Q1 2026 FirstService Corp Earnings Call

April 23, 2026

Speaker #1: Bixby presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star 11 on your telephone, you will then hear an automated message advising you hand is raised.

Speaker #1: Today's call is being recorded. Legal counsel requests 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: Good day, and welcome to the First Quarter Investors Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. 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, performance, or achievements contemplated in the forward-looking statements.

Speaker #1: Good day and welcome to the first quarter . Investors conference call At this time , all participants are on a listen only mode After the speakers presentation , there will be a question and answer session .

Speaker #1: Actual results may be materially different from any future results. Performance, or achievements complicated 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 40F as filed with the U.S.

Speaker #1: To ask a question during the session , you will need to press star one one on your telephone . You will then hear an automated message advising your hand is raised Today's call is being recorded .

Speaker #1: 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 Legal results .

Speaker #1: Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is April 23rd, 2026. I would now like to turn the call over to Chief Executive Officer Mr. Scott Patterson.

Speaker #1: Performance or achievements . Complicated . 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 F , as filed with the US Securities and Exchange Commission As a reminder , today's call is being recorded .

Operator: 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-F as filed with the U.S. Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is 23 April 2026. I would now like to turn the call over to Chief Executive Officer, Mr. Scott Patterson. Please go ahead, sir.

Speaker #1: Please go ahead, sir.

Speaker #2: Thank you, Olivia. Good morning, everyone. Thank you for joining our Q1 conference call. We reported solid results this morning that would generally in line with the expectation.

Speaker #2: I'll provide a high-level review, touch on some highlights, and then pass to Jeremy Rakusin for a more in-depth discussion of the results. Total revenues were up 5% over the prior year, with the organic growth accounting for over half of the increase.

Speaker #1: Today is April 23rd , 2026 . I would now like to the call over to Chief Executive Officer , Mr. Scott Patterson . Please go ahead , sir .

Scott Patterson: Thank you, Olivia. Good morning, everyone. Thanks for joining our Q1 conference call. We reported solid results this morning that were generally in line with the expectation. I'll provide a high-level review, touch on some highlights, and then pass to Jeremy Rakusin for a more in-depth discussion of the results. Total revenues were up 5% over the prior year, with organic growth accounting for over half of the increase. EBITDA for the quarter was up 2%, reflecting a modest and expected decline in our consolidated margin. Jeremy will walk through the detail in a few minutes. Finally, our earnings per share for the quarter were $0.95, up 3% over the prior year. Looking at our divisional results, FirstService Residential revenues were up 4% in the seasonally weak Q1. All of the growth was organic.

Speaker #2: Thank you . Livia Good morning everyone Thank you for joining our Q1 conference call . We reported solid results this morning that were generally in line with expectations .

Speaker #2: EBITDA for the quarter was up 2%, reflecting a modest and expected decline in our consolidated margin. Jeremy will walk through the detail in a few minutes.

Speaker #2: I'll provide a high , high level review touch on some highlights . And then pass to Jeremy Rakusan for a more in-depth discussion of the results Total revenues were up 5% over the prior year , with the growth accounting for over half of the increase EBITDA for the quarter was up 2% , reflecting a modest and expected decline in our consolidated margin Jeremy will walk through the detail in a few minutes .

Speaker #2: And finally, our earnings per share for the quarter were 95 cents, up 3% over the prior year. Looking at our divisional results, FirstService Residential revenues were up 4% in the seasonally weak first quarter, all of the growth was organic.

Scott Patterson: Total revenues were up 5% over the prior year, with organic growth accounting for over half of the increase. EBITDA for the quarter was up 2%, reflecting a modest and expected decline in our consolidated margin. Jeremy will walk through the detail in a few minutes. Finally, our earnings per share for the quarter were $0.95, up 3% over the prior year. Looking at our divisional results, FirstService Residential revenues were up 4% in the seasonally weak Q1. All of the growth was organic.

Speaker #2: We had a solid quarter of contract wins and renewals in our core management business at the upper end of expectation, and as we discussed in our year-end call, divisional growth was tempered by modest declines in ancillary services including pool construction and renovation, and contracted labor for commercial maintenance.

Speaker #2: And finally , our earnings per share for the quarter were $0.95 , up 3% over the prior year Looking at our divisional results , FirstService residential revenues were up 4% in the seasonally weak first quarter .

Speaker #2: Looking forward at FirstService Residential, we expect similar or slightly better organic growth in Q2 and some sequential improvement for Q3 and Moving on to FirstService Brands, revenues for the quarter were up 6%, balanced between organic growth and tuck-under-acquisition.

Scott Patterson: We had a solid quarter of contract wins and renewals in our core management business at the upper end of expectation. As we discussed in our year-end call, divisional growth was tempered by modest declines in ancillary services, including pool construction, renovation, and contracted labor for commercial maintenance. Looking forward at FirstService Residential, we expect similar or slightly better organic growth in Q2 and some sequential improvement for Q3 and Q4. Moving on to FirstService Brands, revenues for the quarter were up 6%, balanced between organic growth and tuck-under acquisition. Organic growth was again this quarter driven by increases at Century Fire. Organic revenues within restoration, roofing, and home services were all approximately flat with the prior year. Looking more closely at our segments, our restoration brands, First Onsite and Paul Davis together, were up mid-single digit over the prior year, and as I said, flat organically.

Speaker #2: All of the growth was organic . We had a solid quarter of contract wins and renewals in our core management business . At the upper end of expectations And as we discussed in our year end call , divisional growth was tempered by a modest declines in ancillary services and including pool construction and renovation , and contracted labor for commercial maintenance Looking forward , at FirstService residential , we expect similar or slightly better organic growth in Q2 and some sequential improvement for Q3 and Q4 .

Speaker #2: Organic growth was again this quarter driven by increases at Century Fire. Organic revenues within restoration, roofing, and home services were all approximately flat with the prior year.

Speaker #2: Looking more closely at our segments, our restoration brands, first on-site and Paul Davis together, were up mid-single digit over the prior year, and as I said, flat organically.

Scott Patterson: Moving on to FirstService Brands, revenues for the quarter were up 6%, balanced between organic growth and tuck-under acquisition. Organic growth was again this quarter driven by increases at Century Fire. Organic revenues within restoration, roofing, and home services were all approximately flat with the prior year. Looking more closely at our segments, our restoration brands, First Onsite and Paul Davis together, were up mid-single digit over the prior year, and as I said, flat organically.

