.
Yes, I mean its areas like marketing.
Legal finance HR, so lot of those support functions. We're just working with leaner cost, which is going to be a lot less travel.
Whether its business development air travel.
A lot more virtual.
Business development.
But even.
Executing on.
On work.
Well count Closets as an example, our designers are able to do a lot more virtual consol's versus.
Spending time going home, so thats, just deficient, they're getting a lot more done.
In a given day, a lot more productive and without the associated travel costs.
Those those are some of the examples even in the ancillary services side in them Firstservice residential gain that the teams.
Found ways to optimize the cost structure and.
I think theyre going to be able to.
Generate as much or more revenue with with less resources going forward.
I would I would add I think this situation has enabled.
All of our businesses.
Two.
Reevaluating redefine their staffing models I don't know that theres 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.
And how we staff.
Thanks for that.
My other question relates to your comment about.
Going from defense Softens, obviously, we saw that with the Roland acquisition.
As we look into the second half leading to the next year I mean.
How how's your appetite right now for acquisition do we see you continue to.
The growth the global and two more restoration businesses or are we going to see other.
Are you going to are we going to see you actually have another market segments.
Well the appetite is definitely there and as you heard we have liquidity, we have the balance sheet.
Show, where we're prepared to be aggressive.
But not necessarily more aggressive than we have been over the last several years.
But we're not.
We're not slowing down as a result of the pandemic or pausing in any way, we restarted all of our significant strategic initiatives.
A lot of them have to do are part of the restoration strategy, the rebranding and 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 and in really every other.
Platform as well that will work in house.
Thank you very impressive quarter welcome.
Thanks Roger.
Yes.
Your next question comes from Stephen Macleod with BMO capital markets. Your line is open.
Thank you good morning, guys.
Our earnings.
Morning.
I just had a couple of questions specifically around just a couple of around the outlook Germy gave some some consolidated color.
Just wanted to confirm or or just clarify does the topline impact include the Roland acquisition.
And then secondly, with respect to the outlook are you able to give some sort of broad strokes outlook as to how that second half viewer full year view as supported by the Firstservice residential and for surface brands divisions.
Yes. It does include Roland so that would be the.
My comments around us being higher aren't versus reported 19 with global in their down on an organic basis, but including global and its tuck unders.
That would be in those numbers.
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In not too much to say on parsing out the divisions I mean, I would just say that the back half as the year.
Is.
Largely pretty flat profile.
On the topline.
For a serves residential.
Flat to 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 the on the topline and again the margins are not going to materially differ when we finished the year from last year.
Okay. Okay. That's that's helpful. Thank you.
And then I just wanted to talk.
Just clarify kind of the outlook on the Firstservice brands Division.
Is it looked at I understand correctly that you did see momentum continue into July.
But then but then you're sort of feeling a bit more cautious or from kind of July onwards is that the way to think about.
How your how you're expecting the back half of the year and Firstservice brands Division.
Well, we saw you know specifically speaking about the home improvement brands.
We saw strong June.
Strong activity in their July but recognize the June was still down year over year.
Just significantly better than.
April and better than expectation so.
If it if we sustain at these levels it would it still it's still down year over year.
On the home improvement side, and then restoration and fire or part of that Division also.
Right, Okay and that brings relevant to my final question.
On restoration and fire I think you sort of cited that that's the trends were in line with what you would have what you would have expected to the broader.
Brand Division in Q2, but did you see any.
Any impact around like deep cleaning or sanitization on in the Paul Davis or global side.
Yes, we did we did both both platforms benefited from the Kobe work.
Global.
Maybe I can start there generally.
Inline with expectation as you suggested was up modestly over over the first quarter and and.
Interestingly it was up organically.
Over the prior year period, when we didnt known it.
But you know commercial property claims we believe were down until at least 20%.
In North America.
In part due to covert in part due to weather.
And show for for global to show growth.
Year over year is something we were.
Very pleased above.
And part of the reason is the Kobin related work.
You know, which.
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.
To 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 coated.
So it 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 in into national accounts and mitigation work.
Paul Davis Similarly.
Down only slightly from from prior year, we expected it to be down.
More dramatically due to shutdowns in inability to access homes, but.
It.
As we as Weve discussed the market's rebounded.
Paul Davis was able to.
Get into homes and perform work and then the co bid.
Definitely helped it.
Clots way back to near year ago. So.
It's certainly been part of the quarter for us.
And it.
On the Firstservice residential side, we're obviously doing janitorial as part of that service offering so the protocols have evolved changed and we're obviously.
Performing covert cleaning and for our communities that Doesnt drive topline revenue, but.
It's certainly.
Part of their service offering now.
