Q4 2023 FirstService Corporation Earnings Call
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Operator: and the New York Times. Thank you. Thank you. Welcome to the fourth quarter 2023 earnings call. Today's call is being recorded. Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown risk and uncertainty.
Okay.
Welcome to the fourth quarter 2023 earnings call.
Today's call is being recorded legal counsel requires us to advise that the discussion scheduled to take place today may contain forward looking statements that involve known and unknown risks and uncertainties.
Operator: 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 40-F, as filed with the U.S. Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is February 6th, 2024. I would like to introduce, I would like to turn the call over to Chief Executive Officer Mr. Scott Patterson. Please go ahead. Thank you, Justin.
Actual results may materially differ.
From any future results performance or achievements contemplated in the forward looking statements additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements is contained in the company's annual information form as filed with the Canadian Securities administrations.
And in the company's annual report on form 40 F.
<unk> filed with the U S Securities and Exchange Commission.
As a reminder, today's call is being recorded.
Today.
Speaker Change: Is February six 2024, I would like to introduce I would like to call. It.
Speaker Change: I would like to turn the call over to Chief Executive Officer, Mr. Scott Patterson. Please go ahead.
Scott Patterson: Welcome, ladies and gentlemen, to our fourth quarter and year-end conference call. I'm on with Jeremy Rakoosin, our CFO. Thank you for joining us today.
Scott Patterson: Thank you Justin.
Scott Patterson: Welcome, ladies and gentlemen to our fourth quarter and year end conference call I'm, Martin with Jeremy recruiting our CFO.
Scott Patterson: CFO.
Scott Patterson: Thank you for joining us today.
Scott Patterson: We're very pleased with how we finished the year and with our momentum as we head into 2024. Before I jump into the quarterly results, I want to make a few comments about this year. We closed out 2023 with our revenue up 16% over 2022 and our EBITDA up 18%, very strong results. Organic growth for the year at 10% accounted for over half of our top line. And importantly, the organic growth was balanced equally across our division. Both FirstService residential and FirstService brands grew organically by 10%. We've had some time now to reflect on these results for the year, and we could not be more proud of our teams for how they perform. 2023 represents the third consecutive year with organic growth at 10%, and that is a reflection of our team and their ability to consistently gain market share. Now I'll turn to the fourth quarter.
Scott Patterson: We're very pleased with how we finished the year and with our momentum as we head into 2024.
Scott Patterson: Before I jump into the quarterly results I want to make a few comments about the year.
Scott Patterson: We closed out 2023, with a revenue up 16% over 2022, and our EBITDA up 18%.
Scott Patterson: Very strong results.
Scott Patterson: Organic growth for the year at 10% accounted for over half of our topline increase.
Scott Patterson: And importantly, the organic growth was balanced equally across our divisions.
Scott Patterson: First service residential and first service brands grew organically by 10%.
We've had some time now to reflect on these results for the year and we could not be more proud of our teams for how they performed.
Scott Patterson: 2023 represents the third consecutive year with organic growth of 10% and that is a reflection on our tenants.
Scott Patterson: And their ability to consistently gain market share.
Scott Patterson: Now I'll turn to the fourth quarter.
Scott Patterson: Total revenues were up 6% over the prior year, and right in line with our internal expectations, the growth of the quarter related entirely to acquisitions. Organic growth was nil due to a very strong Q4 last year, driven by significant loss claims activity from Hurricanes Ian and Fiona that led to outsized revenues for our restoration brand. EBITDA for the quarter was flat at $103 million, and again, this was also right in line with our expectations.
Scott Patterson: Total revenues were up 6% over the prior year and right in line with our internal expectations.
Scott Patterson: The growth for the quarter related entirely to acquisitions.
Scott Patterson: Organic growth was nil due to a very strong Q4 last year.
Scott Patterson: By significant lost claims activity from Hurricanes and Fiona.
Scott Patterson: That led to outsized revenues for our restoration brands.
Scott Patterson: EBITDA for the quarter was flat at $103 million and again right in line with our expectations.
Scott Patterson: Jeremy will jump into the margin and errands per share detail in his comment. Looking at our divisional results, FirstService residential revenues were up 12%, nine percent organically. The results are consistent with the previous three quarters of this year and reflect solid growth from net new contract wins and, again, was broad-based across North America with all of our regions showing gains. Looking forward to the coming year, we expect to show growth at FirstService Residential at the high single-digit level, with organic growth starting to ease back during the year into the mid-single-digit range, which is our long-term average in this business. This is a contractual recurring revenue model with only modest swings quarter to quarter.
Scott Patterson: Jeremy will jump into the margin and earnings per share detail on his comments.
Scott Patterson: Looking at our divisional results first service residential revenues were up 12%.
Scott Patterson: 9% organically.
Scott Patterson: The results are consistent with the previous three quarters. This year and reflects solid growth from net new contract wins and again was broad based across North America with all of our regions showing gains.
Scott Patterson: Looking forward to the coming year, we expect to show growth at first service residential at the high single digit level.
Scott Patterson: With organic growth starting to ease back during the year into the mid single digit range, which is our long term average in this business.
Scott Patterson: This is a contractual recurring revenue model with only modest swings quarter to quarter.
Scott Patterson: Moving on to FirstService Brands, revenues for the quarter were up 1% compared to the very strong prior year quarter that was up 28% over the same quarter in 2021. However, revenues declined 7% on an organic basis, with gains at Century Fire and our home improvement brand more than offset by the headwinds at our restoration brands. Let me go through each segment, and I'll start with restoration, which includes our results for Paul Davis and First Onsite. However, revenues for the quarter came in lighter than expected and were down more than 10% against a tough comp in the prior year. We experienced very mild weather patterns across North America during the quarter, and, in addition, our remaining Hurricane Ian-related backlog did not progress as we expected.
Scott Patterson: Moving on to first service brands revenues for the quarter were up 1% comp.
Scott Patterson: Compared to the very strong prior year quarter that was up 28% over the same quarter in 2021.
Scott Patterson: Revenues declined 7% on an organic basis with gains at century fire and our home improvement brands.
Scott Patterson: More than offset by the headwinds at our restoration brands.
Speaker Change: Let me go through each segment and I'll start with the restoration.
Speaker Change: Which includes our results for Paul Davis and first on site.
Speaker Change: Revenues for the quarter came in lighter than expectations and were down more than 10%.
Speaker Change: Against a tough comp in the prior year.
Speaker Change: We experienced very mild weather patterns across North America during the quarter.
Speaker Change: And in addition, our remaining hurricane Ian related backlog.
Speaker Change: Did not progress as we expected.
Scott Patterson: We produced only a modest amount of storm-related work, about $15 million during the fourth quarter, which historically is our strongest storm-related revenue quarter by comparison. We generated $85 million in revenue last year from Hurricanes Ian and Fiona. We've seen an uptick in activity in Q1 from the frigid weather that much of North America experienced in mid-January, and we expect a solid quarter, but it will not be at the level we experienced in Q1 last year off the back of winter storm Elliot and the hurricane. Our expectation is that Q1 restoration revenues will be down at least 10% from the prior year. Moving now to our home improvement brands, including California Closets, CertiPro Painter, Floor Coverings International, and Pillar-to-Post Home Inspection.
Speaker Change: We produced only a modest amount of storm related work about $15 million during the fourth quarter.
Speaker Change: Which historically is our strongest storm related revenue quarter by comparison.
Speaker Change: We generated $85 million in revenue last year from Hurricane Janet.
Speaker Change: We've seen an uptick in activity in Q1 from the frigid weather in much of North America experienced in mid January.
Speaker Change: And we expect a solid quarter that it will not be at the level. We experienced in Q1 last year off the back of winter Storm Elliott and the Hurricanes.
Speaker Change: Our expectation is that Q1 restoration revenues will be down at least 10% from prior year.
