Q1 2024 FirstService Corp Earnings Call
Yes.
Operator: Welcome to the first quarter investors conference call. Today's call is being recorded.
Yeah.
Welcome to the first quarter.
Speaker Change: <unk> Conference call today's call is being recorded legal counsel requires us to advise that the discussion scheduled to take place today may contain forward looking statements that involve known and unknown risks and uncertainties actual results may be materially different from any future results.
Operator: Legal counsel requires us to advise you that the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown risk and uncertainty. The 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 Administrators and in the company's annual report on Form 40-S as filed with the U.S. Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is April 24, 2024. I would like to turn the call over to Chief Executive Officer, Mr. Scott Patterson. Please go ahead.
Speaker Change: 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 administrators and in the company's annual report on form.
Speaker Change: 40 F as filed with the U S Securities and Exchange Commission as a reminder, today's call is being recorded today is April 24, 2024, I would like to turn the call over to Chief Executive Officer, Mr. Scott Peterson Patterson. Please go ahead.
Scott Patterson: Thank you, Justin. Good morning, everyone, and thank you for joining our Q1 conference call. Jeremy Rakusin is on with me, and together we'll walk you through the results we released this morning that were generally right in line with our internal expectations. Total revenues were up 14% over the prior year, driven entirely by acquisition, primarily our acquisition of Roofing Corp of America in December. Similar to our Q4, organic growth in the first quarter was nil due to very strong revenues in last year's Q1, due to Hurricanes Ian and Fiona.
Speaker Change: Thank you Justin good morning, everyone and thank you for joining our Q1 conference call.
Speaker Change: Jeremy Rakuten is on with me and together, we will walk you through the results. We released this morning.
Speaker Change: We're generally right in line with our internal expectations.
Speaker Change: Total revenues were up 14% over the prior year driven entirely by acquisitions, primarily our acquisition of Roofing Corp of America in December.
Speaker Change: Similar to our Q4 organic growth in the first quarter was nil due to very strong revenues in last year's Q1 for.
Speaker Change: From Hurricanes Fiona.
Scott Patterson: EBITDA for the quarter was up incrementally to $83 million from $82 million in the prior year. The results reflect trends and themes that we saw in our Q4 results and discussed in our year-end call. Jeremy will take you through the margin detail and the balance sheet in his commentary.
Speaker Change: EBITDA for the quarter was up incrementally to 83 million from $82 million in the prior year.
Speaker Change: The results reflect trends and themes that we saw in our Q4 results and discussed in our year end call.
Speaker Change: Jeremy will take you through margin detail on our balance sheet in his comments.
Scott Patterson: Looking at our divisional results, FirstService residential revenues were up 11%, 8% organically, and generally consistent with what we've seen from this division over the last year. Organic revenue growth was driven from net new contracts. During the quarter, we announced the acquisition of Florida-based Rosetta & Company. Rosetta provides consulting and management services. HOAs in Florida and also to Community Development Districts, which are known as CDDs. A CDD is a special purpose local government that exists in Florida and also certain other states, including Georgia, Texas, and California. The CDD structure provides the ability to finance new development with tax-free municipal bonds.
Jeremy Alan Rakusin: Looking at our divisional results first service residential revenues were up 11%, 8% organically and generally consistent with what we've seen from this division over the last year.
Jeremy Alan Rakusin: Organic revenue growth was driven from net new contract wins.
Jeremy Alan Rakusin: During the quarter, we announced the acquisition of Florida based Rosetta and company.
Jeremy Alan Rakusin: Or is that a provides consulting and management services to <unk>.
Jeremy Alan Rakusin: Oh ways in Florida, and also to community development District, which are known as C. D DS.
Jeremy Alan Rakusin: A C. D. D is a special purpose of local government that exists in Florida and also.
Jeremy Alan Rakusin: Certain other states, including Georgia, Texas and California.
Jeremy Alan Rakusin: The <unk> structure provides the ability to finance new development with tax free municipal bonds.
Scott Patterson: Rosetta brings a particular expertise in CDD management and introduces a new service offering for us that we believe we can grow within Florida and also to other states. Looking forward at FirstService Residential for the balance of the year, we're reiterating our expectations for high single-digit level growth with organic growth, easing back towards the mid-single-digit rank. Moving on to FirstService Brands, revenues for the quarter are up 16%, driven primarily by the acquisition of Roofing Corp of America, but also several tuck-unders within our restoration and fire safety segment.
Jeremy Alan Rakusin: Or is that a brings a particular expertise in CDP management.
Jeremy Alan Rakusin: And introduces a new service offering for us.
Jeremy Alan Rakusin: We believe we can grow within Florida and also to other states.
Jeremy Alan Rakusin: Looking forward at first service residential for the balance of the year, we're reiterating our expectation.
Jeremy Alan Rakusin: For high single digit level growth with organic growth.
Jeremy Alan Rakusin: Even back towards the mid single digit range.
Jeremy Alan Rakusin: Moving on our first service brands.
Jeremy Alan Rakusin: Revenues for the quarter were up 16% driven.
Jeremy Alan Rakusin: Driven primarily by the acquisition of roofing Corporate America, but also several tuck andress within our restoration and fire safety segments.
Scott Patterson: Organically, revenues were down 6% versus the prior year, with gains at Century Fire, offset by declines in our restoration brands, very similar to our organic results in Q4. Let me give you a high-level review of each segment.
Jeremy Alan Rakusin: Organically revenues were down 6% versus the prior year with gains at century fire.
Jeremy Alan Rakusin: Set by declare declines at our restoration brand very similar to our organic results in Q4.
Speaker Change: Let me give you a high level review of each segment.
Scott Patterson: We'll start with restoration, which includes your results from Paul Davis and First Onsite. Revenues for the quarter were down by almost 10% and organically were off 15% versus a very strong Q1, in the prior year that was up 30% versus 2022. Similar to Q4, we continued to experience mild weather patterns across North America during the quarter. Residential and commercial claim activity was well off what we would expect on average.
I'll start with restoration, which includes our results from Paul Davis and first on site.
Speaker Change: Revenues for the quarter were down by almost 10% and organically were up 15%.
Speaker Change: Versus a very strong Q1.
Speaker Change: In the prior year that was up 30% versus 2022.
Speaker Change: Similar to Q4, we continued to experience mild weather patterns across North America during the quarter.
Speaker Change: Residential and commercial claim activity was well off what we would expect on average.
Scott Patterson: Revenues generated during the quarter from our remaining hurricane-in backlog amounted to about $10 million, compared to over $80 million from Ian, Elliot, and Fiona in our prior Q&A. During the quarter, we were pleased to report the acquisition of Atlanta-based All Restoration Solutions by First Onsite. All Restoration has a strong position in the Georgia market with four branches and a blue chip client base. The addition brings to us a strong leadership team and is very complementary.
Speaker Change: Revenues generated during the quarter from our remaining hurricane in backlog amounted to about $10 million compared to over $80 million.
Speaker Change: Ian Elliot and Fiona and our prior Q1.
Speaker Change: During the quarter, we were pleased to report the acquisition of Atlanta based all restoration solutions by first on site.
Speaker Change: All restoration has a strong position in the Georgia market with four branches and a blue chip client base.
Speaker Change: The addition brings to US a strong leadership team and it's very complementary.