Speaker #2: Moving on to FirstService brands revenues for the quarter were up 6% , balanced between organic growth and tuck under acquisition Organic growth was again this quarter , driven by increases at Century Fire organic revenues within restoration , roofing and home services were all approximately flat , with the prior year Looking more closely at our segments , our restoration brands first on site , and Paul Davis together were up mid-single digit over the prior year .

Speaker #2: We're pleased with the performance in Q1 after entering the quarter with a soft pipeline relative to prior year due to the mild weather we experienced in Q4.

Speaker #2: We saw increased activity from winter storm work that benefited both our brands. The work was primarily quick-turn water mitigation, and very little carried into Q2.

Speaker #2: As a result, our overall restoration backlogs at quarter-end are at similar levels to year-end, and down modestly from the prior year. Based on current activity levels, and the quarter-end backlog, we expect Q2 revenues to be flat to slightly down from prior year levels.

Speaker #2: And as I said , flat organically We're pleased with the performance in Q1 . After entering the quarter with a soft pipeline relative to prior year due to the mild weather , we experienced in Q4 .

Scott Patterson: We're pleased with the performance in Q1 after entering the quarter with a soft pipeline relative to prior year due to the mild weather we experienced in Q4. We saw increased activity from winter storm work that benefited both our brands. The work was primarily quick-turn water mitigation, and very little carried into Q2. As a result, our overall restoration backlogs at quarter end are at similar levels to year end and down modestly from the prior year. Based on current activity levels and the quarter end backlog, we expect Q2 revenues to be flat to slightly down from prior year levels. Moving now to our roofing segment. Q1 revenues were up 7% over the prior year, driven by tuck-under acquisitions, primarily Lakeland, Florida-based Springer-Peterson during Q3 last year. Organically, revenues were flat with the prior year and in line with our expectation.

Speaker #2: We saw increased activity from winter storm work that benefited both our brands The work was primarily quick turn water mitigation and very little carried into Q2 .

Speaker #2: Moving now to our roofing segment, Q1 revenues were up 7% over the prior year, driven by tuck-under-acquisitions, primarily Lakeland Florida-based Springer Peterson during Q3 last year.

Scott Patterson: As a result, our overall restoration backlogs at quarter end are at similar levels to year end and down modestly from the prior year. Based on current activity levels and the quarter end backlog, we expect Q2 revenues to be flat to slightly down from prior year levels. Moving now to our roofing segment. Q1 revenues were up 7% over the prior year, driven by tuck-under acquisitions, primarily Lakeland, Florida-based Springer-Peterson during Q3 last year. Organically, revenues were flat with the prior year and in line with our expectation.

Speaker #2: As a result , our overall restoration backlogs at quarter end are at similar levels to year end and down modestly from the prior year Based on current activity levels and the quarter end backlog , we expect Q2 revenues to be flat to slightly down from prior year levels Moving now to our roofing segment , Q1 revenues were up 7% over the prior year , driven by tuck under acquisitions , primarily .

Speaker #2: Organically revenues were flat with the prior year, and in line with our expectation. We expect a similar result in Q2, with single-digit top-line growth from acquisitions and approximately flat revenue organically relative to year ago.

Speaker #2: Outside of data center work, the new construction market remains depressed, and the commercial re-roof market is flat to slightly up while becoming increasingly competitive.

Speaker #2: Lakeland , Florida based Springer Peterson during Q3 last year . Organically , revenues were flat with the prior year and in line with our expectation .

Speaker #2: We have a strong team in our roofing platform and solid underlying branch operations. We firmly believe we're in a position to accelerate when the market improves.

Scott Patterson: We expect a similar result in Q2 with single-digit top-line growth from acquisitions and approximately flat revenue organically relative to year ago. Outside of data center work, the new construction market remains depressed, and the commercial reroof market is flat to slightly up while becoming increasingly competitive. We have a strong team in our roofing platform and solid underlying branch operations. We firmly believe we're in a position to accelerate when the market improves. Moving to Century Fire Protection, we had a strong quarter with total revenues up over 10% and organic growth at a high single-digit level. The Century Fire Protection results continue to be balanced between strong growth in repair, service, and inspection revenues, supported by solid growth in installation and contract revenues. The backlog is robust, and we expect a similar result in Q2 and for the balance of the year.

Speaker #2: We expect a similar result in Q2 with single digit top line growth from acquisitions and approximately flat revenue organically to year ago Outside of data center work , the new construction market remains depressed and the commercial reroof market is flat to slightly up while becoming increasingly competitive .

Speaker #2: Moving to Century Fire, we had a strong quarter, with total revenues up over 10%, and organic growth at a high single-digit level. The Century results continue to be balanced between strong growth and repair service and inspection revenues, supported by solid growth in installation and contract revenues.

Scott Patterson: We have a strong team in our roofing platform and solid underlying branch operations. We firmly believe we're in a position to accelerate when the market improves. Moving to Century Fire Protection, we had a strong quarter with total revenues up over 10% and organic growth at a high single-digit level. The Century Fire Protection results continue to be balanced between strong growth in repair, service, and inspection revenues, supported by solid growth in installation and contract revenues. The backlog is robust, and we expect a similar result in Q2 and for the balance of the year.

Speaker #2: We have a strong team in our roofing platform and solid underlying branch operations. We firmly believe we're in a position to accelerate when the market improves. Moving to Century Fire, we had a strong quarter, with total revenues up over 10% and organic growth at a high single-digit level.

Speaker #2: The backlog is robust, and we expect a similar result in Q2 and for the balance of the year. Now on to our home services brands, which as a group generated revenues that were up slightly from year-ago levels, modestly lower than our expectation.

Speaker #2: The century results continue to be balanced between strong growth and repair , service and inspection revenues , supported by solid growth in installation and contract revenues .

Speaker #2: We started the quarter with an uptick in lead flow and some optimism. However, this dissipated moving into February and reversed with the onset of the Middle East conflict.

Speaker #2: The backlog is robust and we expect a similar result in Q2 . And for the balance of the year Now on to our home services brands , which as a group generated revenues that were up slightly from year ago levels modestly lower than our expectation We started the quarter with an uptick in lead flow and some optimism .

Speaker #2: Leads in activity levels dropped immediately. Our teams made a decision to increase promotional spending and marketing spend to maintain momentum and capacity utilization as we ride out the storm.

Scott Patterson: Now on to our home services brands, which as a group, generated revenues that were up slightly from year-ago levels, modestly lower than our expectation. We started the quarter with an uptick in lead flow and some optimism. However, this dissipated moving into February and reversed with the onset of the Middle East conflict. Leads and activity levels dropped immediately. Our teams made a decision to increase promotional spending and marketing spend to maintain momentum and capacity utilization as we ride out the storm. We were successful in holding our revenue, driving higher conversion rates and larger job size, and certainly taking share in a tough market. It did impact our margin for the quarter, and Jeremy will speak to this in his comments. Our lead flow for Q1 was down double-digit with a steeper decline in March.