Speaker Change: Moving now to our home improvement brands, including California, Closets sort of pro painters.
Speaker Change: Floor coverings international and pillar to post home inspection.
Scott Patterson: As a group, these brands were up mid-single digit versus the prior year, with organic growth low single digit. Very similar results to those we posted in Q3. We continue to face real headwinds in home improvement, and lead activity continues to be sluggish, still off year over year. It's a real tribute to the tenacity of our teams in this segment that we've driven growth the last two quarters in this environment. Interest rate levels and record low home sales have negatively impacted consumer demand.
Speaker Change: As a group these brands were up mid single digit versus the prior year.
Speaker Change: With organic growth low single digit very similar results to those we posted in Q3.
Speaker Change: We continue to face real headwinds in home improvement and lead activity continues to be sluggish still off year over year.
Speaker Change: It's a real tribute to the tenacity of our teams in this segment.
Speaker Change: We've driven growth the last two quarters in this environment.
Speaker Change: Interest rate levels and record low home sales have negatively impacted consumer demand.
Scott Patterson: And we don't expect this to abate until late in the year or next. That said, our teams in Home Improvement are confident that they can continue to grind out modest gains through 2024. I'll finish my review of the Q4 results with Century Fire, which had another very strong quarter, exceeding our expectations with organic growth near 20%. Similar to previous quarters, this year we are seeing strength across each of installations, and Inspection, and our National Accounts Division, and almost all our branches are performing and growing. Century team has really done a great job this year.
Speaker Change: And we don't expect this to abate until late in the year or next year.
Speaker Change: That said our teams in home improvement our confidence that they continue tenant continue to grind out modest gains.
Speaker Change: Through 2024.
Speaker Change: I'll finish my review of the Q4 results with century fire.
Speaker Change: Which had another very strong quarter.
Speaker Change: Seeding, our expectations with organic growth near 20%.
Speaker Change: Similar to previous quarters. This year, we are seeing strength across each of installation.
Speaker Change: Servicing inspection.
Speaker Change: And our National accounts Division and almost all of our branches are performing and growing.
Speaker Change: <unk> team has really done a great job this year.
Scott Patterson: Looking forward, we're expecting continued strong results, but certainly more modest growth, off the back of the 20% growth this year. Backlogs are solid, a boat flat with prior year end. Based on current bid activity, our expectations for 2024 growth at Century are high single-digit, which is more in line with their experience prior to this past year.
Speaker Change: Yeah.
Speaker Change: Looking forward, we're expecting continued strong results, but certainly more modest growth.
Speaker Change: The back of that 20% growth this year.
Speaker Change: Backlogs are solid.
Speaker Change: About flat with prior year end.
Speaker Change: Based on current bid activity, our expectations for 2024 growth at century.
Speaker Change: High single digit which is more in line with our experienced prior to this past year.
Scott Patterson: Before I pass over to Jeremy, I wanna spend a few minutes introducing our new platform acquisition, Roofing Corp. of America, which we closed in late December. Roofing Corp. is a $400 million revenue business that operates from 16 branches across 11 states. It offers end-to-end roofing services, including new installation, re-roofing, and repair and maintenance, primarily to commercial property owners and managers.
Speaker Change: Before I pass it over to Jeremy I want to spend a few minutes introducing our new platform acquisition of Roofing Corp of America, which we closed in late December.
Speaker Change: Roofing Corp, as a $400 million revenue business that operates from 16 branches across 11 states.
Speaker Change: It offers and the annual roofing services, including new installation re roofing and repair and maintenance primarily to commercial property owners and managers, 90% of the revenue is commercial and the focus go forward is commercial.
Scott Patterson: 90% of the revenue is commercial, and the focus going forward is commercial. It's a business that has come together over the last five years through acquisition. We spent significant due diligence time on each acquired company and each branch, and came away very impressed with the businesses that make up Rupincorp and with the teams, both corporately and at the branch level.
Speaker Change: It's a business that has come together over the last five years through acquisition.
Speaker Change: We spent significant due diligence time on each acquired company at each branch.
Speaker Change: And came away very impressed with the businesses that make up roofing Corp, and with the teams both corporately and at the branch level.
Scott Patterson: We're excited about the opportunity in roofing and excited to be partnering with this group, led by Randy Korak, CEO. We've been looking at roofing in general since late 2020, and I've mentioned it on this call in the past.
Speaker Change: We're excited about the opportunity in roofing and excited to be partnering this group led.
Speaker Change: Led by Randy <unk> CEO.
Speaker Change: We've been looking at roofing in general since late 2020, I've mentioned it on this call in the past.
Scott Patterson: It shares many of the same characteristics as our other businesses in terms of being an essential property service operating in a huge fragmented market with growth potential, both organically and through Tuck Under Acquisition. It's also highly complementary with restoration and fits well with a broader thesis we have around repair, maintenance, and restoration of the built environment and the growth potential in that space, growth from the continual expansion of the built environment but also from the increased frequency and volatility of weather, restoration, roofing, painting, and flooring. We will benefit from weather across all these businesses in the coming year. Roofing Corp finished 2023 with momentum. You have a strong backlog of work, and we expect solid organic growth in the mid to high single-digit range for 2024. We also expect to be active in terms of building the acquisition pipeline and seeking out tuck-ups. With that, let me pass you over to Jeremy, who will provide a more detailed review of our performance, pull together, consolidate, and look forward to 2024. Jeremy
Speaker Change: It shares many of the same characteristics as our other businesses in terms of being an essential property service operating in a huge fragmented market with growth potential both organically and through tuck under acquisition.
Speaker Change: It's also highly complementary with restoration and fits well with our broader thesis, we have around repair and maintenance and restoration of the built environment and the growth potential in that space.
Speaker Change: Growth from the continual expansion of the built environment, but also.
Speaker Change: From the increased frequency and volatility of weather.
Speaker Change: Restoration roofing painting flooring.
Speaker Change: We will benefit from weather across all of these best businesses in the coming years.
Speaker Change: Roofing Corp finished 2023 with momentum.
Speaker Change: We have a strong backlog of work.
Speaker Change: And we expect solid organic growth in the mid to high single digit range for 2024.
We also expect to be active in terms of building the acquisition pipeline and seeking out tuck owners.
Speaker Change: With that let me pass you over to Jeremy who will provide a more detailed review of our performance and pull together a consolidated look forward for 2024.
Speaker Change: Jeremy.
Jeremy: Thank you, Scott. Good morning, everyone. Scott just mentioned we are pleased with the strong full year 2023 financial results we delivered, even in the face of a more tempered fourth quarter when we were up against very strong prior year Q4 2022 headwinds. I will parse out these details in my commentary, starting first with a summary of our consolidated performance, and following up with a segmented breakdown across our two divisions. During the fourth quarter, we reported consolidated revenues totaling $1.08 billion and adjusted EBITDA of $103.3 million, up 6% and 1%, respectively, with our margin at 9.6% compared to 10.1% in the prior year period. For the full year, consolidated revenues increased 16% to $4.33 billion, underpinned by a strong and broad-based 10% organic growth.
Jeremy: Thank you Scott and good morning, everyone. Scott just highlighted we are pleased with the strong full year 2023 financial results, we delivered even in the face of a more tempered fourth quarter. When we were up against very strong prior year Q4 2022 headwinds.
Jeremy: I will parse out these details in my commentary starting first with a summary of our consolidated performance and following up with a segmented breakdown across our two divisions.
Jeremy: During the fourth quarter, we reported consolidated revenues totaling one 8 billion and adjusted EBITDA of $103 3 million up 6% and 1% respectively with our margin at nine 6% compared to 10, 1% in the prior year period.
Jeremy: For the full year consolidated revenues increased 16% to $4 $33 billion.
Jeremy: And depend by a strong and broad based 10% organic growth.