Scott Patterson: In terms of geographic footprint and customer service, we're excited about our opportunity in the Atlanta market and throughout Georgia. Looking forward to Q2 and restoration, we expect revenues to continue at approximately the same level sequentially, which would again result in a 10% revenue decline from Q2 of last year. I will now touch on our new roofing segment, which delivered a Q1 in line with our expectations. Q1 will generally be a modestly weaker quarter for us in roofing, as it is in painting. Due to winter weather in certain of our regions and the inability to consistently work on the exterior.
Speaker Change: In terms of geographic footprint and customer served we're excited about our opportunity in the Atlanta market and throughout Georgia.
Speaker Change: Looking forward to Q2 and restoration, we expect revenues to continue at approximately the same level sequentially.
Speaker Change: Which would again resulted in a 10% revenue decline from Q2 of last year.
Speaker Change: Okay.
Speaker Change: I will now touch on our new Rep roofing segment, which delivered a Q1 in line with our expectation.
Speaker Change: Q1 will generally be a modestly weaker quarter for us in roofing as it isn't panting.
Speaker Change: Due to winter weather in certain of our regions and the inability to consistently work on exteriors.
Scott Patterson: We had budgeted for this during our due diligence, and it rolled in as expected. Looking forward, we expect sequentially stronger results for the balance of the year. Now to our home improvement brands, which as a group were up modestly year over year, low single-digit growth in total and flat organic growth. We're pleased with our results given current market conditions. Home Improvement Spending Down Across North America By matching last year's revenue levels, we are taking share across each of our brands. However, lead activity remains sluggish, and we don't expect it to improve for the balance of the year unless we see some rate cuts.
Speaker Change: We have budgeted for this during our due diligence and it rolled in as expected.
Looking forward we expect.
Speaker Change: Sequentially stronger results for the balance of the year.
Speaker Change: Now to our home improvement brands, which as a group were up modestly year over year low single digit growth in total and flat organically.
Speaker Change: We're pleased with our results given current market conditions with home improvement spending down.
Speaker Change: Ross North America.
Speaker Change: By matching last year's revenue levels, we are taking share across each of our brands.
Speaker Change: We'd activity remained sluggish and we don't expect it to improve for the balance of the year unless we see some rate cuts.
Jeremy Alan Rakusin: We may see some modest fluctuation quarter to quarter, but otherwise, we are confirming our expectation to end the year slightly up in home improvement. And finally, a look at Century Fire, which had another strong quarter with low double-digit organic growth, really a continuation, sequentially, of the strength we saw all last year with Central. Looking forward to the balance of 2024, we're confirming the expectations we laid out in our year-end conference call. That is continued strength at Century, with year-over-year growth trending to high single-digit based on increasingly tough comp quarters upcoming. I will now hand over to Jeremy.
Speaker Change: We may see some modest fluctuation quarter to quarter, but otherwise we are confirming our expectation to end the year slightly up in home improvement.
Speaker Change: And finally, a look at century fire, which had another strong quarter with low double digit organic growth.
Speaker Change: Really a continuation sequentially if the strength, we saw last year with century.
Speaker Change: Looking forward to the balance of 2024, we're confirming the expectations, we laid out in our year end conference call.
Speaker Change: That is continued strength at century with year over year growth trending to high single digit based on increasingly tough comp quarters upcoming.
Speaker Change: I will now hand over to Jeremy.
Jeremy Alan Rakusin: Thank you, Scott. Good morning, everyone.
Jeremy Alan Rakusin: Thank you Scott good morning, everyone I'll start by summarizing our first quarter results on a consolidated basis, which track closely to the indicators. We provided during our most recent 2023 year end earnings call in early February.
Jeremy Alan Rakusin: I'll start by summarizing our first quarter results on a consolidated basis, which track closely to the indicators we provided during our most recent 2023 year-end earnings call in early February. For the quarter, we reported revenues of $1.16 billion, a 14% increase over the $1.02 billion for Q1-23. Adjusted EBITDA was $83.4 million, up a modest 2% year-over-year with a 7.2% margin for the quarter compared to a margin of 8.1% in the prior year quarter, and our adjusted EPS was $0.67 compared to $0.85 per share in the prior year. Adjustments to operating earnings and GAAP EPS and arriving at adjusted EBITDA and adjusted EPS, respectively, are consistent with our approach in prior periods. I'll now summarize the segmented results for our two divisions.
For the quarter, we reported revenues of 1.1 dollars 6, billion% to 14% increase over the one point or $2 billion for Q1 'twenty three.
Jeremy Alan Rakusin: Adjusted EBITDA was $83 $4 million.
Jeremy Alan Rakusin: Up a modest 2% year over year with a seven 2% margin for the quarter compared to a margin of eight 1% in the prior year quarter.
Jeremy Alan Rakusin: And our adjusted EPS was <unk> 67.
Jeremy Alan Rakusin: Compared to 85 per share in the prior year.
Jeremy Alan Rakusin: Our adjustments to operating earnings and GAAP EPS in arriving at adjusted EBITDA and adjusted EPS, respectively are consistent with our approach in prior periods.
Speaker Change: I will now summarize the segmented results for our two divisions.
Jeremy Alan Rakusin: FirstService Residential generated revenues of $496 million, up 11% over last year's first quarter, while EBITDA was $35.6 million, an 11% increase as well over the prior year. The EBITDA margin for the division came in at 7.2%, matching the prior year. During the balance of the year, margins will increase sequentially as our seasonal amenity operations ramp up, and as previously indicated, the margins will remain roughly in line with prior year
Speaker Change: First service residential generated revenues of $496 million up 11% over last year's first quarter, while EBITDA was $35 6 million, an 11% increase as well over the prior year. The EBITDA margin for the division came in at seven 2% matching the prior year.
Speaker Change: Here.
Speaker Change: During the balance of the year margins will increase sequentially as a seasonal amenity operations ramp up and as previously indicated the margins will remain roughly in line with prior year levels.
Jeremy Alan Rakusin: Now to FirstService Brands, where we reported revenues of $662 million for the current quarter, up 16% over last year's Q1. Our EBITDA for the division was $55.5 million, a 1% increase versus the prior year quarter, and the margin was 8.4%, down 120 basis points versus last year's 9.6% level. As Scott noted, our restoration operations faced a headwind of $80 million in prior year storm-related revenues, and that was the principal driver behind the margin decline for the division.
Speaker Change: Now to first service brands, where we reported revenues of $662 million for the current quarter up 16% over last year's Q1.
Speaker Change: Our EBITDA for the division was $55 5, million% to 1% increase versus the prior year quarter and the margin was eight 4% down 120 basis points versus last year's nine 6% level.
Speaker Change: As Scott noted our restoration operations faced a headwind of $80 million in prior year storm related revenues and that was the principal driver behind the margin decline for the division.
Jeremy Alan Rakusin: We also incurred some margin compression in our home services segment as the businesses implemented increased promotions and marketing spending to preserve their top-line performance. Century Fire Protection continued to deliver strong margins, and our new Roofing Corp. of America investment performed in line with our expectations.
Speaker Change: We also incurred some margin compression.
Speaker Change: Our FERC in our home services segment as the businesses implemented increased promotions and marketing spending to preserve their topline performance.