Speaker #2: We were successful in holding our revenue driving higher conversion rates and larger job size, and certainly taking share in a tough market. It did impact our margin for the quarter, and Jeremy will speak to this in his comments.

Speaker #2: However , this dissipated , moving into February and reversed with the onset of the Middle East conflict Leads and activity levels dropped immediately .

Scott Patterson: Leads and activity levels dropped immediately. Our teams made a decision to increase promotional spending and marketing spend to maintain momentum and capacity utilization as we ride out the storm. We were successful in holding our revenue, driving higher conversion rates and larger job size, and certainly taking share in a tough market. It did impact our margin for the quarter, and Jeremy will speak to this in his comments. Our lead flow for Q1 was down double-digit with a steeper decline in March.

Speaker #2: Our lead flow for Q1 was down double-digit, with a steeper decline in March. It remains a depressed levels and is moving in line with consumer sentiment, which is 10% lower than year ago.

Speaker #2: Our teams made a decision to increase promotional spending and marketing spend to maintain momentum and capacity utilization, as we ride out the storm.

Speaker #2: We were successful in holding our revenue, driving higher conversion rates and larger, larger job size, and certainly taking share in a tough market.

Speaker #2: It's expected that increased gas prices and inflation in general will dampen home improvement demand in Q2. Beyond what we foresaw at the beginning of the year, based on our sales and backlogs currently, we expect to get close to prior year revenues in Q2.

Speaker #2: It did impact our margin for the quarter . And Jeremy will speak to this in his comments . Our lead flow for Q1 was down double digit with a steeper decline in March It remains at depressed levels and is moving in line with consumer sentiment , which is 10% lower than year ago It's expected that increased gas prices and inflation in general will dampen home improvement demand in Q2 .

Scott Patterson: It remains at depressed levels and is moving in line with consumer sentiment, which is 10% lower than year ago. It's expected that increased gas prices and inflation, in general, will dampen home improvement demand in Q2 beyond what we foresaw at the beginning of the year. Based on our sales and backlogs currently, we expect to get close to prior year revenues in Q2. This outlook is impressive in the current environment and again reflects on the tenacity and commitment of our teams. We do remain optimistic that there is pent-up demand in the market and believe we could see a pop in activity with stability in the Middle East and reduced concerns around inflation. On the acquisition front, we acquired two of our larger franchises during the quarter.

Speaker #2: This outlook is impressive in the current environment, and again reflects on the tenacity and commitment of our teams. We do remain optimistic that there is pent-up demand in the market and believe we could see a pop in activity with stability in the Middle East and reduced concerns around inflation.

Speaker #2: Beyond what we foresaw at the beginning of the year . Based on our sales and backlogs currently , we expect to get close to prior year revenues in Q2 .

Speaker #2: On the acquisition front, we acquired two of our larger franchises during the quarter. Our Paul Davis franchise covering the Cleveland and Akron markets, and our California Closets operation that owns the franchise territories encompassing Indianapolis, Louisville, Lexington, and Cincinnati.

Scott Patterson: This outlook is impressive in the current environment and again reflects on the tenacity and commitment of our teams. We do remain optimistic that there is pent-up demand in the market and believe we could see a pop in activity with stability in the Middle East and reduced concerns around inflation. On the acquisition front, we acquired two of our larger franchises during the quarter.

Speaker #2: This outlook is impressive in the current environment and again reflects on the tenacity and commitment of our teams We do remain optimistic that there is pent up demand in the market , and believe we could see a pop in activity with stability in the Middle East and reduced concerns around inflation .

Speaker #2: As a reminder, we've had company-owned operations at Paul Davis and California Closets for many years now. We selectively acquire drive incremental growth in the market in partnership with local operators.

Speaker #2: On the acquisition front , we acquired two of our larger franchises during the quarter . Our Paul Davis franchise covering the Cleveland and Akron markets and our California closets operation that owns the franchise territories , encompassing Indianapolis , Louisville , Lexington and Cincinnati .

Scott Patterson: Our Paul Davis Restoration franchise covering the Cleveland and Akron markets, and our California Closets operation that owns the franchise territories encompassing Indianapolis, Louisville, Lexington, and Cincinnati. As a reminder, we've had company-owned operations at Paul Davis Restoration and California Closets for many years now. We selectively acquire franchises if we believe we can drive incremental growth in the market in partnership with local operators, always in the best long-term interest of the brands. We have other tuck-unders in the pipeline across our segments and expect to complete further deals over the balance of the year. I will now pass over to Jeremy for his comments.

Speaker #2: Always in the best long-term interests of the brands. We have other tuck-unders in the pipeline across our segments, and expect to complete further deals over the balance of the year.

Speaker #2: I will now pass over to Jeremy for his comments.

Speaker #2: As a reminder , we've had company owned operations at Paul Davis and California Closets for many years now . We selectively acquire franchises if we believe we can drive incremental growth in the market in partnership with local operators , always in the best long term interests of the brands we have .

Speaker #1: Thank you, Scott. Good morning, everyone. We reported consolidated first-quarter results in line with the outlook we provided on our prior year-end call. And in particular, the top-line performance in each of our brands matched our expectations as you just heard from Scott's walkthrough of each business line.

Scott Patterson: We selectively acquire franchises if we believe we can drive incremental growth in the market in partnership with local operators, always in the best long-term interest of the brands. We have other tuck-unders in the pipeline across our segments and expect to complete further deals over the balance of the year. I will now pass over to Jeremy for his comments.

Speaker #2: Other tuck unders in the pipeline across our segments and expect to complete further deals over the balance of the year . I will now pass over to Jeremy for his comments .

Speaker #1: Highlights of the consolidated quarterly results included revenues of $1.32 billion, reflecting 5% growth over the $1.25 billion last year. Adjusted EBITDA of $106 million up 2% year over year, with an 8% margin down 30 basis points versus the 8.3% margin in Q1 '25, and adjusted EPS at $95, a 3% increase over the prior year.

Jeremy Rakusin: Thank you, Scott. Good morning, everyone. We reported consolidated first quarter results in line with the outlook we provided on our prior year-end call. In particular, the top-line performance in each of our brands matched our expectations, as you just heard from Scott's walkthrough of each business line. Highlights of the consolidated quarterly results included revenues of $1.32 billion, reflecting 5% growth over the $1.25 billion last year, adjusted EBITDA of $106 million, up 2% year over year, with an 8% margin down 30 basis points versus the 8.3% margin in Q1 2025, and adjusted EPS at $0.95, a 3% increase over the prior year. 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. Turning now to the segmented results for our two divisions. I'll lead off with FirstService Residential.