Okay. Okay, that's great and maybe just one more if I could.
With respect to Roland she talked a lot about both the global simulation work.
Can you can you talk a bit about I know you'd noted for the quarter, but do you have any insight or any any any data you could provide around how Roland has done with their health care exposure.
Similar to global.
You know they.
Otherwise would have been perhaps down year over year, but the co big gave it a real boost probably more so with rolling on a on a pro rata basis, then then global.
That's very helpful. Thanks, guys and congratulations on the quarter.
Thanks.
Your next question comes from Stephen Sheldon with William Blair. Your line is open.
Okay.
Hi, guys tank.
With that with some economies reopening and then and then shutting back down wanted to ask how it impacted community plans for somebody amenities you operate in the residential segment like pools gems in spot.
Is there any way can frame roughly what percentage are open now and how do you expect trends the play out over the rest the year with the visibility that you have at this point.
Yes, Stephen I can't I can't give me a percentage.
Accurately I can I can sort of talk regionally I mean.
The amenity spaces are still shut down.
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Here in Ontario, and in the northeast, particularly in New York City and in a number of other pockets.
And jurisdictions.
Around North America.
But otherwise they are they're open and operating.
And I I think our expectation at this point is that they will stay open.
The.
The safety protocols may change in terms of utilization of the amenities that capacity restrictions may change.
But we have not seen any roll back.
Of the amenities at this point I think it once they opened within the community it might be tough and less and less the unless it's legislated.
But that that hasn't happened in.
Yet.
I don't know guys that help US yes, okay, yes thats perfect.
And then wanted to ask about the new contract signed for residential any signs that activity there could pick back up again like it did.
In late 2018 in early 2019 or or must property manager or owners and the remaining and maintenance mode and heading into switch providers right now I guess it. That's also boost retention, but just curious about the new contracts on.
Yes, the you know we head.
I.
Thought that the that our sales would decline in the quarter and it did.
You know the boards.
Of H.O. Asian condos today are under.
Credible pressure in this environment.
Just try and regimen alignment around safety protocol at rules within the community, whether they're too stringent are not stringent enough its a.
There are under pressure and they are generally not focused on changing out management company. So it's been hard to get attention, but we do we're staying on it and we do expect.
Improved sales balance of the year.
That's our hope.
Great. Thanks, guys.
Thanks.
Your next question comes from Stephanie price was CNBC. Your line is open.
Good morning, I want us to.
I wanted to ask maybe that amenity constant you just had a little more broadly and I'm just wondering what you've seen in areas that have seen cobot spikes across both divisions and you know what the environment than like currency too.
It's.
You know those those amenities.
Have remained open.
Stephanie and it's.
They they are in very very important.
Aspect of the community.
And so there was there was pressure.
Within really all the communities to open amenities as soon as possible.
And then.
Regimens can make your own decision around whether they want to use them or not.
But.
Again, we haven't seen any pullback.
And.
Earn aware of.
Any changes in terms of capacity restrictions or even utilization whether there.
They are less active than they were we just havent.
We just haven't seen any change yet.
Okay, and then and then what about on the brand side in terms that you know areas that are seeing cobot. Thanks have you seen any change there can be there.
We get we get leads in metrics everyday and its and its holding its holding steady.
Okay, Great and then in your prepared remarks, he mentioned the positive market share gain for the year. Just wondering if you can talk a bit about the competitive environment and where you're seeing the possibilities. He kept scheme.
Hi.
I don't have certainly we don't have any hard data.
On whether we're gaining share.
But.
I do know that we're performing.
And I think we're positioning ourselves very well.
Gain more share.
I mean.
So I just think that we are delivering on our progress I'm very proud of the way we're delivering on our promise.
And.
Im not sure our competition.
Across the board are delivering in the same way.
So it's it's it's my.
Hypothesis, Stephanie more than anything.
Fair enough aren't results this quarter were definitely yes.
Next question. So thank you very much.
Thanks.
Your next question comes from Daryl Young with TD Securities. Your line is open.
Morning, guys, just a couple of quick ones from me.
On the residential side, who has.
There's been any increasing 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.
Errol it's.
Not yet and I'm not sure we will honestly.
This is a this is a recurring.
Revenue model and it is for all our competitors.
So I think I think there will be fine.
Okay.
And then just in terms of storm activity.
Corrected in 2019, basically restoration had almost zero benefit from from storm activity.
Early early in the year hang over from fourth quarter of 18.
We had some but.
Year to date in and 20.
Almost nil.
Okay and as we so as we head into the back after the year them.
Not that took the then potentially provide some upside.
So the outlook as well, it's everything lined up.
Yes on the.
Yes definitely.
And just one last one so would roll and given their needs focus on health care will not.