Jeremy: Justin Ivedia came in at $415.7 million, up 18% over the prior year and yielding a 9.6% margin, up 20 basis points compared to 9.4% in 2022. From a net earnings perspective, in the fourth quarter, adjusted EPS was $1.11, down from $1.22 in last year's fourth quarter. For the full year, we reported a just EPS of $4.66, up 10% over the $4.24 in 2022. Our annual interest costs almost doubled versus the prior year, largely attributable to the higher interest rate environment.
Jeremy: Adjusted EBITDA came in at $415 $7 million up 18% over the prior year and yielding a nine 6% margin up 20 basis points compared to nine 4% in 2022.
Jeremy: From a net earnings perspective in the fourth quarter adjusted EPS was $1 11 down from $1 22.
Jeremy: In last year's fourth quarter for.
Jeremy: For the full year, we reported adjusted EPS of $4 66 up 10% over the $4 24.
Jeremy: In 2022.
Jeremy: Our annual interest costs almost doubled versus the prior year largely attributable to the higher interest rate environment.
Jeremy: Higher rates in 2023 compared to 2022 had a more than 30 cents per share, or 7% negative impact on our adjusted EPS growth, which otherwise would have matched our EBITDA annual growth rate in 2023. Note that these comments on our Adjusted EBITDA and Adjusted EPS results respectively reflect adjustments to GAAP operating earnings and GAAP EPS, which are disclosed in this morning's press release and are consistent with our approach in Now we'll provide additional commentary on our division results for both the fourth quarter and full year. At FirstService Residential for the fourth quarter, revenues were $496 million, up 12% versus the prior year period, and the division reported EBITDA of $43.5 million, up 14%, for the quarter.
Jeremy: Rates in 2023 compared to 2022 at a more than 30 cents per share or 7% negative impact on our adjusted EPS growth, which otherwise would have matched our EBITDA annual growth rate in 2023.
Jeremy: Note that these comments on our adjusted EBITDA and adjusted EPS results respectively.
Jeremy: Reflect adjustments to GAAP operating earnings and GAAP, EPS, which are disclosed in this morning's press release and are consistent with our approach in prior periods.
Speaker Change: Now I will provide additional commentary on our divisional results for both the fourth quarter and full year.
Speaker Change: At first service residential for the fourth quarter revenues were $496 million up 12% versus the prior year period, and the division reported EBITDA of 43 $5 million up 14%.
Speaker Change: Quarter over quarter our.
Jeremy: Our margin for the quarter was 8.8%, modestly higher than the 8.6% level in Q4 2022. For the full year, revenues hit the $2 billion mark, increasing by 13% over 2022, including 10% organic growth. We also delivered an 11% increase in annual EBITDA, with our full-year margin at 9.4% and in line with the 9.5% margin for 2022. The margin is also down the middle of our typical 9% to 10% annual margin band for the FirstService residential division and a range consistent with what we also see for 2024. Shifting now to our FirstService Brands Division and focusing first on Q4, we recorded revenues of $583 million, a 1% increase. However, as Scott referenced, our restoration operations had lower revenues versus the prior year due to the mild weather during the current quarter compared to the contribution from significant hurricane events in late 2022. The Brands Division saw solid organic revenue growth, excluding this restoration-related headwind.
Speaker Change: Our margin for the quarter was eight 8% modestly higher than the eight 6% level in Q4 2022.
Speaker Change: For the full year revenues hit the $2 billion, mark increasing by 13% over 2022, including 10% organic growth.
We also delivered an 11% increase in annual EBITDA with our full year margin at nine 4% and in line with the nine 5% margin for 2022.
Speaker Change: The margin is also down the middle of our typical 9% to 10% annual margin band for the first service residential division and a range consistent with what we also see for 2024.
Speaker Change: Shifting now to our first service brands Division and focusing first on Q4, we recorded revenues of $583 million, a 1% increase as Scott referenced our restoration operations had lower revenues versus prior year.
Speaker Change: Due to the mild weather during the current quarter compared to the contribution from significant hurricane events in late 2022.
Speaker Change: The brands Division saw solid organic revenue growth, excluding this restoration related headwind.
Jeremy: For the fourth quarter, our Brands Division EPA came in at $61.1 million, down 9% versus the prior year quarter. Our division margin during the quarter was 10.5%, down from 11.7% in Q4 2022, and, as expected, matched the margin level for the prior sequential third quarter, which we noted in our Q3 earnings call. Profitability and margins were lower within our restoration businesses as a result of the reduced weather-driven activity levels and revenue. Margins at our home services brands also moderated in the fourth quarter compared to the prior year as increased promotional pricing and marketing initiatives were implemented to preserve our top-line growth. For the full year, revenues were very strong, up 19%, including 11% organic growth.
Speaker Change: For the fourth quarter, our brands Division EBITDA came in at $61 1 million down 9% versus the prior year quarter.
Speaker Change: Our division margin during the quarter was 10, 5% down from 11, 7% in Q4 2022.
Speaker Change: And as expected matched the margin level for the prior sequential third quarter, which we noted in our Q3 earnings call.
Speaker Change: Profitability and margins were lower within our restoration businesses as a result of the reduced weather driven activity levels and revenues.
Speaker Change: Margins at our home services brands also moderated in the fourth quarter compared to prior year as increased promotional pricing and marketing initiatives were implemented to preserve our top line growth.
Speaker Change: For the full year revenues were very strong up 19%, including 11% organic growth.
Jeremy: Our annual EBITDA grew 24%, resulting in a 10.4% full-year margin, up 50 basis points versus the prior year of 9.9%. We will continue to experience quarterly and even annual shifts in our brand division margins into 2024 and beyond, particularly in light of our restoration operations, which depend on certain levels of baseline weather-driven activity. The more periodic and larger area-wide storm events can further exacerbate the year-over-year margin profiles within restoration and thereby influence the brand's margin comparison. Despite these near-term fluctuations, our focus continues to be on the longer-term secular market opportunity for our restoration, repair, and maintenance brand to deliver attractive compounded growth rates. Finally, to close off my commentary on the P&L, we reported lower corporate costs in the fourth quarter due to the benefit of foreign exchange movements.
Our annual EBITDA grew 24%, resulting in a 10, 4% full year margin up 50 basis points.
Speaker Change: Versus the prior year of nine 9%.
Speaker Change: We will continue to experience quarterly and even annual shift in our brands division margins into 2024 and beyond particularly in light of our restoration operations, which depend on certain levels of baseline weather driven activity.
Speaker Change: The more periodic and larger area wide storm events can further exacerbate the year over year margin profiles within restoration and thereby influence the brand's margin comparisons.
Speaker Change: Despite these near term fluctuations our focus continues to be on the longer term secular market opportunity for our restoration repair and maintenance brands to deliver attractive compounded growth rates.
Speaker Change: Finally to close out my commentary on the P&L.
We reported lower corporate costs in the fourth quarter due to the benefit of foreign exchange movements. We also had larger than typical acquisition related items during the quarter, which negatively impacted GAAP operating earnings and GAAP EPS.
Jeremy: We also had larger-than-typical acquisition-related items during the quarter, which negatively impacted GAAP operating earnings and GAAP EPS, which had no effect on our EBITDA and adjusted EPS performance metrics. Of the $16 million amount in Q4, most related to earnouts tied to prior Tuck Under acquisitions and transaction costs for the larger Roofing Corp of America acquisition that Scott previously described. Now, I'll walk you through a summary of our cash flow and capital deployment. For the fourth quarter, we delivered cash flow from operations after working capital totaling $110 million, double the level during the prior year period. For the full year, operating cash flow was $280 million, up significantly over the $106 million in 2022, driven by strong operating earnings growth and the conversion of working capital investments in our restoration operations from prior year hurricane activity levels. We incurred $25 million of capital expenditures during Q4, resulting in full-year capex of $93 million, which came in lower than our most recently indicated target of $100 million.