Speaker #2: Thank you Scott .

Speaker #3: Good morning everyone . We reported consolidated first quarter results in line with the outlook we provided on our prior year end call . And in particular , the top line performance in each of our brands matched our expectations .

Speaker #3: As you just heard from Scott's walkthrough of each business line , highlights of the consolidated quarterly results , included revenues of $1.32 billion , reflecting 5% growth over the $1.25 billion last year Adjusted EBITDA of $106 million , up 2% year over year .

Speaker #1: Our adjustments to operating earnings and gap EPS in arriving at adjusted EBITDA and adjusted EPS, respectively, are consistent with our approach in prior periods.

Speaker #1: Turning now to the segmented results for our two divisions, I'll lead off with firstService Residential. The division generated revenues of $546 million up 4% over last year's first quarter, while EBITDA was $46 million a 10% growth rate over the prior year.

Speaker #3: With an 8% margin down 30 basis points versus the 8.3% margin in Q1 25 . And adjusted EPS at $0.95 , a 3% increase over the prior year 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 #1: This resulted in an EBITDA margin of 8.4%, a 50 basis points increase over the 7.9% level in Q1 '25. The margin expansion was driven by broad-based labor cost efficiencies across our operation.

Speaker #3: Turning now to the segmented results for our two divisions , I'll lead off with FirstService residential . The division generated revenues of $546 million , up 4% over last year's first quarter , while EBITDA was $46 million , a 10% growth rate over the prior year .

Jeremy Rakusin: The division generated revenues of $546 million, up 4% over last year's first quarter, while EBITDA was $46 million, a 10% growth rate over the prior year. This resulted in an EBITDA margin of 8.4%, a 50 basis points increase over the 7.9% level in Q1 2025. The margin expansion was driven by broad-based labor cost efficiencies across our operation. This encompassed both a continuation from last year of the initiatives around our client accounting and portfolio management functions, as well as other productivity gains across our teams. Now to FirstService Brands, where we reported revenues of $771 million for the current quarter, up 6% over last year's Q1. Our EBITDA for the division was $64 million, a 5.5% decline versus the prior year quarter. The resulting margin was 8.3%, down 100 basis points compared to last year's 9.3% level, and primarily driven by our roofing and home services businesses.

Speaker #1: This encompassed both a continuation from last year of the initiatives around our client accounting and portfolio management functions, as well as other productivity gains across our teams.

Speaker #3: This resulted in an EBITDA margin of 8.4% , a 50 basis points increase over the 7.9% level in Q1 25 . The margin expansion was driven by broad based labor cost efficiencies across our operations .

Speaker #1: Now to firstService Brands, where we reported revenues of $771 million for the current quarter, up 6% over last year's Q1. Our EBITDA for the division was $64 million a 5.5% decline, versus the prior year quarter.

Jeremy Rakusin: This encompassed both a continuation from last year of the initiatives around our client accounting and portfolio management functions, as well as other productivity gains across our teams. Now to FirstService Brands, where we reported revenues of $771 million for the current quarter, up 6% over last year's Q1. Our EBITDA for the division was $64 million, a 5.5% decline versus the prior year quarter. The resulting margin was 8.3%, down 100 basis points compared to last year's 9.3% level, and primarily driven by our roofing and home services businesses.

Speaker #3: This encompassed both a continuation from last year of the initiatives around our client accounting and portfolio management functions , as well as other productivity gains across our teams Now to FirstService brands , where we reported revenues of $771 million for the current quarter , up 6% over last year's Q1 .

Speaker #1: The resulting margin was 8.3%, down 100 basis points compared to last year's 9.3% level, and primarily driven by our roofing and home services businesses.

Speaker #1: The performance at our roofing platform was expected. As we indicated on our February year-end call, the forecast decline was due to job margin pressures in a heightened competitive environment against the backdrop of dormant commercial new development activity.

Speaker #3: Our EBITDA for the division was $64 million, a five and a half percent decline versus the prior year quarter. The resulting margin was 8.3%, down 100 basis points compared to last year's 9.3% level.

Speaker #1: At our home services businesses, we saw the need during the quarter to increase our marketing spend to preserve our top-line performance in the face of macroeconomic uncertainty and the weakening consumer sentiment that Scott referenced.

Speaker #3: And primarily driven by our roofing and home services businesses . The performance at our roofing platform was expected , as we indicated on our February year end call , the forecast decline was due to job margin pressures in a heightened competitive environment .

Jeremy Rakusin: The performance at our roofing platform was expected. As we indicated on our February year-end call, the forecast decline was due to job margin pressures in a heightened competitive environment against the backdrop of dormant commercial new development activity. At our home services businesses, we saw the need during the quarter to increase our marketing spend to preserve our top-line performance in the face of macroeconomic uncertainty and the weakening consumer sentiment that Scott referenced. Remodeling spending in our home improvement brands is influenced by interest rate levels and consumer sentiment in home affordability indices, all of which have been undermined by recent geopolitical developments. Periodically in the past, when we have encountered these types of exogenous challenges impacting our key performance indicators, we have tactically deployed promotional initiatives to support the brand and our market share.

Speaker #1: Remodeling spending in our home improvement brands is influenced by interest rate levels, and consumer sentiment in home affordability indices. All of which have been undermined by recent geopolitical developments.

Speaker #3: Against the backdrop of dormant commercial new development activity at our home services businesses , we saw the need during the quarter to increase our marketing spend to preserve our top line performance in the face of macroeconomic uncertainty and the weakening consumer sentiment that Scott referenced .

Speaker #1: Periodically in the past, when we have encountered these types of exogenous challenges impacting our key performance indicators, we have tactically deployed promotional initiatives to support the brand and our market share.

Jeremy Rakusin: Remodeling spending in our home improvement brands is influenced by interest rate levels and consumer sentiment in home affordability indices, all of which have been undermined by recent geopolitical developments. Periodically in the past, when we have encountered these types of exogenous challenges impacting our key performance indicators, we have tactically deployed promotional initiatives to support the brand and our market share.

Speaker #3: Remodeling spending in our home improvement brands is influenced by interest rate levels and consumer sentiment , and home affordability indices , all of which have been undermined by recent geopolitical developments .

Speaker #1: We expect to continue with these investments at least over the short-term, covering the second quarter, but we'll be keeping a close pulse on our leading indicators to pull back this spending once the environment improves.