They still have the same benefits from from storm activity as a global does.
Oh, they would because they have a national accounts and relationships.
So if a storm work 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.
Mark.
Wanted to just go over all if you could talk a little bit about the evolution of the investment plans as we are ending last year going into this year. There was the you know the announcements of investing behind global and some other initiatives and some IP spending what have you and then that got postponed.
To see what at least some of it did I was what did you could talk about now it sounds as though you're going to be the mid seller in that or been putting that in business will work going forward as one of you could talk about how maybe what those investments are and how that's evolved from maybe the way you might have been done at the end of last year, a as far as dollar amount.
The difference is there's 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.
It's everything we had planned but it's being stretched over a longer period of time, we have continued to nurse these initiatives along.
March and April.
May and then when we.
Starting to see our results come in when we did the private placement it gave us confidence to start to accelerate them again so.
The rebranding for one.
Bill is now scheduled for the first quarter of 2021.
And but we are.
Continuing to work on the.
National infrastructure and the systems that we need to support that unified brand sales CRM.
HR enterprise wide platform consolidator financial system that sort of thing.
Which will Oh, a lot of that would have taken place in 20 now it's all being.
Sort over the next 12 months to to 18 months I would say.
But the dollar so at the same.
Okay that makes sense I appreciate that thank you and then the last thing for me as I was wondering to talk about pricing dynamic in both residential and brands. If there was anything notable changes or if it's been been steady as she goes as far as to the general pricing dynamic.
Thank you.
I think the pricing has been.
Steady.
We are.
Sort of looking looking forward to.
Renewals at Firstservice residential and budgets for our communities at Firstservice residential.
And whether there will be a.
A heightened sensitivity.
Around pricing and this in this environment.
Thats, even possible because that is a.
Has isn't always has been a very price sensitive business.
But I would say we havent.
We haven't seen anything yet.
Okay, great. Thank you very much.
Thanks Mark.
Your next question comes from Mt. Logan with RBC. Your line is open.
Thank you and good morning.
Morning.
Following up on some of your sales store.
Same store sales figures within the brands Division can you talk about your non restoration brands such as century fire at Cal Closets, and Certapro and maybe just give us a sense for how those are performance.
The.
You know century.
I was up.
Year over year.
Modestly for the quarter, and it's primarily relating to its installation business.
Which largely tied to new construction they.
Early on in the core or they there were construction sites that were shut down but only for a very short time.
And.
So they they entered the quarter with a strong backlog and were able to generate.
Solid revenues through the period in the backlog remains solid.
But I think we generally.
Expected that.
So they were might have been a bit better than our expectation.
And the other part of the businesses the service and repair business, which.
Down in.
It is down and we expect to.
Slowly Clos way back a year over year over the balance for the year.
And the.
The home improvement brands, all rather than.
Slice and dice between Cal closets insert a.
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.
[noise], but big improvement as the quarter went on as I as I said earlier.
Jeremy I don't know if you have anything to add to that or.
No. That's that's exactly right, Scott, 20% down versus more than 50, 50 to 60 present expectations. So that's really where the pickup whitening.
And fire as you characterize it.
The two segments performing.
And following up on some of the questions with regards to storm activity.
I hope was framed the potential upside from my normalization and weather patterns like when we look at you reach to guidance a would would that be included.
And if we looked at revenue from restoration over the past 12 months, what would that take your be.
Both on an actual basis and on a normalized basis.
Jeremy why leave that to you.
Yeah, Okay. So my first question.
In terms of the guidance what I said early in my prepared comments, we wouldn't expect any.
Any significant degree of storm activity in those numbers those are hard to forecast, but typically as we've said before if we get a normal level of activity again, we did not see it in 2019 and its will normally plays out in the back half of the year.
You know high teens.
Contribution from storm activity. If you look at the last five to 10 years.
And high teens within waited a bit more to the back end of the year.
In the first half of the year.
In the normal year, we would normally see potentially 10% from storm or cat related activity contributing.
This year at pretty well zero.
What was the other.
Did I answer all of your pieces or was there another component I missed the Matt.
That helps Jeremy appreciate that but in terms of the high teens contribution what percentage would that be live would that be able to have a restoration or the total piece of revenue.
Hi, there would be out of out of global restorations numbers.
Well the global illustration, so what percentage did global represent over the last 12 months.
I mean, we bought them at 400 plus of revenues they've done.
Roughly that.
Okay.
That that's certainly helps in terms of framing the potential upside so I'll leave it there.
Appreciate the color.
Okay.
There are no further questions at this time.
Thank you Jesse 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 procured participation and have a nice day.
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The second quarter investors.
Today's call is being recorded.