Speaker Change: Have no effect on our EBITDA and adjusted EPS.
Speaker Change: <unk> metrics.
Speaker Change: The $16 million amounts in Q4.
Speaker Change: Most related to earn outs tied to prior tuck under acquisition and transaction costs for the larger roofing Corporate America acquisition that Scott previously described.
Speaker Change: Now I'll walk through a summary of our cash flow and capital deployment.
Speaker Change: For the fourth quarter, we delivered cash flow from operations after working capital totaling $110 million.
Speaker Change: Double the level during the prior year period.
Speaker Change: For the full year operating cash flow was $280 million up significantly over the $106 million in.
Speaker Change: In 2022, driven by strong operating earnings growth and conversion of working capital investments in our restoration operations from prior year hurricane activity levels.
Speaker Change: We incurred $25 million of capital expenditures during 2000 during Q4, resulting in full year capex of $93 million, which came in lower than our most recently indicated a target of $100 million.
Jeremy: In 2024, we expect total capital expenditures to increase in line with the growth of our operation to approximately $115 million. Maintenance CapEx represents the predominant amount of this spending for service vehicle fleet, IT, and office leasehold replacement cycles across our brands and will continue to represent roughly 2% of revenues and 20% of EBITDA on a consolidated basis. The fourth quarter also saw significant acquisition spending, totaling $434 million, with the bulk of that amount going to finance the Roof and Corp transactions.
Speaker Change: In 2024, we expect total capital expenditures to increase in line with the growth of our operation to approximately $115 million.
Speaker Change: Maintenance capex represent the predominant amount of the spending per service vehicle fleet.
Speaker Change: And office leasehold replacement cycles across our brands and we will continue to represent roughly 2% of revenues and 20% of EBITDA on a consolidated basis.
Speaker Change: The fourth quarter also saw significant acquisition spending totaling $434 million with the bulk of that amount to finance that would've been caught back transaction.
Jeremy: For the year, we deployed almost $550 million towards acquisitions, and excluding the Roofing Corp transaction, our tuck-under acquisition program spending totaled close to $150 million, which contributed a mid-single-digit percentage of incremental revenue growth above our organic growth base. Beyond these growth-driven capital deployment priorities, we also continued our trend of growing our dividends by yesterday approving an 11% dividend increase to $1 per share annually in U.S. dollars, up from the prior $0.90. We have now annually hiked our dividend by 10% or higher every year over the past decade. Our 2023 year-end balance sheet continues to be strong, even after the larger roofing corp. investment, closed out the year with just under $1 billion of net debt, and I leveraged it to a conservative 2.1 times net debt to adjust the EBITDA, up only a half turn from the 1.6 times level at the end of 2022.
Speaker Change: For the year, we deployed almost $550 million towards acquisitions and excluding the roofing Corp transaction, our tuck under acquisition program spending totaled close to $150 million.
Speaker Change: Which contributes a mid single digit percentage of incremental revenue growth above our core organic growth base.
Speaker Change: Beyond these growth driven capital deployment priorities. We also continued our trend of growing our dividends by yesterday approving an 11% dividend increase to $1 per share and in U S dollars up from the prior 90.
Speaker Change: We have now annually heightened our dividend, 10% or higher every year over the past decade.
Speaker Change: Our 2023 year end balance sheet continues to be strong even after the larger roofing Corp investment we closed out the year with just under $1 billion of net debt and our leverage sits at a conservative two one times net debt to adjusted EBITDA.
Speaker Change: Only a half turn from the one six times level at the end of 2022.
Jeremy: After year-end this past January, we also bolstered our liquidity by tapping into $125 million of senior's unsecured notes under our note-holder MasterShell facilities, which have 5-7 year maturities with interest coupons in the 5.5% area. Together with our cash on hand and availability under our bank credit facility, our current liquidity is approximately $400 million, which is ample for us to drive further acquisition growth as we work through our existing deal pipeline.
Speaker Change: After current year end. This past January we also bolstered our liquidity by tapping into a $125 million of senior unsecured notes and our Noteholder master shelf facilities.
Speaker Change: Which have five to seven year maturities with interest coupons in the five 5% area.
Speaker Change: Together with our cash on hand, and availability under our bank credit facility. Our current liquidity is approximately $400 million, which is ample for us to drive further acquisition growth as we work through our existing deal pipeline.
Jeremy: Looking forward, you've heard Scott comment on the individual brand's top line near-term growth indicators. With all that in mind, we see upcoming first quarter consolidated revenue growth to be approximately 10 percent. Q1 margins will be lower versus the prior year, with the Residential Division margin roughly flat, and the Brands Division margin down due to our restoration operations, which are comparing against approximately $80 million of hurricane-related revenue in Q1-23 that will not repeat in the first quarter of 2024. For the full year, we expect to deliver top-line growth in the low teens percent range with a healthy base of organic growth on the back of continued momentum with our brand With respect to profitability, residential margins will likely perform in line with prior year quarters.
Speaker Change: Looking forward you've heard Scott comment on the individual brands topline near term growth indicators with all that in mind, we see upcoming first quarter consolidated revenue growth to be approximately 10%.
Speaker Change: Q1 margins will be lower versus prior year with the residential division margin roughly flat in the brands Division margin down due to our restoration operations, which are comparing against approximately $80 million of hurricane related revenue in Q1, 'twenty three that will not repeat.
Speaker Change: In the first quarter of 2024.
Speaker Change: For the full year on a consolidated basis, we expect to deliver top line growth in the low teens percentage range with a healthy base of organic growth on the back of continued momentum with our brands.
Speaker Change: Together with approximately $400 million revenue contribution from our roofing Corp acquisition.
Speaker Change: With respect to profitability residential margins will likely perform in line with prior year quarters.
Operator: While our brand's margins should see modest year-over-year improvement during the latter half of the year when we are no longer comparing against the 2023 hurricane and winter storm event. Piecing it all together, we expect our consolidated EBITDA margin for the full year to be relatively in line to slightly up versus 2023. This now concludes our prepared comments. Operator, please open up the call to questions, and thank you. And thank you. As a reminder to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.
Speaker Change: While our brands margins should see modest year over year improvement during the latter half of the year. When we are no longer comparing against the 2023 hurricane and winter storm events.
Speaker Change: Piecing it all together, we expect our consolidated EBITDA margin for the full year to be relatively in line to slightly up versus 2023.
Speaker Change: This now concludes our prepared comments.
Greater: Greater please open up the call to questions and thank you.
Speaker Change: And thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby we compile the Q&A roster.
Michael Dumet: Please stand by. We're compiling the Q&A roster. And one moment for our first question. And our first question comes from Michael Dumet from Scotiabank. Your line is now open. Hey, good morning, guys. Nice quarter.
Greater: Yes.
Speaker Change: And one moment for our first question.
Speaker Change: And our first question comes from Michael <unk> from Scotiabank. Your line is now open.
Michael: Hey, good morning, guys nice quarter.
Scott Patterson: Scott, Jeremy, I think maybe just to start on the guidance for the year. So the way I understand it for 2024, the guidance doesn't include any storm-related activity, which, all equal, would suggest lower EBITDA margins for 2024, but you're calling for flat to slightly higher EBITDA margins, which again would imply embedded margins are rising somewhere else. Just trying to see if we can break that down a little bit where the margin expansion is happening, whether it's roofing corp. or something else. Yeah, great, Michael. I mean, just to put a box around it, the top line low teens, you know, that does not include, as you said, any additional shots in the arm from storms. It also doesn't include unidentified tuck under acquisitions.
Michael: Scott Jeremy I think maybe.
Michael: Maybe just to start on the guidance for the year.
Michael: So the way I understand it for 2020 for the guidance doesn't include any storm related activity, which all else equal would suggest lower EBITDA margins for 2024, but you're calling for flat to slightly higher EBITDA margins.