Speaker Change: Century fire protection continued to deliver strong margins and our new roofing Corp of America investment performed in line with our expectations.
Jeremy Alan Rakusin: Wrapping up our P&L review with items below the operating divisions, our corporate costs were up significantly over the prior year. Most of the $3 million increase was due to the negative non-cash effect of foreign exchange movements during the quarter. Higher interest costs also reduced our earnings per share, as in prior quarters. In this particular Q1, it was up almost double the level of the prior year with a negative impact of $0.13 per share.
Speaker Change: Wrapping up our P&L review with items below the operating divisions, our corporate costs were up significantly over prior year.
Speaker Change: Most of the $3 million increase was due to the negative noncash effect of foreign exchange movements during the quarter.
Speaker Change: Higher interest costs also reduced our earnings per share as in prior quarters. In this particular Q1, it was up almost double the level of the prior year with a negative impact of <unk> 13.
Speaker Change: Per share.
Jeremy Alan Rakusin: Finally, our consolidated tax rate increased from 26 percent last year to 29 percent in the current quarter, which is right in line with our tax rate expectations for full year 2024. Turning to our consolidated cash flow, we generated $56 million of cash flow from operations before working capital changes. Q1 is our seasonal trough cash flow period when some of our businesses have lower revenues and higher operating expenses and working capital requirements as they invest for the balance of the year.
Speaker Change: Finally, our consolidated tax rate increased from 26% last year to 29% in the current quarter, which is right in line with our tax rate expectations for full year 2024.
Speaker Change: Turning to our consolidated cash flow, we generated $56 million of cash flow from operations before working capital changes.
Speaker Change: Q1 is our seasonal trough cash flow period, when some of our businesses have lower revenues and higher operating expenses and working capital requirements as they invest for the balance of the year.
We netted $10 million of cash flow. After these operational working capital investments.
Speaker Change: Excluding almost $20 million for recent acquisition related earn out payments.
Jeremy Alan Rakusin: We netted $10 million of cash flow after these operational working capital investments, excluding almost $20 million for recent acquisition-related earn-out payments. Capital expenditures during the quarter were $25 million, up modestly over the prior year spending level and tracking to our CapEx guidance for the full year of roughly $115 million. During the quarter, we also deployed just over $30 million of capital towards the two Tuck Under acquisitions with Scotch Rep. Our teams have an active Tuck Under Prospect pipeline across several of our brands, including property management, restoration, roofing, and fire protection, as we look to augment our organic growth with acquisitions in these business lines.
Speaker Change: Capital expenditures during the quarter were $25 million up modestly over the prior year spending level and tracking to our capex guidance for the full year of roughly $115 million.
Speaker Change: During the quarter. We also deployed just over $30 million of capital towards the two tuck under acquisitions, which Scott referenced.
Speaker Change: Our teams have an active tuck under prospect pipeline across several of our brands, including property management restoration roofing and fire protection as we look to augment our organic growth with acquisitions in these business lines.
Speaker Change: Concluding the reported financials commentary as our balance sheet.
Speaker Change: We closed the quarter with net debt at a little under $1 1 billion, an increase of $80 million since year end reflective of the cash flow movements I just walked through.
Our leverage as measured by net debt to trailing 12 month EBITDA sits at two three times, increasing modestly over the two one times level at year end.
Jeremy Alan Rakusin: Concluding the reported financials commentary is our balance. We closed the quarter with net debt at a little under $1.1 billion, an increase of $80 million since year-end, reflective of the cash flow movements I just walked through. Our leverage, as measured by Net Death to Trend 12 Months EBITDA, sits at 2.3x, increasing modestly over the 2.1x level at year-end, as is relatively typical after our seasonally lowest Q1. Liquidity, including our cash and undrawn bank revolver balance, is approximately $360 million.
Speaker Change: It's relatively typical after our seasonally lowest Q1.
Speaker Change: Liquidity, including our cash and Undrawn bank revolver balance is approximately $360 million.
Speaker Change: The strength and flexibility of our balance sheet remains a cornerstone of our conservative approach to driving further growth.
Speaker Change: Looking forward in the upcoming second quarter, we are forecasting consolidated revenue growth similar to Q1 in the low teens percentage range.
Speaker Change: EBITDA is expected to increase at a mid single digit growth rate with residential division margins relatively flat.
Jeremy Alan Rakusin: The strength and flexibility of our balance sheet remain a cornerstone of our conservative approach to driving further growth. Looking forward, in the upcoming second quarter, we are forecasting consolidated revenue growth, similar to Q1, in the low-teens percentage range. EBITDA is expected to increase at a mid-single-digit growth rate, with residential division margins relatively flat, while brands' division margins will remain down year-over-year in the face of continued, tough, weather-driven restoration.
Speaker Change: While brands Division margins will remain down year over year in the face of continued tough weather driven restoration prior year comparisons.
Speaker Change: With the reported first quarter and pending Q2 lining up with our expectations our outlook for the 2020 for full year, which I provided with our 2023 year end results in February remains on track.
Speaker Change: That concludes our prepared comments operator, operator could you. Please open up the call to questions now thank you very much.
Thank you as a reminder to ask a question.
Jeremy Alan Rakusin: With the reported first quarter and pending Q2 lining up with our expectations, our outlook for the 2024 full year, which will be provided with our 2023 year-end results in February, remains on track. Operator, could you please open up the call to questions now? Thank you very much.
Speaker Change: 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, while we compile the Q&A roster and one moment for your first question.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: One moment for your first question.
Speaker Change: And our first question comes from Steven Mac Lloyd from BMO capital markets. Your line is now open.
Great. Thank you good morning, guys.
Operator: 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. Please stand by while we compile the Q&A roster. And one moment for our first question. One moment for our first question. And our first question comes from Stephen MacLeod from BMO Capital Markets. Your line is now open.
Speaker Change: Steve.
Speaker Change: Hi, Good morning, just a couple of questions that I wanted to ask here.
Speaker Change: Firstly with respect to the restoration business could.
Speaker Change: Could you just remind us how much weather you had in last year's Q2, or how much weather related revenues I seem to recall back to my notes that it was in the $30 million range is that right.
Speaker Change: Correct, It was Steven $30 million from storms.
Speaker Change: The other thing that we benefited from in Q2.
Speaker Change: Last year was just.
Speaker Change: General weather widespread whether that is certainly greater than what we're seeing today.
Stephen MacLeod: Great. Thank you.
Stephen MacLeod: Good morning, guys. Hi, Steve. Hi, morning. Just a couple of questions that I wanted to ask here. First of all, with respect to the restoration business, could you just remind us how much weather you have?
Speaker Change: And.
And we had a couple of particularly large losses.
Speaker Change: At this time last year, we're in the business of large loss at first on site.
Scott Patterson: in last year's Q2 or how much weather-related revenues. I seem to recall from my notes that it was in the $30 million range. Is that right? Correct. It was, Stephen, $30 million from storms. The other thing that we've benefited from in Q2 last year was general weather, widespread weather that is certainly greater than what we're seeing today.
Speaker Change: And we consistently have.
Speaker Change: Large losses in our backlog, but year over year that level of activity is down just to because of the size of a couple of.
Speaker Change: Particular jobs last year.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: That's helpful and I guess, just if I if I thought through.
Speaker Change: The year over year impacts from weather.