Speaker #1: A second factor contributing to the first-quarter margin compression at our home services brands was reduced capacity utilization of our frontline teams. While we delivered revenues in line with prior year, job volumes declined, and we were reluctant to flex our labor costs down in proportion to these reduced activity levels until conditions stabilized and we have greater clarity of market demand trends.

Speaker #3: Periodically in the past . When we have encountered these types of exogenous challenges impacting our key performance indicators , we have tactically deployed promotional initiatives to support the brand and our market share .

Jeremy Rakusin: We expect to continue with these investments at least over the short term, covering Q2, but we'll be keeping a close pulse on our leading indicators to pull back the spending once the environment improves. A second factor contributing to Q1 margin compression at our home services brands was reduced capacity utilization of our frontline teams. While we delivered revenues in line with prior year, job volumes declined, and we were reluctant to flex our labor costs down in proportion to these reduced activity levels until conditions stabilize and we have greater clarity of market demand trends. With respect to our consolidated operating cash flow, we generated $88 million during Q1, a sizable level during our seasonal trough Q1, and up more than double compared to Q1 2025.

Speaker #3: We expect to continue with these investments , at least over the short term , covering the second quarter , but we'll be keeping a close pulse on our leading indicators to pull back this spending .

Speaker #3: Once the environment improves . A second factor contributing to the first quarter margin compression at our home services brands was reduced capacity utilization of our front teams while we delivered revenues in line with prior year job volumes declined and we were reluctant to flex our labor costs down in proportion to these reduced activity levels until conditions stabilize and we have greater clarity of market demand , trends With respect to our consolidated operating cash flow , we generated $88 million during the first quarter .

Speaker #1: With respect to our consolidated operating cash flow, we generated $88 million during the first quarter, a sizable level during our seasonal truff first quarter and up more than double compared to Q1 2025.

Jeremy Rakusin: While we delivered revenues in line with prior year, job volumes declined, and we were reluctant to flex our labor costs down in proportion to these reduced activity levels until conditions stabilize and we have greater clarity of market demand trends. With respect to our consolidated operating cash flow, we generated $88 million during Q1, a sizable level during our seasonal trough Q1, and up more than double compared to Q1 2025.

Speaker #1: Capital expenditures during the quarter were $28 million slightly below prior year, and we now expect to have our full-year CapEx coming modestly lower than the initial guidance of $140 million.

Speaker #1: The resulting high free cash flow conversion rate is a function of our business model and focus around generating cash, even when we have periods of more tempered growth on the P&L.

Speaker #3: A sizable level during our seasonal trough . First quarter and up more than double compared to Q1 2025 . Capital expenditures during the quarter were $28 million , slightly below prior year , and we now expect to have our full year CapEx , coming modestly lower than the initial guidance of $140 million .

Jeremy Rakusin: Capital expenditures during the quarter were $28 million, slightly below prior year, and we now expect to have our full-year CapEx coming modestly lower than the initial guidance of $140 million. The resulting high free cash flow conversion rate is a function of our business model and focus around generating cash even when we have periods of more tempered growth on the P&L. This translated into further deleveraging on our balance sheet, where our leverage is measured by net debt to EBITDA ticked down to a very conservative 1.5 times, compared to 1.6 times at prior year-end, and versus the two times level at Q1 last year. We have a well-balanced mix of floating and fixed rate and varying maturities of debt instruments.

Speaker #1: This translated into further deleveraging on our balance sheet, where our leverage is measured by net debt to EBITDA tick down to a very conservative 1.5 times compared to 1.6 times at prior year-end and versus the 2 times level at Q1 last year.

Speaker #3: The resulting high free cash flow conversion rate is a function of our business model and focus around generating cash , even when we have periods of more tempered growth on the PNL This translated into further deleveraging on our balance sheet , where our leverage is measured by net debt to EBITDA ticked down to a very conservative 1.5 times , compared to 1.6 times at prior year end .

Speaker #1: We have a well-balanced mix of floating and fixed rates and varying maturities of debt instruments. And lastly, our liquidity-reflecting cash and undrawn credit facility balances exceed $1 billion—the highest level in the history of the company—which puts us in a strong financial position to deploy capital as opportunities in our acquisition pipeline arise.

Speaker #3: And versus the two times level at Q1 last year. We have a well-balanced mix of floating and fixed rate, and varying maturities of debt instruments.

Speaker #1: Looking forward, in the upcoming second quarter, we are forecasting similar year-over-year trends as we just saw in Q1 across both divisions. We see a continuation of similar EBITDA margin expansion and growth in the firstService Residential division.

Jeremy Rakusin: Lastly, our liquidity reflecting cash and undrawn credit facility balances exceeds $1 billion, the highest level in the history of the company, which puts us in a strong financial position to deploy capital as opportunities in our acquisition pipeline arise. Looking forward, in the upcoming Q2, we are forecasting similar year-over-year trends as we just saw in Q1 across both divisions. We see a continuation of similar EBITDA margin expansion and growth in the FirstService Residential division. This will be largely offset by Brands division declines, reflecting the ongoing margin pressures in roofing and home services I referenced earlier, and which are dictated by the current uncertain geopolitical and macroeconomic environment. This all aggregates on a consolidated basis for Q2 to mid-single digit top-line growth and EBITDA performance flat to slightly up compared with the prior year. That concludes our prepared comments.

Speaker #3: And lastly , our liquidity reflecting cash and undrawn credit facility balances , exceeds $1 billion , the highest level in the history of the company , which puts us in a strong financial position to deploy capital as opportunities in our acquisition pipeline arise .

Speaker #1: This will be largely offset by brands division declines reflecting the ongoing margin pressures in roofing and home services I referenced earlier, and which are dictated by the current uncertain geopolitical and macroeconomic environment.

Speaker #3: Looking forward in the upcoming second quarter , we are forecasting similar year over year trends as we just saw in Q1 across both divisions , we see a continuation of similar EBITDA margin expansion and growth in the FirstService residential division .

Speaker #1: This all aggregates on a consolidated basis for Q2 to mid-single-digit top-line growth and EBITDA performance flat to slightly up compared with the prior year.

Jeremy Rakusin: We see a continuation of similar EBITDA margin expansion and growth in the FirstService Residential division. This will be largely offset by Brands division declines, reflecting the ongoing margin pressures in roofing and home services I referenced earlier, and which are dictated by the current uncertain geopolitical and macroeconomic environment. This all aggregates on a consolidated basis for Q2 to mid-single digit top-line growth and EBITDA performance flat to slightly up compared with the prior year. That concludes our prepared comments. Olivia, you can now open up the call to questions. Thank you.