Scott Jeremy: Which again it would imply embedded margins are rising somewhere else just trying to see if we can break that down a little bit where the margin expansion, that's happening, whether it's roofing corp, or or something else.
Scott Jeremy: Okay.
Speaker Change: Yes, correct, Michael I mean, just.
Speaker Change: To put a box around it.
Speaker Change: Top line.
Speaker Change: Low teens that does not include as you said any additional shot in the arm from storms. It also doesn't include unidentified tuck under acquisitions I mean, frankly, we do acquisitions every year and if we continue with that cadence you could see our top line.
Scott Patterson: I mean, frankly, we do acquisitions every year, and if we continue with that cadence, you could see our top line and bottom line, frankly, resemble pretty close to the performance we just delivered in 23 in 2022. But again, we don't build that into our thinking. You know, I'd say the residential margins are relatively flat, so no real pickup there. It's in the brands; there would be a little bit of a mix. We're adding the roofing corp. transaction, which, you know, we come in at low double-digit margins, and that has a little bit of a positive mixed impact, and some of the efficiencies that we're going to start to see in our restoration operations from the implementation of the operating platform, it's not going to be in a straight line, but that, incrementally over the quarters and into, frankly, beyond 24, will be something that That's super helpful.
Speaker Change: And Bottomline frankly resemble.
Speaker Change: Pretty close to the performance, we just delivered in 'twenty three over 2022, but again, we don't build that into our thinking yes, I'd say the.
Speaker Change: Residential.
Speaker Change: Margins relatively flat so no real pickup there in the brands it would be a little bit of mix.
Speaker Change: We're adding the roofing Corp transaction, which we come in at low double digit.
Speaker Change: Margins in that.
Speaker Change: It's a little bit of a positive mix impact in some of the efficiencies that we're going to start to see.
Speaker Change: In our restoration operations from the implementation of the operating platform, it's not going to be in a straight line, but that incrementally.
Speaker Change: Incrementally over the quarters and into frankly.
<unk> 2004 will be something that we're working on and.
Speaker Change: Should be.
Speaker Change: Small margin enhancer for us as well during the course of 2024.
Speaker Change: That's super helpful, maybe bigger picture here I do.
Scott Patterson: Maybe a bigger picture here. So I do, you know, like the thesis around the roofing business. I wonder to what extent there are synergies between, you know, the restoration business and the roofing business. And I wonder, you know, again, if you continue to expand the restoration business, whether or not there are other businesses where you might increasingly look to explore synergies. Michael certainly would.
Speaker Change: The fees that surround the roofing business I wonder to what extent.
Speaker Change: There are synergies between the restoration business in our roofing business.
Speaker Change: And I Wonder you know again, if you continue to expand the rest of the restoration business now whether or not there are other businesses where.
Speaker Change: You might increasingly look to explore synergies.
Michael: Michael certainly.
Michael: Yeah.
Scott Patterson: Roofing is complementary to restoration, and, as I said in my prepared comments, we've been looking at it for a few years now and really become aware of it or more aware of it through First Onsite and our commercial restoration because we're regularly seeing opportunities in roofing and either subcontracting it out or walking away from it. So certainly, we became more aware of the opportunity through restoration. But it is a discrete opportunity that we see big opportunities in. There will be some collaboration, certainly, between the restoration brands and a roofing corp., um, but it is a discrete segment and a discrete opportunity for us. Beyond that, I mean, generally, the thesis around repair, maintenance, and restoration and the impact that weather will have on that, I mean, we're very bullish on it. We think SertaPro painters will certainly benefit, and we are. SertaPro every year is expanding its commercial capability, and again, we see collaboration between these areas going forward. Really helpful. I appreciate the call.
Michael: Roofing is complementary to restoration.
Michael: Yes.
Michael: As I said in my prepared comments, we've been looking at it for a few years now and really became.
Michael: Aware of it are more aware of it through.
Michael: First on site in our commercial restoration.
Michael: Because we are ready.
Michael: Regularly.
Michael: <unk> seen opportunities on roofing and either shopping it out we're walking away from it.
Sure.
Michael: So certainly we became more aware of the opportunity through restoration, but it is a discrete opportunity.
Michael: That we see big opportunity in.
Michael: There will be some collaboration certainly between the restoration brands and roofing Corp.
Michael: But but it is a discrete chegg.
Michael: Segment, and a discreet opportunity for us.
Michael: And that I mean, generally the thesis around repair and maintenance from restoration and the impact that weather will have on that.
Michael: I mean, we.
Michael: We're very bullish on it.
Michael: We think short of pro painters, who will certainly benefit and we are sort of pro every year is expanding its.
Michael: Our commercial capability.
Michael: And again, we see collaboration between these areas going forward.
Speaker Change: Really helpful. I appreciate the color. Thank you guys.
Michael Dumet: Thank you, guys, and thank you. And one moment for our next question. And our next question comes from Stephen Sheldon on behalf of William Blair. Your line is now open. Hey, good morning.
Speaker Change: And thank you.
Speaker Change: And one moment our next question.
Speaker Change: And our next question comes from Stephen Sheldon from William Blair. Your line is now open.
Stephen Hardy Sheldon: Thank you. Just first here, can you talk about the top of the funnel trend in the home improvement brand? I think you said it continues to be sluggish. Are you seeing it weaken even more than you'd seen before?
Stephen Hardy Sheldon: Hey, good morning, Thank you.
Stephen Hardy Sheldon: Just first can you talk about half of the funnel trends in the home improvement brands. I think you said it continues to be sluggish are you seeing if we can even more than you had seen before and then just as we think about the next couple of quarters. There how much visibility you have into revenue there.
Scott Patterson: And then, just as we think about the next couple of quarters there, how much visibility do you have into revenue there? Just given the backlog that continues to convert? It's not weaker, Stephen.
Stephen Hardy Sheldon: Given the backlog that continues to convert.
Stephen Hardy Sheldon: It's not weaker Stephen it's it's sort of holding.
Scott Patterson: It's sort of holding off our lead activity by 5% to 10%. So it's similar to the last few quarters we've had, and we would expect, similar results in the first half of the year to what you've seen in the last half of 23. So I mean, it's tough, it's a grind, but we expect that we'll be up a bit on the top line. You know, we are continuing to invest in markets and continue to focus on lead conversion and closing rates, which are really two levers more in our control that can help offset the headwinds we're experiencing. Very helpful. And then there's a follow-up within the fire bit. Is there much of a margin differential between the installation work tied to construction activity versus the recurring inspection and repair work? And just asking that in case we see construction activity taper over the next year or two and the impact that could have on margins in the fire brand if there is a makeshift more towards the recurring revenue streams there? No, but they are very, very similar.
Stephen Hardy Sheldon: Off our lead activity, 5% to 10%.
Stephen Hardy Sheldon: So it's similar to the last few quarters we've had.
Stephen Hardy Sheldon: And we would expect.
Similar results in the first half of the year to what you've seen in the last half of.
Stephen Hardy Sheldon: <unk> 23, so I mean, it's.
Stephen Hardy Sheldon: It's tough it's a grind.
Stephen Hardy Sheldon: But we expect that we will be up a bit.
Stephen Hardy Sheldon: Our top line.
Stephen Hardy Sheldon: We are continuing to invest in marketing.
Stephen Hardy Sheldon: And continuing to focus on lead conversion and closing rate, which are really two levers more in our control that can help.
Stephen Hardy Sheldon: Offset the headwinds and we're having success with that.
Speaker Change: Very helpful.
Speaker Change: And then as a follow up within the fire business.
Speaker Change: Is there much of a margin differential between the installation work tied to construction activity versus the recurring inspection and repair work and just asking that in case, we see construction activity taper over the next year or two.
Speaker Change: And the impact that could have on margins in the firebrand. If there is a mix shift more towards the recurring revenue streams there.