Speaker Change: Q1 versus the year over year back weather in Q2 would you expect margins to be down at a similar.
Speaker Change: Magnitude in Q2 on a year over year basis are a little bit less because the large storm activity was a bit less robust.
Scott Patterson: We had a couple of particularly large losses at this time last year. We're in the business of large losses at First On-Site. We consistently have large losses in our backlog, but year over year, that level of activity is down just because of the size of a couple of particular jobs last year. Okay, okay, no, that's, that's helpful. And I guess just if I thought through the year-over-year comparisons.
Speaker Change: And it was in Q1 last year.
Speaker Change: Net net it could be a little less as Stephen but yes, I think the headline named storms, you're right is a little less of a headwind in Q2, but as Scott just mentioned because of some other large losses, it's not.
Speaker Change: It's not going to necessarily be particularly keyed right to that differential between the 80 million dollar headwind in Q1 and $30 million in Q2, but we will be down and it's reflective of my comments on margins in general for Q2 being down.
Scott Patterson: Would you expect margins to be down by a similar magnitude in Q2 on a year over year basis or a little bit less?
Speaker Change: Right Okay. Okay no that's helpful.
Operator: less because the large storm activity was.
Speaker Change: And then just on the on the on the residential business.
Operator: and It was in QM last year.
Speaker Change: You had another nice quarter of strong organic growth I know youre guiding to that kind of trending back down to the mid single digit range can you just talk a little bit about sort of what other factors youre seeing impacting <unk>.
Jeremy Alan Rakusin: It could be a little less, Stephen, but I think the headline name storms, you're right, are a little less of a headwind in Q2, but, as Scott just mentioned, because of some other large losses, it's not. It's not going to necessarily be particularly keyed right to that differential between the $80 million headwind in Q1. $30 million in Q2. But we will be down, and it's reflective of my comments on margins in general about Q2 being down.
Speaker Change: Organic growth beyond new contract wins, you're still seeing conversions to outsource management and.
Speaker Change: I guess have you seen that sort of.
Speaker Change: New community activity, beginning to tail off a little bit.
Speaker Change: I mean, we're definitely seeing.
Jeremy Alan Rakusin: Right. Okay. Okay, no, that's...
Speaker Change: Continue to see new development and conversions to from self management to professional management.
Scott Patterson: And then just on the residential business, you know, you had another nice quarter of strong, organic business.
Speaker Change:
Speaker Change: It was a couple of things that are causing us to.
Speaker Change: See a normalization in our net new contract wins back to historical levels.
Scott Patterson: I know you're guiding us to that kind of trending back down to the mid-single digit.
Speaker Change: Really for the last nine months community budgets have been under considerable pressure from primarily from accelerating insurance premiums.
Scott Patterson: Can you just talk a little bit about, sort of, what other factors you're seeing impacting organic growth beyond new colonies?
Speaker Change: But also in Florida from legislation.
Speaker Change: Requires cash.
Speaker Change: Cash reserves for maintenance and repairs to be funded.
Scott Patterson: and Style Source Management, and I guess if you've seen that sort of new community activity beginning to tail off a little bit.
Speaker Change: This is all post <unk>.
Speaker Change: Search side legislation sharp side being the condo collapsed in June of 'twenty one.
Scott Patterson: I mean, we're definitely seeing and will continue to see new developments and conversions from self-management to professional management. There's a couple of things that are causing us to see a normalization in our net new contract wins back to historical levels. You know, really, for the last nine months, community budgets have been under considerable pressure, primarily from accelerating insurance premiums, but also in Florida from legislation that requires cash reserves for maintenance and repairs to be funded. This is all post.
Speaker Change: In the past <unk> correct.
Speaker Change: Choose to defer maintenance.
Speaker Change: Or reduced.
Speaker Change: Cash reserves and it's no longer possible.
Speaker Change: And.
Speaker Change: The combination of insurance and some recently passed legislation is causing.
The boards to look very very closely at cash flow.
Speaker Change: And all expense items, and thats, putting pressure on management fees.
Speaker Change: Really nothing new for us.
Speaker Change: I mean, we're always looking to find that balance between margin and organic growth.
Speaker Change: And if we're not able to generate an appropriate margin in a particular community contract.
Scott Patterson: Surfside legislation, Surfside being the condo collapse on June 21, 21. In the past, boards could choose to defer maintenance or reduce cash reserves, and it's no longer possible. You know, the combination of insurance and some recently passed legislation is causing boards to look very, very closely at cash flow and all expense items, and it's putting pressure on management fees. Really, nothing new for us. I mean, we're always looking to find that balance between margin and organic growth.
Speaker Change: We're allocate our resources elsewhere.
Speaker Change: The other thing Thats.
Speaker Change: Happening trend for us as our pool maintenance and management business, which is part of our amenity service offering along with the management of fitness areas and spies concierge events and so on we've offered pool services.
Speaker Change: For years and years to our managed communities, but also the country clubs in multifamily.
Scott Patterson: And if we're not able to generate an appropriate margin on a particular community contract, um, you know, where I allocate our resources elsewhere. The other thing that's a trending for us is our pool maintenance and management business, which is part of our amenity service offering, along with the management of fitness areas and spas, concierge, events, and so on. We've offered pool services for years and years to our managed communities but also to country clubs and multifamily.
Speaker Change: The pool business is very seasonal.
Speaker Change: And where we're looking to maintain this business, but we're not focused on growing it it's become very very difficult to staff with lifeguards and maintenance pool tax.
Speaker Change: And so we're being very careful and strategic about.
Speaker Change: The business, we take on and how again, how we allocate our resources.
Speaker Change: And.
Speaker Change: This will have the effect of diluting our growth in this division, particularly in the seat.
Speaker Change: The peak seasonal quarter, so Q2 and Q3.
Scott Patterson: The pool business is very seasonal, and we're looking to maintain this business, but we're not focused on growing it. It's become very, very difficult to staff with lifeguards and maintenance pool techs. And so, we're being very careful and strategic about the business we take on and how, again, we allocate our resources. This will have the effect of diluting our growth in this division, particularly in the peak seasonal quarter, so Q2 and Q3, and so we expect to see some of that.
Speaker Change: And so we expect to see some of that.
Speaker Change: This year.
Speaker Change: Okay. Thanks, Scott.
Helpful color.
Speaker Change: I guess as we think about those those factors, specifically and maybe turning the page to 2025.
Speaker Change: Do you expect to continue to be able to drive.
Scott Peterson: Our historical mid single digit organic growth rate in the residential business notwithstanding those items you just talked about.
Speaker Change: Including those answers yes.
Speaker Change: We just think that at the at the eight 910 level.
Speaker Change: We see that.
Speaker Change: As we've said for.
Speaker Change: For a few quarters now.
Speaker Change: See that organic growth start to temper and settling closer to our historical average.
Stephen MacLeod: Okay, thanks Scott, that's a helpful color. I guess as I think about those factors.
Speaker Change: Okay that makes sense.
Speaker Change: Thanks, guys appreciate it.
Speaker Change: And thank you.
Stephen MacLeod: Specifically, and maybe turning the page to 2025, you know, do you...
Speaker Change: And one moment our next question.
Speaker Change: And our next question comes from Stephen Sheldon with William Blair. Your line is now open.