Okay. All required just a bifurcated discussion is scheduled to take place today may contain forward looking statements.
No risks and uncertainties actual results may materially differ from any future results.
Archie what's contemplated in the fourth statements additional information concerning factors that could cause actual results materially differ from those its forward looking statements contained in the Companys annual information form as filed with the Canadian Securities administrators and in the company. Its annual report on form 40 dash.
Filed with the U.S. Securities Exchange Commission.
Sure motorcycles be recorded today, it's July 23rd what's your Twentys I'd now like turn the call over to Chief Executive Officer Mr. Scott Patterson. Please go ahead Sir.
Thank you Jesse.
Welcome everyone to work Q2 earnings call.
Thank you for dialing it.
Jeremy Rakusin is on the line with me today.
We spoke on April 23rd.
At that time, we were all right the middle of locked out.
About 85% North America was under some short a walk down or stay at home measure.
It really there was no clarity around when these measures would be relaxed.
We went through a vigorous we forecasting exercise based on what we were experiencing.
April to provide some direction going 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 in the guidance we provided.
There are number of factors involved.
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 corridor and their Jeremy will follow with a closer review other 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 top honors 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 a flat to up 15%.
Margins at both divisions were materially higher than forecast.
The principal reasons for the outperformance was that markets in general opened up more quickly than anticipated.
Drove revenue opportunities across both divisions.
At Firstservice residential and salary revenues proved to be more resilient during the quarter.
Particularly transfer and disclosure income.
Which was down less than four cashed in April and May and they spiked in June and was up year over year.
Oh sales across the U.S. were up significantly in June and our results reflected the same tracked.
At Firstservice brands, our residential property service companies.
Floating in California, Closets Certapro painters.
Paul Davis.
Floor coverings international and pillar to post.
You're welcome to into homes more readily that expected.
These brands came out early with clear communication around our in home safety protocols, which opened in many doors for us.
Our lead conversion and close rates increased across all these businesses.
On the bottom line be aggressive attacked we took in mid March around cost control.
Set us up to reap the benefits of operating leverage on a stronger than expected revenues.
Performance during the quarter improved sequentially every month with June results should.
Across many of our businesses in regions that were near 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 Corona virus cases across many stage.
We're extremely pleased with how to how the quarter played out relative to early expectations.
Our teams were aggressive around cost containment and incredibly 10 nations about seizing every revenue opportunity that was presented.
And we continue to deliver on our service excellence promise across every Brad.
Our frontline teams are performing her role play in differentiating us from our competition, we feel very confident that we will emerge from this pandemic environment and an improved competitive position.
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Looking forward, we are cautiously optimistic about the back half a year Jeremy will provide some general direction in his comments, but we will refrain from providing any specific guidance for Q3 for the balance of the year.
The economic outlook in North America remains very uncertain.
And we have some concern that the strength we sign June across many of our businesses was driven partially by pent up demand.
Before I hand off the Jeremy I want to talk about two important highlights from the corridor.
The first is the 150 million dollar private placement that we completed with durable capital partners on May 22nd.
We ended Q1 with debt to EBITDA leverage of 2.4 times, which is right in our target comfort range.
The equity raise took us down to 1.8 times, our pro forma basis and gave us confidence that we could withstand anything that pandemic through atish will also be aggressive in terms of add on acquisitions and strategic investment.
We have sense greenlighted many initiatives that we paused in the early days the pandemic and are driving a had full steam.
An example was the acquisition of rolling companies.
At the ended the quarter by global restoration.
The second highlight I want to talk about.
Rolling as a leading commercial and larger all flash 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 saying some of that top and most experienced restoration professionals in the industry.
Rolling had nine operation centers in the mid Atlantic ne and se 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 multifamily education and assisted living verticals.
We've added many new national relationships.
We believe we can grow and further penetrate.
In particular.
No one has built an exceptionally strong healthcare practice.
And the company has been an industry leader supporting healthcare companies and other clients.
Throughout the Cobot 19 pandemic.
This is an important move for us.
And we're very excited about welcoming Sam Bergman, Mark Petroski and the entire Roland team into the global in first service families.
On that note I will pass the floor over to Jeremy.
Thank you Scott 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 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 86 cents down 23% from last year's second quarter.
Together with our first quarter results are six months year to date consolidated financial performances 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.
And adjusted EPS at $1.23.
Down 15% versus $1.45 per share reported during that same six month period last year.
Our adjustments to operating earnings in a GAAP EPS to calculate our adjusted EBITDA and adjusted EPS, respectively had been summarized in this mornings press release and remain consistent with our.
Research and disclosure in prior periods.
I'll now summarize our segmented can 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 pool aquatic restaurants spawn fitness facilities was down in line with forecasts.