Speaker Change: Yes.
Speaker Change: No very very similar.
Scott Patterson: One, I would say 2023 margins were similar. Historically, as we've experienced price increases in steel and other materials, it's impacted installation relative to service, which is more labor driven.
Speaker Change: The warrant.
Speaker Change: I would say 2023 margins were similar historically as we experienced price increases in steel and other materials, it's impacted installation relative to service, which is more labor driven.
Stephen Hardy Sheldon: But right now, they're running very well. Great, thank you, and thank you. One moment for our next question. And our next question comes from Stephen MacLeod from BMO Capital Markets. Your line is now open.
Speaker Change: Right now they're running very similar.
Speaker Change: Great. Thank you.
Speaker Change: And thank you.
Speaker Change: And one moment our next question.
Speaker Change: And our next question comes from Stephen Mac Lloyd from BMO capital markets. Your line is now open.
Stephen Macleod: Great. Thank you. Good morning, guys.
Speaker Change: Okay.
Speaker Change: Great. Thank you good morning, guys.
Scott Patterson: I just wanted to circle around on a couple of things related to Q1, particularly within restoration. I know you gave some sort of near-term guidance on the different components, but just wondering when you put it all together, how do you sort of foresee Q1 organic growth evolving on a consolidated basis within the brand, within the brands division? Jeremy, do you want to handle that?
Speaker Change: Yes.
Speaker Change: Just wanted to circle around on a couple of things related to Q1.
Speaker Change: Particularly within restoration I know you gave some sort of near term guidance on the different components.
Speaker Change: But just wondering when you put it all together how do you sort of foresee Q1 organic.
Speaker Change: Growth evolving on a consolidated basis within the brand.
Speaker Change: The brands Division.
Speaker Change: Yeah.
Speaker Change: Jeremy you want to handle that.
Jeremy: Sure. I think it's going to be pretty similar, Stephen, to what we just saw in Q4, with similar headwinds in the order of $80 million. I think I mentioned in my prepared comments the $80 million that we're going to be comping against in Q1 versus Q1 of 2023, and that's a similar headwind as what we had just in Q4. So organic revenue growth, as Scott mentioned, was down 7%. It's going to be down about the same amount, including the storms.
Speaker Change: Sure.
Jeremy: I think it's going to be pretty similar Steven to what we would.
Jeremy: What we just saw in Q4 similar headwinds in the order of $80 million I think I mentioned in my prepared comments $80 million.
Jeremy: That we're going to be comping against in Q1 versus Q1 of 2023 and that's that's a similar headwind as what we had just in Q4, so organic revenue growth as Scott mentioned was down 7%, it's going to be down about the same amount, including the storms. If you ex out this.
Jeremy: If you X out the, That $80 million headwind would be healthy, organic growth for the brand. Yeah, okay, great. And then just, would you expect a similar type of margin impact in Q1 that you saw in Q4, considering the organic is roughly the same? On a consolidated basis, you know, I said that residential would be flattened, and brands would be down on a consolidated basis. I would look for Q1 consolidated margins to be down roughly 100 basis points, perhaps a little bit more.
Jeremy: That $80 million headwind would be held.
Jeremy: Healthy organic growth for the brands Division.
Speaker Change: Yeah, Okay, Great and then just.
Speaker Change: Would you expect a similar type of margin impact in Q1 that you saw in Q4, considering the organic is roughly the same.
Speaker Change: On a consolidated.
Speaker Change: Said that residential will be flat and brands will be down on a consolidated basis I would look for Q1 consolidated margins to be down roughly 100 basis points, perhaps a little bit more.
Stephen Macleod: Okay, and that would be sort of flat, flat resi and down, down brands to get to that. Yeah, consolidate down. Yeah, obviously brands down more than 100 if the other division's flat, but the consolidated would be 100 basis points of potential wider on the compression. Yeah, okay, no, that's helpful. Thanks, Jeremy. And then just, just sort of higher levels.
Speaker Change: Okay, and that would be sort of flat flat, Rosie and down down brands to get to about <unk> consolidated EBITDA, obviously brands down more than 100, if it's the other divisions flat, but the consolidated would be 100 basis points of potential.
Speaker Change: Wider.
Speaker Change: On the compression.
Speaker Change: Yeah, Okay, no that's very helpful. Thanks, Jeremy.
Speaker Change: And then just I'm just sort of higher level.
Scott Patterson: You know, having now owned the roofing business for, you know, six weeks or whatever the length of it has been, just wondering if you can give a little bit of color as to kind of what you're seeing so far. I know you mentioned that the business finished the year strongly, which is great, but just wondering, you know, are there any wins or highlights that you can sort of highlight that you've seen so far? Yeah, I mean, it's early days, Stephen, thinking through the wind.
Speaker Change: Having having now owned.
The roofing business for.
Speaker Change: Six weeks or however, long it's been just wondering if you can give a little bit of color as to kind of what what what youre seeing so far I know you mentioned that the business finished the year strongly which is great. But just wondering are there are there.
Speaker Change: Some wins or highlights that you can sort of highlight that you've seen so far.
Speaker Change: Yes.
Speaker Change: It's early days.
Speaker Change: Steven.
Speaker Change: Thinking through the winter I think the biggest thing.
Scott Patterson: I think that, you know, the biggest thing from our perspective is just our excitement to be partnering with this group. It's a strong team, and we're just filled with optimism about our opportunity in this business. We've got great operators at the branch level that, and generally, the alignment with the management team around building the premier roofing contractor in the U.S. and doing it the right way, that we're serving the customer, winning day-to-day and growing organically, and then topping that off with acquisitions. You know, we do expect it.
Speaker Change: I think from our perspective is just our.
Speaker Change: Excitement to be partnering with this group.
Speaker Change: A strong team.
Speaker Change: We just we're just filled with optimism.
Speaker Change: About our opportunity.
Speaker Change: In this business, we've got great operators at the branch level debt.
Speaker Change: And generally the alignment with the management team around building the premier roofing contractor in the U S and doing it the right way.
Speaker Change: Ensuring that we're serving the customer winning day to day and growing organically.
Speaker Change: And then topping that off with.
Speaker Change: With acquisitions in.
Speaker Change: We do expect to be participating it's a consolidating industry.
Scott Patterson: It's a consolidating industry. And we'll definitely, I expect that we'll, talk, we'll have some success completing talk unders this year. Okay, that's, that's great.
Speaker Change: And.
Speaker Change: We will definitely I expect it will we'll do some tuck will have some success completing tuck under this year.
Speaker Change: Okay, that's fair.
Scott Patterson: Thank you, Scott. And then maybe just a sort of higher level, just as we think about the year 2024, you know, looking at it looks like the comps are a bit tougher in both brands and retail in the first half of the year. So are you kind of expecting the year to shape out that way with sort of tougher comps in queue in the first half and then maybe some stronger growth in the back half of the year? Not so much, and I think Scott spoke about it in residential.
Speaker Change: Great. Thank you Scott and then maybe just just sort of higher level just as.
Speaker Change: If you think about the year for 2024.
Speaker Change: Looking at it looks like the comps are a bit tougher in both.
Speaker Change: Brands and resi in the first half of the year. So are you kind of expecting the year to shape out that way with sort of tougher comps in Q in the first half and then maybe some stronger growth in the back half of the year.
Speaker Change: Okay.
Speaker Change: Not so much and I think Scott spoke about it in residential if you're talking topline.
Jeremy: If you're talking top line, you know, we're going to settle more into a mid-single-digit organic top line growth pattern. And brands, sure, you know, the headwinds are most acute in the front half of the year, particularly Q1, a little less so in Q2, but still there with respect to the hurricane-related and winter storm Elliott-related work that we had, starts to taper off in Q3. And as you know, it was pretty minimal for us in Q4 this year. So, yeah, the headwinds will fade as we move through the year.