Speaker #3: This will be largely offset by Brands division declines, reflecting the ongoing margin pressures in roofing and home services I referenced earlier, and which are dictated by the current uncertain geopolitical and macroeconomic environment.

Speaker #1: That concludes our prepared comments. Livia, you can now open up the call to questions. Thank you.

Speaker #2: Certainly. Lisa, Angela, and as a reminder to ask a question at this time, you will need to press star 11 on your telephone. And wait for your name to be announced.

Speaker #3: This all aggregates on a consolidated basis for Q2 to mid-single digit top line growth and EBITDA performance flat to slightly up compared with the prior year .

Speaker #2: So we draw your question. Simply press star 11 again. Please stand by while we compile the Q&A roster. Now, first question coming from the line of Stephen McLeod with BMO Capital Markets.

Jeremy Rakusin: Olivia, you can now open up the call to questions. Thank you.

Speaker #2: Your line is now open.

Speaker #3: That concludes our prepared comments . Olivia . You can now open up the call to questions . Thank you

Speaker #3: Thank you. Morning. Morning, guys. Just wanted to ask about the roofing vertical, which obviously you're seeing some pressure and both in the M markets as well as from competitive intensities.

Operator: Certainly. Ladies and gentlemen, as reminded, to ask a question at this time, you will need to press *11 on your telephone and wait for your name to be announced. To withdraw your question, simply press *11 again. Please stand by while we compile the attendee roster. Now first question coming from the line of Stephen MacLeod with BMO Capital Markets. Your line is now open.

Speaker #1: , ladies and gentlemen . As a reminder to ask a question at this time , you will need to press star one one on your telephone and wait for your name to be announced to withdraw your question , simply press star one one again , please stand by while we compiled a roster Now , first question coming from the line of Stephen McLeod with BMO Capital Markets , your line is now open

Speaker #3: And I'm just curious, are you still expecting that some of those reroofing jobs are being delayed into later points in the year, or beyond this period of geopolitical and macro uncertainty?

Stephen MacLeod: Thank you. Morning, guys. Just wanted to ask about the roofing vertical, which obviously, you're seeing some pressure both in the end markets as well as from competitive intensities. I'm just curious, are you still expecting that some of those re-roofing jobs are being delayed into later points in the year or beyond this period of geopolitical and macro uncertainty?

Speaker #4: Thank you . Good morning guys . Just wanted to ask about the the roofing vertical , which obviously , you know , you're seeing some pressure and both in the end markets as well as from competitive intensities .

Speaker #4: I think, Stephen, it has delayed a rebound. The reroof market certainly stabilizing, but stubbornly weak. I think the persistent uncertainty does continue to impact decision-making around major projects.

Speaker #4: And I'm just curious, are you still expecting that some of those reroofing jobs are being delayed into later points in the year or beyond?

Speaker #4: I mean, we're seeing it in some of our other businesses. So we do believe we'll grow organically this year. We expect to. We expect it to see some organic growth in Q2, but I think that the rebound has been pushed out.

Speaker #4: Is this this period of geopolitical and macro uncertainty?

Scott Patterson: I think, Stephen, it has delayed a rebound. The reroof market, certainly stabilizing, but stubbornly weak. I think the persistent uncertainty does continue to impact decision-making around major projects. We're seeing it in some of our other businesses. We do believe we'll grow organically this year. We expect to. We expected to see some organic growth in Q2, but I think that the rebound has been pushed out. We do expect to see sequential improvement in Q3 and Q4. There are opportunities that were delayed last year that we're seeing scheduled now. We're bidding work. We're winning work. Generally, we're feeling optimistic. We believe that we have a very solid branch network, and we're poised to really take advantage when the market improves.

Speaker #2: I think it Steven , it has rebound . The reroof market certainly stabilizing , but stubbornly weak . I think the persistent uncertainty does continue to impact decision making around major projects .

Speaker #4: We do expect to see sequential improvement in Q3 and Q4. There are opportunities that we're delayed last year that we're seeing scheduled now. We're bidding work.

Speaker #2: I mean we're seeing it in some of our other businesses So we . You know , we do believe we'll grow organically this year .

Speaker #4: We're winning work. Generally, we're feeling optimistic. We believe that we're we have a very solid branch network, and we're poised to really take advantage when the market improves.

Scott Patterson: We expected to see some organic growth in Q2, but I think that the rebound has been pushed out. We do expect to see sequential improvement in Q3 and Q4. There are opportunities that were delayed last year that we're seeing scheduled now. We're bidding work. We're winning work. Generally, we're feeling optimistic. We believe that we have a very solid branch network, and we're poised to really take advantage when the market improves.

Speaker #2: We expect to we expected to see some organic growth in Q2 . But I think that the rebound has been pushed out . We do expect to see sequential improvement in Q3 and Q4 .

Speaker #3: Okay. That's helpful color, Scott. Thank you. And then maybe just with respect to capital allocation, you have a strong free cash flow leverage is not very high.

Speaker #2: There . There are opportunities that we're that were delayed last year that were seeing scheduled . Now , you know , we're bidding work , we're winning work .

Speaker #3: You do have an NCIB outstanding. Just curious if you would consider a buyback in or being active on the buyback in this given where the stock is and given sort of some of the weakness in terms of the outlook.

Speaker #2: Generally , we're feeling optimistic . We're pleased . We believe that we're you know , we have a very solid branch network . And we're poised to to really take advantage when the when the market improves

Stephen MacLeod: Okay. That's helpful color, Scott. Thank you. Maybe just with respect to capital allocation, you have a strong free cash flow. Leverage is not very high. You do have an NCIB outstanding. Just curious if you would consider a buyback or being active on the buyback given where the stock is and given sort of some of the weakness in terms of the outlook?

Speaker #4: Yeah, Stephen. It's Jeremy. Yeah, no, it's one of the alternatives that's always on the forefront of our minds, particularly over the current environment. And as you said, leverage giving us ample room.

Speaker #4: Okay . That's that's helpful color . Scott . Thank you . And then maybe , just maybe just with respect to capital allocation , you know , you have strong free cash flow .

Speaker #4: Leverage is not very high . You do have an NCIB outstanding . Just curious if you would consider a buyback in or being active on the buyback in this , given where the stock is and given , you know , sort of some of the some of the weakness in terms of the outlook .

Speaker #4: First and foremost, we're a growth company, and we were looking to deploy capital towards those growth initiatives and supporting the brands where we have capital allocation opportunities.