Other ancillary services several of which carry a 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, 85% 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 falloff in the quarter in those higher margin ancillary services I just referenced.
With the proactive in meaningful headcount and cost reductions, we took in areas with reduced activity levels.
It more than offset the negative impact to our topline, 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 central services nature and resiliency of this business.
Now, it's our first service brands Division.
In the second quarter, we recorded revenues of $283.4 million, a 39% increase over the prior year period, driven by contribution from the large global restoration acquisition.
And partially offset by 10% revenue decline.
In the division on an organic basis, excluding acquisitions.
This overall division topline performance, well surpassed our expectations of zero 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 lock down.
Our assumptions where that these measures would remain in place for all or 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 did get into homes complete jobs and drive increased sales activity.
EBITDA for the brand segment 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 globals lower margin this quarter to the higher Q2 margin profile for the balance of the division.
The current quarter margin as with the topline 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, we're nimble in re accelerating their activity levels in markets, where governments in homeowners permitted access.
This more modest impact to the topline together with pre emptive, an aggressive cost reduction initiatives.
Drove the brands division to solid profitability in a challenging environment.
Free cash flow. It 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 of 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 called the intention to trim, our capex for the balance of the year.
This was there was reflected in our results with $7 million in but vested 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 dollar equity private placement.
Allowing us to pivot from defense to offence as we green 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.
I look quickly, reflecting total undrawn availability under our revolver and cash on hand.
With $625 million at quarter end and remains at a record level, even after the capital deployed for their role in 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're very pleased with our overall results to date in the face of Cobot 19, and we maintain a positive yet cautious stance on the outlook for the back half of the year.
They 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 fully or we will be down modestly year over year on an organic basis on the topline.
But with the full year contribution of global restoration versus half year in 2019.
Our revenues are expected to marginally exceed that 2019 reported level.
We also anticipate that our consolidated EBITDA margin will be largely inline with prior year.
And that concludes our prepared comments.
I would ask the operator to please open the call to questions. Thank you.
Thank you at this time I'd like to tell everybody in order to ask the question. Please press Star then one of your telephone keypad to queue for question to address your questions press. The pound key we'll pause just smell would tick pilot accumulate roster.
Your first question comes from George do you met with Scotiabank. Your line is open.
Good morning, guys that 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 he also your comments also said the where they are really strong momentum to continue to July. So can you maybe help us understand maybe where you see that potential for that pent up demand is it.
The lead orders of California, closets read anything around around the commentary there.
Well we improved.
Sequentially April May June and.
In June was particularly strong in terms of in terms of leads.
As book sales and I think that well 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.
We may see it sustain but with the with the surgeon cases.
And and reading economic reports from other industries.
And generally I think we share some of the concern that's out there generally that that we might see some.
Some pullback in the economy.
You know in addition, we're watching closely.
600, dollar a week unemployment benefit and when that might and and and whether that's propping up.
Some of the home improvement spend.
Okay great.
Last quarter I believe the the number for our for Lloyd Furloughed, sorry employees around 3200.
You guys have that number where we sit today and and that's those folks come back to work just kind of wondering how we should think of the evolution of maybe the margins.
Your next.
Yes, George I'll take that yeah, furloughs reduced as terminations in aggregate your rights over a 3000 at Q1, we've got roughly a third of those back.
And incrementally we see more coming back as activity levels continue to increase or you know if we see the opening up.
A lot of our managed the related services at Firstservice residential for example.
Particularly in areas like the northeast, where you know pools and aquatic or is it still remain closed.
As to the margin.
You know outlook in conjunction with that.
A lot of the cost things that we realized.
Sure remain in place.
Some of those costs will learning.
Through this pandemic.
To manage.
With less resources.
For a given the level of revenue than we have before and so is that 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 that's too early to tell but we think there'll be some.
Probably with cost reductions that will be reflected margins going forward.
Okay, Great just one last one if I may Jeremy on the working capital with a really big source of cash.
Half way through the year do you expect that to I guess to revert to a typical I guess once a 2% of revenue dragged that we've just kind of seen a lot in the last few years.
Yes, I mean.
The two biggest areas of the pickup in the working capital a piece of the cash flow statement was.
Focused collection in a our collection, particularly in this environment and obviously with a bit slower growth you're not investing as much in that front and you're more you know collecting and harvesting.
After the revenues that have previously being generated.
But also on tax you know some of the government stimulus.
Packages on both sides of the border afford us the opportunity to deferred taxes.
Which will be paid in the normal course in the back half of the or so I would say.
Q2 is an anomaly on the on the working capital pick up but it did help us with the balance sheets.
And our financial position.
Hi, guys. Thanks, your 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.