Scott Patterson: You expect to continue to be able to maintain kind of that historical mid-single-digit organic growth rate.
Stephen Hardy Sheldon: Hey, good morning, Thanks for taking my questions.
Scott Patterson: We just think at the 8, 9, 10 level, we see that, as we've said for a few quarters now, that organic growth is starting to attempt. OK.
Stephen Hardy Sheldon: I wanted to start on residential and Scott you kind of talked about this a little bit in your prepared remarks, how are you thinking about the opportunity to gain market share with some of these larger CBD now that you own risks that are you expecting this to be an outsized area growth in residential and potentially become.
Stephen MacLeod: Okay, that makes sense. Great. Thanks, guys. I appreciate it.
Operator: And one moment for our next question. And our next question comes from Stephen Sheldon from William and Blair. Your line is now open.
Stephen Hardy Sheldon: A larger chunk of the portfolio as you think about the coming years.
Scott Peterson: I wouldn't say, it's an outsized opportunity.
Stephen Hardy Sheldon: But it is a new service offering for us.
Stephen Hardy Sheldon: Hey, good morning. Thanks for taking my question. I wanted to start in residential, and Scott, you kind of talked about this a little bit in your prepared remarks. How are you thinking about the opportunity to gain market share with some of these larger CBDs now that you own Rosetta? Are you expecting this to be an outsized area of growth in residential and potentially become a larger chunk of the portfolio as you think about the coming years?
Stephen Hardy Sheldon: And Cds are created.
Stephen Hardy Sheldon: Really around large <unk>.
Stephen Hardy Sheldon: Multi phased communities.
Stephen Hardy Sheldon: With expensive lifestyle amenities. So if the developer is looking at that type of community. He may choose to finance it with the CBD.
Stephen Hardy Sheldon: Which enables.
Stephen Hardy Sheldon: The building of infrastructure.
Stephen Hardy Sheldon: And the building of club house and amenities.
Stephen Hardy Sheldon: Early on in the development.
Stephen Hardy Sheldon: And it certainly helps sell lots and accelerate development.
Scott Patterson: I wouldn't say it's an outsized opportunity, but it is a new service offering for us, and CEDs are created really around large, multi-phage communities with expensive lifestyle amenities. So if a developer is looking at that type of community, he may choose to finance it with a CDD, which enables... The Building of Infrastructure, and the building of a Clubhouse and Amenities, early on in the development, certainly helps sell lots and accelerate development.
Stephen Hardy Sheldon: That size of community is right in our strike zone.
Stephen Hardy Sheldon: In terms of <unk>.
Stephen Hardy Sheldon: Our capability and expertise.
Speaker Change: So we do.
Speaker Change: We are excited about about adding the CVD consulting and management expertise and reserve.
Speaker Change: Has been at it for years and they are experts at this.
Speaker Change: Got it that's helpful.
Speaker Change: Maybe then.
Speaker Change: Great to get an update on the restoration technology platform that you guys have been developing how is that progressing and if you think about the next few years, what could it mean to.
Scott Patterson: That size of community is right in our strike zone, in terms of our capability and expertise. And so we are excited about adding the CDD consulting and management expertise. Rosetta has been at it for years, and they're experts.
Speaker Change: Restoration operating efficiency.
Speaker Change: So.
Jeremy Alan Rakusin: Steven It's Jeremy.
Jeremy Alan Rakusin: Yes.
Jeremy Alan Rakusin: Touch on it last quarter, we completed a lot of the heavy lifting since what we call phase one the complete rollout of the operating platform in the U S.
Jeremy Alan Rakusin: Got it. You know, it's helpful. Maybe then it would be great to get an update on the restoration technology platform that you guys have been developing. How is that progressing? And as you think about the next few years, what could it mean for restoration operating efficiency?
Jeremy Alan Rakusin: We're always going to have kind of enhancements and other modules that were working on tweaking at least for the next couple of years and then we're also.
Jeremy Alan Rakusin: So, Stephen, it's Jeremy. Yeah, I touched on it last quarter. We've completed a lot of the heavy lifting, essentially what we call phase one, the complete rollout of the operating platform in the US. We're always going to have some kind of enhancements and other modules that we're working on, tweaking at least for the next couple of years. And then we're also in the planning phase of migrating this into the Canadian operation.
Jeremy Alan Rakusin: In the planning phase of migrating this into into the Canadian operations.
Jeremy Alan Rakusin: We're already seeing tangible benefits.
Jeremy Alan Rakusin: Hi.
Jeremy Alan Rakusin: Dealing with better transparency with our clients field reports that we're able to provide to them internal.
Jeremy Alan Rakusin: Clarity and visibility around our job costing so theres a lot of tangible benefits and and again some of the efficiencies again I touched on I think on my last call and I've said it for several quarters. This is going to be a multiyear.
Jeremy Alan Rakusin: Effort.
Jeremy Alan Rakusin: That we will see over time and it won't be a straight line.
Jeremy Alan Rakusin: We're already seeing tangible benefits, such as better transparency with our clients, field reports that we're able to provide to them, internal clarity, and visibility around our job costing. So there are a lot of tangible benefits. And again, some of the efficiencies, again, I touched on, I think, in my last quote and have said it for several quarters, this is going to be a multi-year effort that we will see over time, and it won't be in a straight line.
Jeremy Alan Rakusin: The lack of predictability around weather is one of the factors around that and job mix for different types of events. So all of that it's not going to make it.
Jeremy Alan Rakusin: Clear straight line realization, but we will see it over over a multiyear period.
Jeremy Alan Rakusin: But good efforts well executed and again seeing tangible benefits, both internally and with our clients.
Speaker Change: Great to hear thank you.
Speaker Change: And thank you.
Speaker Change: And one moment our next question.
Speaker Change: Yeah.
Speaker Change: And our next question comes from Hyman Shoe Gupta.
Jeremy Alan Rakusin: The lack of predictability around weather is one of the factors around that, and it makes for different types of events. So all of that is not going to make it. You know, clear straight line realization, but we will see it over a multiyear period but good efforts, well executed, and again seeing tangible benefits both internally and with the clients.
Speaker Change: <unk> from Scotia Bank. Your line is now open.
Speaker Change: Thank you and good morning.
Speaker Change: Thanks for taking my question here.
Speaker Change: So on century fire, it's been they've been strong again double digits organic growth.
So question is what's driving these kind of games.
Operator: And one moment for our next question. And our next question comes from Hyman Hsu. Gupta from Scotiabank, your line is now open.
Scotia Bank: And I mean are you gaining market share are you benefiting from a strong construction cycles.
Scotia Bank: Yes.
Speaker Change: I would say that.
Speaker Change: And really this has been the case for the last year that almost all our 30 plus branches continue to perform and grow year over year I think thats.
Himanshu Gupta: Thank you and good morning. And, you know, thanks for taking my question here.
Scott Patterson: So on Century Fire, it's been very, very strong. Again, double-digit organic growth. The question is, what's driving these kinds of gains? And I mean, are you getting market share? Are you benefiting from a strong construction sector?
Speaker Change: That's the key for us at century debt.
Speaker Change: Really all the engines are firing.
Speaker Change: We focused.
Over the years really since we partnered.
Speaker Change: On adding services and ensuring that all our branches are full service. So we've added sprinkler to alarm historically alarm branches.