Speaker Change: We're going to settle more into a mid single digit organic topline growth pattern.
Speaker Change: Yes brands for sure.
Speaker Change: The headwinds are most acute in the front half of the year, particularly Q1, a little less so in Q2, but still there.
Speaker Change: With.
Speaker Change: With respect to the hurricane related and winter storm Eliot related work that we had it starts to taper off in Q3 and as you know it was pretty minimal for us in Q4. This year. So so yeah. The headwinds will abate as we move through the year.
Jeremy: Okay, that's great. Well, thanks guys. I appreciate it, and thank you.
Speaker Change: Okay, that's great well thanks, guys appreciate it.
Speaker Change: And thank you.
Daryl Young: And one moment for our next question. And our next question comes from Daryl Young from Steeple. Your line is now open. Hey, good morning, everyone.
Speaker Change: And one moment our next question.
Speaker Change: And our next question comes from Daryl Young from Stifel. Your line is now open.
Daryl Young: Hey, good morning, everyone.
Scott Patterson: Just sticking on the roofing theme, a question around the growth focus and, I guess, how the organic model is going to work there and what some of the key variables are for winning market share. So, you know, is it about competing on price, or is there a way to pursue a differentiation strategy in terms of large-scale or more complex roofing projects or specialty facilities or any color you can give here on what differentiates the growth. I think, first and foremost, it's a growing market. I'm sure there are tailwinds that will drive growth in the market, and then you know it comes down to serving the customer in the local market and having great leadership locally, great relationships, and delivering on your promises.
Daryl Young:
Daryl Young: Just sticking on the roofing theme.
Daryl Young: And around the growth focus and I guess, how the organic model is going to work there and what some of the key variables are for winning market share. So.
Daryl Young: Is it about competing on price or is there a way to pursue a differentiation strategy in terms of large scale or more complex roofing projects.
Daryl Young: Specialty facilities or any any color you can give here.
Daryl Young: What differentiates the growth.
Speaker Change: I think.
Speaker Change: First and foremost, it's a growing market.
Speaker Change: So there are.
Speaker Change: Tailwind that will will drive the growth in the market and then.
Speaker Change: It comes down to.
Speaker Change: Serving the customer in the local market.
Speaker Change: And having great leadership locally.
Speaker Change: Great relationships and delivering on year.
Scott Patterson: Brand Promise, and so this is a group that has historically done that, and one of the reasons why we're so excited about partnering with them is that kind of alignment. So it's going to be, you know, the markets are... Thank you. And it's very similar to our other markets. And the opportunity to grow organically is really through your culture, your people, and bringing it every day.
Speaker Change: Brand promise.
Speaker Change: This is a group that has.
Speaker Change: <unk> done that historically.
And one of the reasons why we're so excited about partnering with them is that kind of alignment so it's going to be.
Speaker Change: The markets are.
Speaker Change: Huge.
Speaker Change: And it's very similar to our other markets.
Speaker Change: And the opportunity to grow organically is really.
Speaker Change: Through your culture your people and brand at every day and that's the same as all of our businesses and really that's the opportunity that we saw will be taking a long term perspective.
Scott Patterson: And that's the same as all our businesses, which are really just the opportunity that we saw. We'll be taking a long-term perspective. It's incremental, um, and then, you know, it is early days, but there is an opportunity as we fill out our footprint to start developing a national account program similar to what we've done at First On-Site Century Fire. Um, We'll be working on that in earnest in the coming years. That's a great color, thank you.
Speaker Change: Incremental.
Speaker Change: And then.
Speaker Change: It is early days, but there is an opportunity as we fill out our footprint to start developer and National account program similar to what we've got at first onsite century fire.
Speaker Change: And we'll be we'll be working on that in earnest in the coming coming years.
Speaker Change: That's great color. Thank you.
Scott Patterson: And then on the residential property management side, we've seen a number of third-party technology platforms that have kind of popped up in the last few years looking at helping HOAs and residents self-manage communities and record keeping and amenity booking and all that. Are you seeing any sort of competitive risks related to that? I know you invest a lot in your own tech stack, but just any color you can give us there in terms of the ability to keep winning market share on the retail side and any potential disruption. You know, I mean, a lot of that technology would relate to smaller communities, where they and the board may be able to manage it themselves.
Speaker Change: And then on the residential property management side.
Speaker Change: We've seen a number of third party technology platforms that have kind of popped up in the last few years and looking at helping HOA and residents self managed communities in record keeping and amenity booking and all that are you seeing any sort of <unk>.
Speaker Change: Competitive risks related to that I know you invest a lot in your own tech stack, but just any color you can give us there in terms of ability to keep winning market share on the resi side and any potential disruption.
Speaker Change: Yes, I mean, a lot of that technology.
Speaker Change: Would relate to smaller communities.
Speaker Change: Where are they.
Speaker Change: Technology and the board may be able to manage it themselves you did mentioned shelf management so on.
Scott Patterson: You did mention self-management, so I'm looking forward to that. Thank you. You know, our sweet spot is really the larger communities, more complex communities, high-rise lifestyles where there are large numbers of sighted staff; technology certainly matters. And as you suggest, we continue to invest in ours, but it's more about the day-to-day delivery of service from yours. Got it. Okay, that's it for me. I'll jump back in the queue.
Speaker Change: I think thats, what Youre speaking to.
Speaker Change: Our sweet spot is really the larger communities more complex communities.
Speaker Change: High rise and lifestyle, where there's large numbers of sited staff tech.
Speaker Change: Technology certainly matters.
Speaker Change: And as you suggest we continue to invest in ours, but it's.
It's more about the day to day.
Speaker Change: Delivery of service from your from your teams.
Speaker Change: Got it okay.
Daryl Young: Thanks, guys, and thank you. And one moment for our next question. And our next question comes from Frederic Bastien from Raymond James. Your line is now open. Good afternoon, guys.
Speaker Change: Good for me I'll jump back in the queue. Thanks, guys.
Speaker Change: And thank you.
Speaker Change: And one moment our next question.
And our next question comes from Frederic Bastien from Raymond James Your line is now open.
Frederic Bastien: Hi, Good afternoon, guys just wanted to dig in a little further on the M&A side.
Frederic Bastien: I just wanted to dig a little further on the M&A side. Scott, on the brand side, you've been pretty vocal about adding services like roofing, insulation, and asbestos removal. Obviously, you took care of the roofing part with RCA, but I was wondering what your views are right now on the other two business plans that you were calling out in previous quarters? Frederic, I mean, nothing, nothing close, but I think we're always. We're going to be keeping our eyes out for adjacencies, and it's around this, maintenance, repair, restoration, space, know what to do when we have a large loss, commercially large loss. What other opportunities are there?
Frederic Bastien: Scott on the brand side, you've been pretty vocal about adding services like roofing installation and asbestos removal. Obviously you took care of the roofing part with RCA, but wondering what are your views right now on the other two business lines that you were.
Frederic Bastien: You were calling out.
Frederic Bastien: In prior quarters.
Scott: Fredrik I mean, nothing nothing close, but I think we're always.
Scott: Coiner be keeping our eyes out for Adjacencies and again, it's around this.
Scott: Thats repair restoration space.
Scott: What when when when we.
Scott: Service, a large loss commercial large loss.
Speaker Change: What other opportunities are there.
Scott Patterson: What are we walking away from? How can we deliver a better service to the customer, which is what led us to roofing and to comment on some of the other things. Okay. Nothing close.
Speaker Change: What are we walking away from how can we deliver a better service to the customer which is really what led us to roofing and to comment on some of the other things that you've mentioned.
Speaker Change: Okay.
Nothing close though.