The you believe you'll be able to permanently take out of the equation can can you provide a bit more color on sort of.
Where's that coming from corporate level are you able to squeeze some costs out of every brand and across the organization.
Yeah, I mean, its areas like marketing legal finance HR. So a lot of those support functions. We're just working with leaner cost, which is going to be a lot less travel you know whether its business development air travel.
A lot more virtual.
Business development.
But even executing on on work.
Cal Closets as an example, our designers are able to do a lot more virtual consol's versus.
Spending time going home jump. So it's just deficient they're getting a lot more done.
In a given day, a lot more productive and without the associated travel costs.
Those those are some of the examples even in the ancillary services side and Firstservice residential again that the teens.
Found ways to optimize the cost structure and.
I think they're going to be able to.
Generate as much a more revenue with with less resources going forward.
I would I would add I think just situation has enabled.
All of our businesses.
Two.
Reevaluating redefine their staffing models I don't know that Ah theres 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 off since obviously, we saw that with the Roland acquisition.
As we look into the second half leading to the next year I mean.
How how's your appetite right now for acquisition do we see you continue to.
The growth the global and two more restoration businesses or are we going to see other.
Are you going to are we going to see you actually have another market segments.
Well the appetite is definitely there and and as you heard we have liquidity, we have the balance sheet.
Show, where we're prepared to be aggressive.
But not necessarily a more aggressive them, we have bad over the last several years.
But we're not to.
We're not slowing down as a result of the pandemic or pausing in any way, we restarted all of our significant strategic initiatives.
A lot of them have to do or part of the restoration strategy, the rebranding and investment in the infrastructure.
And then we continue to work on our acquisition pipeline.
Again.
Certainly restoration as part of that but we have opportunities and it really every other.
Platform as well that will work in house.
Thank you very impressive quarter well done.
Thanks Roger.
Your next question comes from Stephen Macleod with BMO capital markets. Your line is open.
Thank you good morning, guys.
Earnings.
Morning.
Just a couple of questions specifically around just a couple of around the outlook.
Jeremy gave some nice will consolidated color I, just wanted to confirm or or just clarify does the topline impact include the role in acquisition.
And then secondly, with respect to the outlook are you able to give some sort of broad strokes outlook as to how that second half viewer full year viewer supported by the firstservice residential and for surface brands divisions.
Yes. It does include Roland so that would be the.
My comments around us being higher our versus reported 19 with global in their down on an organic basis, but including global at its tuck unders.
Yeah 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 topline.
First serves residential.
Flat to slightly down most likely.
And.
Firstservice brands would be down without the global.
Contribution.
If you added in global it would be relatively flat.
So consolidated flat on the back half the on the topline and again the margins are not going to materially differ when we finished the year from last year.
Okay. Okay. That's a that's helpful. Thank you.
And then I just wanted to talk.
Just clarify kind of the outlook on the floor is yours brands Division.
It looked at I understand correctly that you did see momentum continue into July.
But then but then you're sort of feeling a bit more cautious of from kind of July onwards is that the way to think about.
How your how you're expecting the back half of your and Firstservice brands Division.
Well, we saw you know specifically speaking about the Oh must prove our brands.
We saw strong June.
Strong activity in their July but recognize the June was still down year over year.
Just significantly better than.
April and better than expectation show.
If it if we sustain at these levels it would it still it's still down year over year.
On the home improvement side, and then restoration fire or part of that Division also.
Right, Okay and that brings on that my final question.
On restoration and fire I think you sort of cited that that the trends were inline with what you would have what you wouldn't expect into the broader.
Brands Division in Q2, but did you see any.
Any impact around like deep cleaning or sanitization on in the Paul Davis or global side.
Yeah, We did we did both both platforms benefited from the Kobe work.
You know global maybe I can start there generally.
Inline with expectation as you suggested was up modestly over over the first quarter and and.
Interestingly it was up organically.
Over the prior year period, when we Didnt know in it.
But you know commercial property claims we believe were down up at least 20%.
In North America.
In part due to co bid in part due to weather.
And show for for global to show growth.
Year over year is something we were.
Very pleased above.
And and part of the reason as is the Kobin related work.
You know, which.
Thousands of different.
Discrete jobs that we performed they tend to be.
Smaller jobs.
Lower revenue, but it.
It did fill that gap for us and enabled us to.
To 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 a co bid.
So it it definitely benefited and it also.
Importantly.
Opened up doors for us and enabled us to engage with new clients that we had since leveraged in them into national accounts and mitigation work.
Paul Davis Similarly.
Down only slightly from from prior year, we expected it to be down.
More dramatically due to shutdowns and inability to access homes, but.
It.
As we as Weve discussed the market's rebounded.