Scott Patterson: Yes. You know, I would say that. And really, that has been the case for the last year that almost all our 30-plus branches continue to perform and grow year over year. I think that's great.
Speaker Change: Added alarm capability to historically sprinkler branches.
Speaker Change: It has been a real growth driver as we've layered in additional services to existing customers effectively.
Scott Patterson: That's the key for us at Century, that really all the engines are firing. We have focused, over the years, really since we partnered, on adding services and ensuring that all our branches are full service. So we've added sprinklers to alarm, historically alarm branches, and added alarm capability to historically alarm branches, and it has been a real growth driver as we've layered in additional services to existing customers. Separately, our National Accounts Program has certainly been helping drive growth.
Speaker Change: Separately, our national accounts program.
Speaker Change: As certainly been helping drive growth.
Speaker Change: And frankly, our commercial construction has been has been fairly robust.
Speaker Change: A century.
Speaker Change: As well known.
Speaker Change: And its markets for being a quality provider of their backlog is as.
Speaker Change: Uh huh.
Speaker Change: <unk> solid the last couple of years so.
Speaker Change: A lot of things at play.
Scott Patterson: And, and, frankly, commercial construction has been fairly robust, and Century is well known in its markets for being a quality provider. Their backlog has been solid for the last couple of years. So a lot of things at play, you know, going forward in 24. We expect organic growth to ease back to high single digits and that's really, really only based on the tough comps that they have and the strength that they had, particularly in the last nine months of 2020. I hope that answered your question.
Speaker Change: Going forward in 'twenty four.
Speaker Change: We expect.
Speaker Change: Organic growth to us back to high single digit and that's really.
Speaker Change: Really only out.
Speaker Change: Based on the tough comps that they have and the strength that they had particularly the last nine months.
Speaker Change: Of 2023.
Speaker Change: Hope that answer your question.
Speaker Change: Yes, thank you for that.
Speaker Change: And.
Speaker Change: And then shifting to home improvement business, specifically, California closets.
Speaker Change: How should we think about the growth here I mean, how did that segment perform in Q1, and how should we think about Q2.
Scott Patterson: And then, you know, shifting to the home improvement business, specifically California closets. How should we think about the growth here? I mean, how did that segment perform in Q1, and how should we think about Q2? And I guess, I think you were mentioning higher marketing costs and maybe sluggish demand as well. So maybe something on that. Yeah, CalClosets and really...
Speaker Change: And I guess I think you were mentioning about higher marketing cost, maybe sluggish demand as well so maybe something on that yes, Cal closets and really all our home improvement brands serve pro floor coverings.
About flat year over year up up a couple of points organically flat.
Speaker Change: Now.
Speaker Change: We.
Speaker Change: We continue to face headwinds.
Scott Patterson: Yeah, CalClosets and really all our home improvement brands, Sertipro, Floor Coverings, are both flat year-over-year, up a couple of points, organically flat. You know, we continue to face headwinds. The macro environment is tough. [inaudible] points to a continuation of these headwinds.
Speaker Change: Macro environment is tough.
Speaker Change: Home sales down interest rates elevated global instability, all of this creates uncertainty and tempered consumer confidence and home improvement spending and all of the indicators. We're looking at all of our internal metrics.
Speaker Change: Point to a continuation of these.
Scott Patterson: We have, you know, we made a decision in 23 and in Q1 to invest in marketing, to help drive leads and to cautiously use promotions to help facilitate and close sales with a view to taking market share in this environment. And by holding Sales to last year's level, we've done that. It is a, you know, it's a balance between growth and margin. We've got our hand on the dial, and we're tweaking it, and we'll continue to tweak it.
Speaker Change: At these headwinds we have we made a decision in 'twenty three.
Speaker Change: And in the Q1 to invest in marketing to help drive leads into.
Speaker Change: Cautiously huge promotions too.
Speaker Change: To help facilitate in closed sales with a view to take market share in this environment.
Speaker Change: And by holding.
Speaker Change: Sales to last year.
Speaker Change: Level, we've done that.
Speaker Change: It is a it is a balance between growth and margin we've got R.
Speaker Change: Our hand on the dial and were tweaking it.
Speaker Change: And we will continue to tweak it.
Scott Patterson: I expect that we'll temper some of our investment for the balance of this year, but we do expect that... Our margins will continue to be impacted, and Jeremy, do you want to add to that on the margin side?
Speaker Change: Spec that will will temper.
Speaker Change: Some of our investment.
Speaker Change: The balance of this year, but we do expect that.
Speaker Change: Our margins will continue to be.
Speaker Change: Impacted Jeremy do you want to add to that on the margin side.
Jeremy Alan Rakusin: No, Scott, I think you walked through it well. All to say that the margin compression, at least for the next couple of quarters or reflective of this year, is baked into the outlook I've previously provided.
Jeremy Alan Rakusin: No Scott I think it's.
Jeremy Alan Rakusin: I think you walked through it.
Speaker Change: All to say that.
Jeremy Alan Rakusin: Margin compression at least for the next couple of quarters are reflective in this year are baked into the outlook previously provided.
Himanshu Gupta: Got it. Thank you, guys. Very helpful, and I'll turn it back. And thank you for joining us today. And thank you for joining us today.
Jeremy Alan Rakusin: Okay.
Speaker Change: Got it. Thank you guys very helpful. I'll turn it back thank you.
Speaker Change: And thank you.
Operator: And one moment for our next question, and our next question comes from Daryl Young from Steeple. Your line is now open.
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. Just focusing on the M&A pipeline and specifically, I guess, valuations, just curious if you've seen any sort of change in the dynamics there with the hired for longer rate outlook? And are you seeing any potential targets coming in the line of sight that maybe wouldn't have been available six months or a year ago? Yeah, Daryl, it's...
Daryl Young: Hey, good morning, everyone.
Daryl Young: Just focusing on the M&A pipeline and specifically I guess valuations just curious if you've seen any sort of change in the dynamics there with the higher for longer rate outlook.
Daryl Young: Are you seeing any.
Daryl Young: Any potential targets coming in the line of sight that maybe wouldn't have been available six months or a year ago.
Speaker Change: Yes Darryl.
Scott Patterson: I would say it's even... the opposite of what you might expect, very, very competitive for acquisition across the board right now, and maybe, I would say, even more so than it was six months ago, all our markets are very attractive to PE firms. And in general, I would say they're, they're, they're, they're active right now. Certainly, roofing is consolidating quickly and is very competitive. We'll be participating in that consolidation and differentiating ourselves from private equity, and restoration continues to be, consolidating space, and is also very competitive. So the multiples, if they did dip, it was for a short period of time. Any solid businesses are very attractive.
Darryl: I would say it's even.
Darryl: The opposite of what you might expect.
Darryl: It's very very competitive for acquisitions.
Darryl: Across the board right now and maybe I would say even more so than it was six months ago.
Darryl: All of our markets are.
Darryl: Very attractive to PE firms and in general I would say, they're there. They are active right now certainly roofing is consolidated quickly.
Darryl: And very competitive.
Darryl: Be participating in that consolidation.
Darryl: Fracturing ourselves from private equity.
And restoration continues to be.
Darryl:
Darryl: A consolidating space and also.
Darryl: Very competitive.
Darryl: So the multiples if they did dip it was for a short period of time and.