Jeremy Rakusin: Yeah, Steven, it's Jeremy. It's one of the alternatives that's always in the forefront of our minds, particularly the current environment, and as you said, leverage giving us ample room. First and foremost, we're a growth company, and we're looking to deploy capital towards those growth initiatives and supporting the brands where we have capital allocation opportunities. I think that's our primary focus. You're right, we can pull the trigger on the NCIB at any point in time. We have given consideration to it, but I think for now it's a pause just given potential opportunities in the pipeline, the growth mindset, and really where the uncertainty is in the geopolitical and how that influences the stock market valuations.

Speaker #4: So I think that's our primary focus. You're right. We can pull the trigger on the NCIB at any point in time. We have given consideration to it, but I think for now, it's a pause just given potential opportunities in the pipeline, the growth mindset, and really where the uncertainty is in the geopolitical and how to influence the stock market valuations.

Speaker #3: Yeah . Stephen , it's Jeremy . Yeah . No , it's one of the alternatives . That's that's always on , on our , the forefront of our minds , particularly of the current environment .

Speaker #3: And as you said , leverage giving us ample room . First and foremost , we're a growth company and we're looking to deploy capital towards those , those growth initiatives and supporting the brands where we have capital allocation opportunities .

Jeremy Rakusin: I think that's our primary focus. You're right, we can pull the trigger on the NCIB at any point in time. We have given consideration to it, but I think for now it's a pause just given potential opportunities in the pipeline, the growth mindset, and really where the uncertainty is in the geopolitical and how that influences the stock market valuations.

Speaker #3: Okay. That's great. Thanks, Jeremy. And then maybe just finally, just on the M&A, Scott, you referenced that you have done some tuck-ins recently. I guess when you think about M&A and the outlook from here, would it mostly be kind of bringing in those company turning franchises into company-owned?

Speaker #3: So I think that's our primary focus . You're right , we can pull the trigger on a on the NCIB at any point in time .

Speaker #3: We have given consideration to it . But I think for now , it's a it's a pause . Just given , you know , potential opportunities in the pipeline , the growth mindset and , and really , you know , where the uncertainty is in the , the geopolitical and how it influence the stock market valuations .

Speaker #3: Or do you see other alternatives in your other verticals as well?

Speaker #4: No, I really think it's tuck-unders in the other verticals. Nothing's really changed as we approach the company-owned strategies that Paul Davis or California Closets.

Stephen MacLeod: Okay. That's great. Thanks, Jeremy. Maybe just finally, just on the M&A. Scott, you referenced that you have done some tuck-ins recently. I guess when you think about M&A and the outlook from here, would it mostly be kind of bringing in those companies, turning franchises into company-owned, or do you see other alternatives in your other verticals as well?

Speaker #4: Okay , that's great . Thanks , Jeremy . And then maybe just , just finally , just on the M&A , you know , Scott , you referenced , you know , that you have done some tuck ins recently , I guess when you think about M&A and the outlook from here , would it mostly be kind of bringing in those company .

Speaker #4: Those will be very episodic. One or two a year, at each brand. So we're not looking to accelerate that.

Speaker #4: You know , turning franchises into company owned or do you do you see , you know , other other alternatives in your other other verticals as well ?

Speaker #3: That's great. Thanks, guys. Appreciate the color.

Scott Patterson: No, I really think it's tuck-unders in the other verticals. Nothing's really changed as we approach the company-owned strategies of Paul Davis or California Closets. Those will be very episodic, one or two a year at each brand. We're not looking to accelerate that.

Speaker #2: Thank you. Now, next question coming from the line of Daryl Young with Steeple. Your line is now open.

Speaker #2: No , I really think it's , it's tuck unders in the other verticals . Nothing's really changed as we approach the company owned strategies at Paul Davis or California Closets .

Speaker #5: Hey, good morning, everyone. I just wanted to touch on Century Fire for a second. It seems to continue to defy gravity amid a soft commercial construction market.

Speaker #2: Those will be very episodic . You know , 1 or 2 a year at each branch . So we're not looking to accelerate that

Speaker #5: So I'm just wondering, has there been any regulatory changes that might help explain some of the growth there in terms of maybe frequency of inspections or system retrofits or anything else that can explain that growth?

Stephen MacLeod: That's great. Thanks, guys, appreciate the color.

Speaker #4: That's great . Thanks , guys . Appreciate the color .

Operator: Thank you. Now next question coming from the line of Daryl Young with Stifel. Your line is now open.

Speaker #1: Thank you. Now, the next question comes from the line of Darryl Young with Steve Allen. The line is now open.

Speaker #4: No, the growth has really been in the service repair and inspection side. It has been very consistent in the last number of years. And it continues to be a driver for them.

Daryl Young: Hey, good morning, everyone. I just wanted to touch on Century Fire for a second. It seems to continue to defy gravity amid a soft commercial construction market. I'm just wondering, has there been any regulatory changes that might help explain some of the growth there, just in terms of maybe frequency of inspections or system retrofits or anything else that can explain that growth?

Speaker #5: Hey, good morning everyone. I just wanted to touch on Century Fire for a second. It seems to continue to defy gravity and amid a soft commercial construction market.

Speaker #4: There's just a real focus on it across all the branches. And there's still, in the process of layering in service expertise at some of their branches that we're primarily installation-focused.

Speaker #5: So I'm just wondering , has there been any regulatory changes that that might help explain some of the growth there in terms of maybe frequency of inspections or system retrofits or anything else that can explain that growth ?

Scott Patterson: No, the growth has really been in the service repair inspection side, has been very consistent in the last number of years, and it continues to be a driver for them. There's just a real focus on it across all the branches, and they're still in the process of layering in service expertise at some of their branches that were primarily installation focused. There's nothing on the regulatory environment, certainly that we're aware of, that's accelerated the growth in the service side. It's just a continued focus on it.

Speaker #2: No . The growth has really been in the service repair and inspection side has been very consistent in the last number of years .

Speaker #4: So there's nothing on the regulatory environment, certainly, that we're aware of that's accelerated the growth in the service side. It's just a continued focus on it.

Speaker #2: And it and it continues to be a driver for them . There's there's just a real focus on it across all the branches and , you know , they're still in the process of layering in service expertise at some of their branches that we're primarily installation focused .

Speaker #5: Okay. And then with respect to restoration, the outlook is maybe a little bit lighter than I would have expected in the short term. Is there any loss of market share or anything going on with national accounts that might explain that as well?

Speaker #5: Because I would have thought there's a lot of white space from a geographic expansion perspective.