Paul Davis was able to.
Get into homes and perform work and then the Kobe.
Definitely helped it.
Clawed its way back to near year ago. So.
It's certainly been part of the quarter for us.
And it should and all the Firstservice residential side, we're obviously doing a janitorial as part of that service offering. So the protocols have evolved changed and we're obviously.
Performing covert cleaning and have for our communities that doesn't drive topline revenue but.
It's certainly a.
Part of their service offering now.
Okay. Okay, that's right and maybe just one more if I could with respect to Roland She talked a lot about though that the global simulation work.
Can you can you talk a bit about I know you noted for the quarter, but do you have any insight or any any any data you can provide around how you know Roland has done with their health care exposure.
Somewhat similar to global.
You know they.
Otherwise would have been perhaps down year over year, but the co big gave it a real boost probably more show with roll it out a on a pro rata basis that then global.
That's very helpful. Thanks, guys and congratulations on the quarter.
Thanks.
Your next question comes through Stephen Sheldon with William Blair. Your line is open.
Hi, guys. Thanks, with some economies reopening and then and then shutting back down.
Wanted to ask how it impacted community plans for somebody amenities you operate in the residential segment like pools gems in spot.
Is there any way 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 I can't give me a percentage.
Accurately I can I can sort of talk regionally I mean.
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 they're open and operating.
And I I think our expectation at this point is that they will stay open.
The.
The safety protocols may change in terms of utilization of the amenities the capacity restrictions may change.
But we have not seen any roll back.
Of the amenities at this point I think it to you know once they opened within the community it might be tough and less and less the unless it's legislated.
But that that hasn't happened.
Yet.
I don't know guys that helped like yeah, 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 in early 2019 or or must property manager or owners and the remaining and maintenance mode and headcount to switch providers right now I guess it that's also booster attention, but just curious about the new contract side.
Yeah that the you know we head.
Thought that the that our sales would decline in the quarter and it did.
You know the boards.
Of H.O. Asian condos today are under.
Incredible pressure in this environment.
Just try and you know regimen alignment around safety protocol at rules within the community, whether they're too stringent are not stringent enough its a.
There are under pressure and they are generally not focused on changing out management company. So it's been hard to get attention, but we do.
We're staying on it and we do expect.
Improved sales a balance of the year.
That's our hope.
Great. Thanks, guys.
Thanks.
Your next question comes from Stephens, a price with CNBC. Your line is open.
Good morning.
Okay.
I wanted to ask maybe that amenity question, you just had a little more broadly and just wondering what you've seen in areas that have seen cobot spikes across both divisions and you know what the environment than like Q2.
It's.
Those those amenities.
Have remained open.
Stephanie and it's.
You know they there and very very important.
Aspect of the community.
And so there was there was pressure.
Within really all that communities to open amenities as soon as possible.
And then.
Regimens can make your own decision around whether they want to use them or not.
But.
Again, we haven't seen any pullback.
And and.
Aren't aware of any.
Any changes in terms of capacity restrictions or even utilization whether they're.
They are less active in there where are we just havent.
We just haven't seen any change yet.
Okay, and then and then what about on the brand side in terms that you know area that are seeing Colby. Thanks can be seen any change that can be there.
We get a we get leads in metrics every day as and its holding its holding steady.
Okay, Great and then in your prepared remarks, you mentioned the positive market share gains for the year. Just wondering if you can talk a bit about the competitive environment and where you're seeing a you know the possibilities he kept scheme.
Okay.
I don't have certainly we don't have any hard data.
Whether we're gaining share.
But.
I do know that we're performing.
And I think we're positioning ourselves very well.
Gain more share.
I mean.
So I just think that we're delivering on our progress I'm very proud of the way we're delivering on our progress.
And.
Im not sure our competition.
Across the board are delivering in the same way.
So it's it's it's my.
Hypothesis, Stephanie more than anything.
All right well results this quarter were definitely Ah you know above expectation. So thank you very much.
Thanks.
Your next question comes from Daryl Young with TD Securities. Your line is open.
Morning, guys, just a couple of quick ones for me.
On the residential side has has.
There's 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 the I've seen it.
Well it's a.
Not yet and I'm not sure we will honestly.
This is a this is a a you know are occurring.
Revenue model as for all our competitors.
So I think I think they'll be fine.
Okay.
And then just in terms of the storm activity.
Correct that in 2019, basically restoration had almost zero benefit from from storm activity.
Early early in the year hang over from fourth quarter of 18.
We had some but a year to date in and 20.
Almost chanel.
Okay and as we so as we head into the back after the year then.
Not that took the that potentially provide some upside.
So the outlook as well, it's everything lines up yet on that.