Darryl: Any any solid businesses there are very attractive.
Daryl Young: Double-digit multiples right now, for sure. Got it. Okay. And then, flipping to the residential side and just sticking with the commercial construction theme and multifamily, I think new construction starts are at multi-decade lows at this point. So just curious, can you refresh on what percentage of your organic growth has been coming from new developments and, you know, the outlook there? Yes.
Darryl: Trackman.
Darryl: Double digit multiples right now for sure.
Got it okay.
Darryl: And then flipping to the residential side and just sticking on the commercial construction team in multifamily.
Darryl: New construction starts are multi decade lows at this point so.
Speaker Change: Im just curious can.
Speaker Change: Can you refresh on what percentage of your organic growth has been coming from new developments.
Speaker Change: The outlook there.
Scott Patterson: You know, we do these developments, obviously, are in. Thank you, type of development you have. It's always been a stable component of our growth, and I would say our..., our backlog of pending development is pretty solid relative to History. [inaudible] suggest I think there's going to be an air pocket here in terms of ground-level planning around new development, which will..., you know, will impact us maybe in 3, 4, 5 years. But it's hard to say.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: We do these developments obviously array.
Speaker Change: Q in terms of permitting and approvals for years and years and years and construction depending on the.
Speaker Change: The type of development you have.
It's always been a stable component.
Speaker Change: Our growth and I would say our.
Speaker Change: Our backlog of.
Speaker Change: Pending developments is.
Speaker Change: It's pretty solid relative.
Two to history.
Speaker Change: And but.
Speaker Change: As you suggest I think theres going to be an air pocket here in terms of.
Speaker Change:
Speaker Change: Ground level planning around new developments.
Speaker Change: Which will.
Speaker Change: It will impact us maybe.
Speaker Change: Sure.
Speaker Change: 345 years out.
Speaker Change: And.
Daryl Young: We don't see it yet, let me say that. Got it. Okay, that's great. That's all from me. Thanks. Thanks very much, guys.
Speaker Change: But it's hard to say, we don't see we don't see it yet.
Speaker Change: Say that.
Speaker Change: Got it okay. That's great. That's all from me. Thanks, Thanks, very much guys.
Speaker Change: And thank you.
Operator: In one moment for our next question, and our next question comes from Tom Callaghan from RBC Capital Markets. Your line is now open.
Speaker Change: And one moment our next question.
Speaker Change: And our next question comes from Thom Callahan from RBC capital markets. Your line is now open.
Tom Callaghan: Thanks, morning, guys. Maybe just following up on Daryl's line of question there, just in terms of the M&A pipeline, Jeremy, I know you mentioned earlier in your remarks there that the outlook for 2024 is basically consistent with what you mentioned in Q4. Does that include or would that encompass kind of the comment around that low-teens revenue growth guidance potentially looking a little more similar to 2023? Should the M&A tuck-in pipeline continue to present themselves and execute on it?
Speaker Change: Yeah.
Tom Callaghan: Hey, good morning, guys.
Tom Callaghan: Maybe just following up on barrels line of question. There just in terms of the M&A pipeline, Jeremy I know you mentioned earlier in your remarks, there that the outlook for 'twenty four is basically consistent with what you mentioned in Q4 does that include.
Speaker Change: Would that encompass kind of a comment around that low teens revenue growth guidance potentially looking at a little more similar to 223 should the M&A tuck in pipeline.
Speaker Change: To present themselves and you execute on it.
Jeremy Alan Rakusin: Correct. Yeah, I said at the end of our year-end call in February that we would have low teens, revenue growth with the roofing corp. acquisition and any acquisitions we had already completed but not any others. (Inaudible)
Speaker Change: Okay.
Correct, Yes, I said at the end of.
Speaker Change: At our year end call in February that we would have low teens.
Speaker Change: Revenue growth with the roofing Corp acquisition, and any acquisitions, we had already completed but not any other.
Speaker Change: And identified or closed non closed transactions in our pipeline that would be additive and could get us back to a similar all in growth level.
Scott Patterson: And then maybe just switching gears on the roofing corp. of America, I know it's still very early days there, but just curious from your perspective, any insights or things that you're seeing in terms of the competitive environment thus far in that line of service?
Speaker Change: We had in 'twenty three versus 22 correct.
Speaker Change: Thanks, and then maybe just switching gears on the roofing Corp of America I know, it's still very early days, there, but just curious.
Speaker Change: From your perspective any insights in.
Speaker Change: Or things that you're seeing in terms of the competitive environment, thus far.
Speaker Change: Line of service.
Scott Patterson: No, nothing new that we didn't see or understand through our due diligence exercise. The You know, as I said a few minutes ago, certainly it's competitive, it's a very fragmented market, and there are... a number of different platforms, private equity-sponsored platforms, that are out looking to add to their platforms who talk about acquisition. And so certainly, it's active on the acquisition front and very competitive. The team that we partnered with is very positive about everything we've seen to date. It is exactly as we had hoped and expected it would be, in terms of the branches and businesses. We have the partners, we have the operating capability, so there is nothing to compare with the day-to-day competitive environment. In terms of your specific questions, it's more around the acquisition. Thanks, Scott. I'll pass it back to you.
Speaker Change: No nothing that.
Speaker Change: Nothing new that we didn't see or understand through our.
Speaker Change: Due diligence access.
Speaker Change: Exercise the.
Speaker Change: As I said, a few minutes ago, certainly it's competitive.
Speaker Change: A fragmented market and there are.
Speaker Change: A number of different platforms private equity sponsored platforms.
Speaker Change: That are out looking to add to their platform through tuck under acquisition.
Speaker Change: And so certainly it's active on the acquisition front and very competitive.
Speaker Change: The team that we partnered with.
Speaker Change: We are.
Speaker Change: Very positive about everything we've seen to date is exactly is.
Speaker Change: As we had hoped and expected it would be.
Speaker Change: In terms of.
Speaker Change: The branches and the businesses, we have the partners we have.
Speaker Change: The operating capability.
Speaker Change:
Speaker Change: So nothing nothing on the day to day competitive environments.
Speaker Change: To your specific question is more around the acquisition activity.
Speaker Change: Thanks, Scott I'll pass back.
Speaker Change: And thank you.
Yes.
Tom Callaghan: And one moment for our next question. And our next question comes from Tim James from TD Securities. Your line is now open.
Speaker Change: Okay.
Speaker Change: And one moment our next question.
And our next question comes from Tim James from TD Securities. Your line is now open.
Tim James: Thanks. Good morning.
Speaker Change: Yes.
Tim James: Thanks, and good morning.
Tim James: My first question, just returning to Century Fire for a minute, and your expectation for growth to slow to what are still actually relatively strong levels, but slower from what you've seen in recent quarters. Can you talk about how much of that, if any, is pricing related? Is there any kind of inflation that's still coming through, and are you able to pass that through? And how much of it is actual volume growth, if there's even a way to kind of characterize it that way?
Tim James: My first question, just returning to century fire true minute.
Tim James: And your expectation for growth to slow to what are still actually relatively strong levels, but slowing from.
Tim James: What you've seen in recent quarters can you talk about how much of that if any is is pricing related is is kind of inflation, that's still keeping coming through and you are able to pass that through and how much of that is actual volume growth. If there's even a way to kind of characterize it that way.