Scott Patterson: Okay, and then this was, I guess, discussed a little earlier on, but presumably the RCA acquisition came in with a laundry list of potential targets, and is that what is giving you confidence that you might be able to bring in a couple more tuck-ins on that side? Yeah, I don't know if it's a laundry list, but there's certainly... a pipeline. And over the last few years, we've had many conversations. And so, sort of combining those efforts will create some opportunities this year. But we also are going to be very careful, and FocusShop, yet another strategy.
Speaker Change: Okay.
Speaker Change: And then this was discussed a little earlier on but presumably the RCA acquisition came in with a laundry list of potential targets.
Speaker Change: And is that what gives is giving you confidence that you might be able to bring in a couple more tuck ins on that on that side.
Speaker Change: I don't know if its a laundry list, but theres certainly.
Speaker Change: Our pipeline and over the last few years, we've had many conversations and so.
Speaker Change: Sort of.
Speaker Change: Combining those efforts.
Speaker Change: We will create some opportunity this year.
Speaker Change: But it's.
Speaker Change: We also.
Speaker Change: Are going to be very careful and focus on.
Speaker Change: Fit and strategy.
Scott Patterson: But this roofing is a consolidated industry, happening quickly, so we need to be there. Great, that's all I have. Thank you, and thank you. And we have a follow-up question, one moment. And our follow-up question comes from Tom Callahan from RBC Capital Markets. Your line is now open. Hey, good morning, guys. Maybe just on the residential side, in terms of the building blocks for 2024, can you just talk kind of about pricing and what you're seeing there? Like, I know through the year in 2023, obviously, renewals were running kind of stronger than historically, but maybe what's kind of embedded in your outlook into 2024 there? Tom, we've been running at 3%, and that contributed to the strong organic growth in the 10% range these past few quarters.
Speaker Change: But this roofing is a consolidating industry.
Speaker Change: Industry.
Speaker Change: Happening in quickly so we.
Speaker Change: We need to be there.
Speaker Change: Great. That's all I have thank you.
Speaker Change: And thank you.
Speaker Change: And we have a follow up question one moment.
Speaker Change: And a follow up question comes from Thom Callahan from RBC capital markets. Your line is now open.
Thom Callahan: Hey, good morning, guys.
Thom Callahan: Maybe just on the residential side in terms of the building blocks for 2024 can you just talk kind of about pricing and what youre seeing there.
Thom Callahan: Through the year and 'twenty, three obviously renewals are running kind of stronger than historical but maybe whats kind of embedded in your outlook into 'twenty four there.
Speaker Change: Yes, Tom we've been running at 3% and that contributed to the <unk>.
Speaker Change: <unk> organic growth in the in the 10% range. These past few quarters.
Scott Patterson: Heading into 24, and built into I think in Scott's comments about us settling back to a mid-single-digit range, is moving back down to the longer term and typical pricing dynamic in this industry, which is 1% to 2%. So we're incrementally, as we renew contracts throughout the year, we're kind of starting to see that type of pricing dynamic settle back in there. And it makes sense, you know, wage inflation is coming down and it's a price-competitive industry and we've always said that, so that's the look forward, got it thanks for that uh and then just maybe one more and i know you guys kind of have touched upon it here in your prepared remarks but just given kind of the macro headwinds and obviously leads um being down in the home improvement side of things um but obviously uh you know still still showing gains how are you kind of thinking about that volume slash market share versus kind of the price um promotion trade-off and and kind of the impact or related impact on margins there uh as we kind of move forward into 24.
Speaker Change: Heading into 'twenty, four and built into I think in Scott's comments about is settling back to a mid single digit range is there.
Speaker Change: Moving back down to the longer term and typical pricing dynamic in this industry, which is 1% to 2%. So we're incrementally as we renew contracts throughout the year, we're kind of starting to see that type of pricing dynamic settled settle back in there.
Speaker Change: And it makes sense wage inflation is coming down and it's a price competitive industry and we've always said that so.
Speaker Change: That's the look forward.
Speaker Change: Got it thanks for that and then just maybe one more and I know you guys kind of touched upon it here in your prepared remarks, but just given kind of the macro headwinds and obviously leads.
Speaker Change: Being down in the home improvement side of things.
Speaker Change: But obviously.
Speaker Change: Still still showing gains how are you kind of thinking about that volume slash market share versus kind of the price promotion trade off and kind of the impact or related impact on margins there.
Speaker Change: Kind of move forward into 'twenty four yes.
Scott Patterson: Yeah, it's uh, it's definitely a balance that we're working through. It's um, You know, it's a growth-oriented group, and it's a time when... Stephen MacLeod, We can, We want to take advantage of the market and gain share, but we want to balance it with margins. We're looking to... know this year, not go backwards on margins certainly, and looking to are what we experienced in 2000.
Speaker Change: It's it's definitely.
Speaker Change: Only a balance that we're there we're working through it.
Speaker Change: It's a growth oriented group.
Speaker Change: And it's a time when.
Speaker Change: We can.
Speaker Change: In some respects take advantage of the market and gain share.
Speaker Change: We want to balance it with margins so.
Speaker Change: We're looking to.
Speaker Change: This year.
Speaker Change: Yes.
Speaker Change: Not go backwards on margin, certainly and looking to increase it from where.
Speaker Change: What we experienced in 2023.
Tom Callahan: Okay, great. I appreciate the call, guys. I'll turn it back on.
Speaker Change: Okay, Great I appreciate the color guys I'll turn it back thanks.
Scott Patterson: Thanks, and thank you. And one moment for our next follow-up question. And our follow-up question comes from Daryl Young from Steeple. Your line is now open. Yeah, sorry guys, just one last one. With respect to the national account strategy and now having sort of fire restoration and roofing all potentially pursuing the same customers, is there an insurance angle that's starting to work its way through on the commercial side, and opportunities to be a preferred vendor with insurance companies as well? Or is that still kind of an early days concept?
Speaker Change: And thank you.
Speaker Change: And one moment our next follow up question.
Speaker Change: And a follow up question comes from Daryl Young from Stifel. Your line is now open.
Daryl Young: Yes, sorry, guys just one last one with respect to the National account strategy and now having sort of fire restoration in roofing.
Daryl Young: Potentially pursuing the same customers.
Daryl Young: Is there an insurance angle that starting to work its way through on the commercial side and opportunities to be a preferred vendor with insurance companies as well or is that still kind of in early days concept.
Daryl Young: Um, it's not something that's risen to the top. Certainly, national insurance carriers are our customers for Paul Davis and First On Spite. Uh, not significant customers for Roofing Corp. and not at all to Century Fire, so it, I think, is more isolated to restaurants.
Speaker Change: It's not something that.
Speaker Change: Risen to the top.
Speaker Change: Certainly.
Speaker Change: National insurance carriers are.
Speaker Change: Our customers too Paul Davis and first on site.
Speaker Change:
Speaker Change: Not significant customers to roofing Corp, and not at all with century fire. So it's I think more isolated to restoration right now.
Scott Patterson: Right. Okay, that's great. Thanks, and thank you. And I'm showing no further questions. I would now like to turn the call back over to Scott Patterson for closing remarks. Thank you, Justin. And thank you all for joining us. We're
Speaker Change: Okay, that's great. Thanks.
Speaker Change: Okay.
Speaker Change: And thank you.
Speaker Change: And I'm showing no further questions I would now like to turn the call back over to Scott Patterson for closing remarks.
Scott Patterson: Thank you Justin and thank you all for joining we're looking.
Scott Patterson: Looking forward to a strong 2024, and we'll reconnect with you all in April around Q1. Have a great day. Ladies and gentlemen, this concludes the first quarter investors conference call. Thank you for your participation and have a nice day. Thanks for watching!
Scott Patterson: Looking forward to a strong 2024.
Scott Patterson: And we will we'll reconnect with you all in in April around Q1 have a great day.
Speaker Change: Ladies and gentlemen, this concludes the first quarter investors conference call. Thank you for.
Speaker Change: Your participation and have a nice day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.