Yes definitely.
And just one last one so.
Role and given the niche focused on health care and whatnot.
Still have the same benefits from from storm activity as a global does.
Oh, they work because they have a national accounts and relationships.
So if a storm work to impact any of their customers that 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.
Mark.
Let me just go over all if you could talk a little bit above the evolution of the investment plans as we are ending last year going into this year. There was the you know the announced plans of the best in behind global and some other initiatives and some I do spending what have you and then that you know that postponed.
So what we some of it did I was what did you could talk about Dallas itself, so you're going to be the mid seller in bad or and then put in denim business will work going forward as one of you could talk about how maybe what those investments are and how that's evolved from maybe the way you might have been done at the end of last year as far as dollar amount.
The difference 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.
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 you know March and April.
May and then when we.
I started to see our results come in when we did the private placement it gave us confidence to start to accelerate them a gap so.
The rebranding for one.
Bill is now scheduled for the first quarter of 2021.
And but we are.
Continuing to work on the.
National infrastructure in the systems that we need to support that unified brand shale CRM.
HR enterprise wide platform, a consolidated financial system that sort of thing.
Which will Oh, a lot of that would have taken place in 20 now it's all being sort over the next 12 months to to 18 months I would say.
But the dollars other say.
Okay that makes them, but I appreciate that thank you and then the last thing for me as I was wondering to talk about pricing dynamic and both residential and brands. If there was anything notable changes were could spend been steady as she goes as far as the the general pricing dynamic that.
Thank you.
I think the pricing has been.
Steady.
We are.
Sort of looking looking forward to.
Renewals at Firstservice residential and budgets for our communities.
At Firstservice residential.
And whether there will be a.
A heightened sensitivity.
Around pricing and less and less environment, if that's even possible because that is a.
Oh has isn't always has been a very price sensitive.
Business.
But I would say, we havent, we haven't seen anything yet.
Okay, great. Thank you very much.
Thanks Mark.
Your next question comes from Mt. Logan with RBC. Your line is open.
Thank you and good morning.
More importantly.
Following up on some easier sale store.
Same store sales figures within the brands Division can you talk about your non restoration brands such as century fire at Cal Closets answered a pro and maybe just give us a sense for how those are performance.
The.
You know century.
I was up.
Year over year.
Modestly for the quarter, and it's primarily relating to its installation business.
Which largely tied to new construction Nate.
Early on the core or they.
There 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.
A.
Solid revenue through the period in the backlog remains solid.
But I think we generally.
Expected that.
So they were made a bit better than our expectation.
And the other part of the business is the service and repair business, which.
Down in.
It is down and we expect to.
Slowly Clos way back a year over year over the balance for the year.
And the the home improvement brands all.
Rather than.
Slice and dice between Cal closets insert a.
Because they're all very similar the as a group.
They were down 20%.
The quarter, we expected them to be down.
Much more significantly.
But a big improvement as the quarter went on as I as I said earlier.
Jeremy I don't know if you have anything to add to that or.
No. That's that's exactly right, Scott, 20% down versus more than 50, 50% to 60% expectation, So that's really where the pickup widening.
And fire as you characterize it.
Two segments performing.
And following up on some of the questions with regards to storm activity.
I hope was framed the potential upside from my normalization and weather patterns.
When we look at you reach to guidance a would would that be included.
And if we looked at revenue from restoration over the past 12 months, what would that take your be.
Both on an actual bases and on a normalized basis.
Jeremy <unk> why I leave that to you.
Yeah. Okay. So Matt first question in terms of the guidance what I said early in my prepared comments, we wouldn't expect any.
Any significant degree of storm activity and in those numbers. So those are hard to forecast, but typically as we've said before if we get a normal level of activity again, we did not see it in 2019 and it's more normally plays out in the back half of the year.
You know a high teens.
Contribution from storm activity, if you look at the last 510 years.
Hi teams within waited a bit more to the back end of the year.
In the first half of the year.
In a normal year, we would normally see potentially 10% from storm or cat related activity contributing.
This year.
Well zero.
What was the other.
Did I answer all of your pieces or was there another component I missed a Matt.
That helps Jeremy appreciate that but in terms of the high teens contribution what percentage would that be accretive would that be able to have a restoration or the total piece of revenue.
I know that would be out of out of global restorations numbers.
For the global illustration, so what percentage did global represent over the last 12 months.
I mean, we bought them at 400 plus of revenues they've done.
Roughly that.
Okay.
That's certainly helps in terms of framing the potential upside so I'll leave it there appreciate the color.
Okay.
There are no further questions at this time.
Thank you Jesse and thank you everyone for joining once again, we're very pleased with the corridor 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 procured participation and have a nice day.