Scott Patterson: Our pricing... at Century, I think, has been stable for the most part. The last..., certainly the last year, there was a run-up, leading into 23, steel pricing was increasing, and certain other impurities, labor, of course, and that helped, that certainly helped drive organic growth in 23, year-over-year change that we're seeing currently is minimal. If that was your question.
Tim James: Our our pricing.
Speaker Change: At century, I think has been.
For the most part it's been stable the last.
Speaker Change: Certainly the last year, there was a run up.
Speaker Change: Leading into 'twenty three steel pricing.
<unk> was increasing in certain other imparts labor of course.
Speaker Change: And.
Speaker Change: That helped that's certainly helped drive organic growth in 'twenty three.
Speaker Change: It's.
Speaker Change: The pricing.
Speaker Change: Year over year change that we're seeing.
Speaker Change: Currently is minimal.
Speaker Change: If that was if that was your question.
Scott Patterson: Yes, that's helpful. So the slowing growth that you're anticipating is really just a function of sort of macro conditions and sort of normalization from what were just incredibly strong results last year and earlier. Yeah, I think that's right.
Speaker Change: Yes, that's good that's helpful. So the slowing growth that youre anticipating is really just a function of sort of macro conditions in sort of a normalization from what we're just incredibly strong results last year and early this year, yes, I think thats right. There was a run up last year.
Scott Patterson: Yeah, I think that's right. There was a run-up last year, and again, as I said earlier, really firing on all fronts, and it will continue to. But their organic growth, not possible to sustain that. And in Q1, it was, you know... North at 10%, take all day long, starting to settle back and normalize.
Speaker Change: <unk>.
Speaker Change: And again as I said earlier.
Speaker Change: Earlier.
Really firing.
On all fronts.
Speaker Change: Continue to.
Speaker Change: Their organic growth.
Speaker Change: Not possible to sustain that.
Speaker Change: In Q1 it was.
Speaker Change: Just north of 10%, which will.
Speaker Change: We'll take all day long, but.
Speaker Change: It's starting to settle back and normalize.
Tim James: Now, you mentioned earlier that pool maintenance was an area in residential that you're not looking to grow. I think you mentioned just some of it due to some of the staffing issues. Are there any sort of verticals or parts of that business that do look particularly attractive for, you know, putting capital to work for whatever reason, whether it's maybe... more appealing staffing opportunities or other factors that make sort of better opportunities for growth in that business? Yeah, no, I
Speaker Change: Okay.
Speaker Change: You mentioned earlier the pool maintenance.
Speaker Change: That was an area in residential that youre not looking to grow I think you mentioned just some due to some staffing issues are there any sort of verticals or parts of that business that do look.
Speaker Change: Particularly attractive for putting capital to work for whatever reason, whether it's maybe.
Speaker Change: More more appealing staffing opportunities or other factors that make sort of better opportunities for growth in that business.
Scott Patterson: Yeah, no, I appreciate that question because these large lifestyle communities that we manage and the marquee high-rise buildings where we have a particular expertise, they increasingly have, you know, expensive and complex amenities, and that's certainly a focus area for us, and event planning around communities, and concierge, certainly spas and fitness areas, we're very focused on. It's the commercial pool side that we're just tempering, I would say. There are a number of states that require lifeguards. And so we've been, again, we've been in that business for years. But it's becoming increasingly difficult to staff those pools, and so we're pivoting towards these other areas, I would say.
Speaker Change: Yes, no I appreciate that question because.
Speaker Change: No.
Speaker Change: These large lifestyle communities that we manage in the marquee high rise buildings, where we have a particular expertise.
Speaker Change: Increasingly have.
Speaker Change: Expensive.
Speaker Change: Complex amenities and that's certainly a focus area for us and event planning.
Speaker Change: Around communities.
Speaker Change: And <unk>.
Speaker Change: Certainly spas.
Fitness areas, we're very focused on.
Speaker Change: It's the it's the come in the commercial pool side that we're just.
Speaker Change: Temporary I would say in.
Speaker Change: There are number of.
Speaker Change: States that require.
Speaker Change: Lifeguards.
Speaker Change: And so we've been again, we've been in that business for years.
Speaker Change: But.
Speaker Change: It's becoming increasingly difficult to staff those pools.
Speaker Change: So we're.
Speaker Change: <unk> towards these other areas I would say focusing more.
Tim James: Thank you. And just my final question, just a clarification, I just want to make sure I understand the kind of the go forward cadence, the increased promotional activity that you've called out in home services. And correct me if I'm wrong, it sounds like that mostly applies to California Closet. You mentioned that that could be tempered as we go through the balance of this year. At what point does it sort of reach a steady cadence or just a steady steady growth rate or not become a headwind on a year-over-year basis? Is it possible to sort of suggest that sense in the second half? Yeah, you know what? I sort of use the visual hand on the dial, and there is a hand on the dial around different markets.
Speaker Change: Okay. Thank you and then just my final question, just a clarification I want to make sure I'm understanding the kind of the go forward cadence the increased promotional activity that you've called out in home services and correct me if I'm wrong. It sounds like that mostly applies to Cal at California Closets.
Speaker Change: You mentioned that that could be.
Speaker Change: Tempered as we go through the balance of this year.
Speaker Change: At what point does it sort of reached a steady cadence or just a steady steady growth rate or not become a headwind on a year over year basis is it possible to sort of suggest that said.
Speaker Change: It has.
Speaker Change: Yes.
Speaker Change: So now you are saying.
Speaker Change: I just wanted to use the use the visual hand on the dial.
Speaker Change: It is a hand on the dial around.
Different markets.
Scott Patterson: Strategically driving share, and making that decision, and that, you know, that operating team is very, I would say, strong in this area, just in terms of what is in the best interest of the brand long-term and making that decision. So there's no... There's nothing. No decisions have been made, I would say, as to the level of. Spender Promotion. No dates are in the calendar around when to dial it up or down, and Evolutioner makes day-to-day decision-making.
Speaker Change: <unk> driving share.
Speaker Change: In making that decision and that operating team.
Speaker Change: It's very I would say strong in this area just in terms of what is in the best interest.
Speaker Change: Of the brand long term and making that decision so theres no.
Speaker Change: Nothing.
Speaker Change: No decisions have been made I would say.
Speaker Change: As to as to the level of.
Speaker Change: Spender promotion.
No dates are in the calendar around when to dial it up or down.
Speaker Change: <unk>.
Speaker Change: It's an evolution of our.
Speaker Change: Day to day decision, making I would say.
Tim James: Okay, that's very helpful. Thank you.
Speaker Change: Okay. That's very helpful. Thank you.
Operator: And thank you, and I am showing no further questions. I would now like to turn the call back over to Scott Patterson for closing remarks.
Speaker Change: And thank you and I am 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 us today. We look forward to talking again at the end of July. Thank you. Have a great day.
Scott Patterson: Thank you Justin and thank you all for joining US today, we look forward to.
Talking again at the end of July.
Operator: Ladies and gentlemen, this concludes the first quarter investors conference call. Thank you for your participation, and have a nice day.
Speaker Change: Thank you have a great day.
Speaker Change: Ladies and gentlemen, this concludes the first quarter investors conference call. Thank you for your participation and have a nice day.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.