Speaker #2: So there's nothing on the regulatory environment . Certainly that we're aware of . That's accelerated the growth in the service side . It's just it's just a continued focus on it .

Speaker #4: No, I mean, I think we are definitely holding our own. These storm events, they're all very, very different from one to the other. And what areas they impact, where we have branches, relative to the affected areas, so we feel we continue to feel very good about our position in the marketplace as it relates to national accounts.

Daryl Young: Okay. With respect to restoration, the outlook is maybe a little bit lighter than I would have expected in the short term. Is there any loss of market share or anything going on with national accounts that might explain that as well? Because I would have thought there's a lot of white space from a geographic expansion perspective.

Speaker #5: Okay . And then with respect to restoration , the the outlook is maybe a little bit lighter than I would have expected in the short term .

Speaker #5: Is there any loss of market share or any anything going on with national accounts that might explain that as well ? Because I would have thought there's a lot of white space from a geographic expansion perspective .

Scott Patterson: No, I think we are definitely holding our own. These storm events, they're all very different from one to the other and what areas they impact, where we have branches relative to the affected areas. We continue to feel very good about our position in the marketplace as it relates to national accounts, and this is a weather influenced business, and it's hard for us to call from From quarter to quarter. We do see some activity. We have some large loss opportunities. There's potential upside. Based on where our backlogs are, we do think the revenues will be flat, perhaps even down a bit in Q2.

Speaker #2: No , I mean , I think I think we are definitely holding our own , you know , these these storm events , they're all very , very different from one to the other .

Speaker #4: And it's just this is a weather-influenced business, and it's hard for us to call from quarter to quarter. We do see some activity. We have some large-loss opportunities.

Speaker #2: And what areas they impact where we have branches relative to the affected areas . So we feel we continue to feel very good about our position in the marketplace as it relates to national accounts .

Speaker #4: So there's potential upside but based on where our backlogs are, we do think the revenues will be flat and perhaps even down a bit in Q2.

Speaker #2: And it's just, this is a weather-influenced business, and it's hard for us to call from, you know, from quarter to quarter.

Speaker #5: Okay. I'll jump back in the queue for now. Thanks.

Jeremy Rakusin: From quarter to quarter. We do see some activity. We have some large loss opportunities. There's potential upside. Based on where our backlogs are, we do think the revenues will be flat, perhaps even down a bit in Q2.

Speaker #2: Thank you. Our next question coming from the line of Stephen Sheldon with Will and Blair. Your line is now open.

Speaker #2: We we do see some activity . We have some large loss opportunities . So there's , there's potential upside , but Based on where our backlogs are , you know , we do we do think the revenues will be will be flat and perhaps even even down a bit in Q2

Speaker #5: Hey, good morning. Thanks. Nice to see strong margin improvement once again in the residential segment with the labor efficiency gains, we've called out. So curious if you see opportunities to leverage AI and other businesses and segments similar to what you've done in residential around client accounting and call center operations.

Daryl Young: Okay. I'll jump back in the queue for now. Thanks.

Speaker #5: Okay, I'll jump back in the queue for now. Thanks.

Operator: Thank you. Our next question comes from the line of Stephen Sheldon with William Blair. Your line is now open.

Speaker #1: Thank you . Our next question comes from the line of Stephen Sheldon with William Blair . Your line is now open .

Speaker #4: Yeah, Stephen, Jeremy, in our brand's businesses, obviously, we've done it in residential as you're aware, and that's part of the efficiencies. In the brand's businesses, all of them are exploring tools to be more efficient on the front lines.

Stephen Sheldon: Hey, good morning, thanks. Nice to see strong margin improvement once again in the residential segment, with the labor efficiency gains you've called out. Curious if you see opportunities to leverage AI in other businesses and segments, similar to what you've done in residential around client accounting and call center operations.

Speaker #6: Hey, good morning. Thanks. Nice to see strong margin improvement once again in the residential segment with the labor efficiency gains we've called out.

Speaker #4: Yeah, I can point out one example of restoration where on walk-throughs, job estimating, and scoping, AI tools are being used to speed up the process, be more productive for those estimating teams, and also helping enhance the accuracy making sure nothing's missed and really captured in that scoping exercise.

Speaker #6: So curious if you see opportunities to leverage AI and other businesses and segments similar to what you've done in residential around client accounting and call center operations

Jeremy Rakusin: Yeah. Stephen, Jeremy. In our brands businesses, obviously we've done it in residential, as you're aware, and that's part of the efficiencies. In the brands businesses, all of them are exploring tools to be more efficient on the front lines. I can point out one example, restoration, where on walkthroughs, job estimating, and scoping, AI tools are being used to speed up the process, be more productive for those estimating teams, and also helping enhance the accuracy, making sure nothing's missed and really captured in that scoping exercise. That would be one example to call out. All of our brands are using AI in early stages, incremental way as we speak.

Speaker #3: Yeah . Stephen . Jeremy . In our brands , businesses , you know , obviously we've done it in residential , as you're aware .

Speaker #3: And that's , that's part of the efficiencies in the brands , businesses , all of them are exploring tools to be more efficient on the front lines .

Speaker #4: That would be one example to call out. But all of our brands are using AI in an early stage as incremental way as we speak.

Speaker #3: You know , I can point out one example of restoration where , you know , and walkthroughs , job estimating and scoping AI tools are being used to speed up the process , be more productive for those estimating teams , and also , you know , helping enhance the accuracy , you know , making sure nothing's missed and really captured in that , in that scoping exercise , that would be one example to call out .

Speaker #5: Got it. Makes sense. And then on roofing, I guess, how are you thinking about the margin trajectory over the coming years as activity hopefully picks back up?

Speaker #5: Are there still a lot of levers to pull where there could be structural margin improvement over the medium term and a better backdrop with more pricing power, things like that?

Speaker #5: I guess, how are you thinking about the long-term or the medium-term margin trajectory there?

Speaker #3: But all of our brands are , are using AI in an early stages , incremental way as we speak .

Speaker #4: Yeah, I think short to medium term, meaning 2026, we've called the margin compression right from the outset again, largely due to competitive pressure. So once we get through that and once new construction, new development sort of resumes its normal course, we think the competitive pressures in re-roof will abate, we'll get more pricing power, the other thing that's tempering our margins a little bit, we're pulling together one ERP financial reporting platform for all of our branches that's a bit of investment that we knew about into '26 and '27.

Stephen Sheldon: Got it, makes sense. On roofing, I guess how are you thinking about the margin trajectory over the coming years as activity hopefully picks back up? Are there still a lot of levers to pull where there could be structural margin improvement over the medium term and a better backdrop with more pricing power, things like that? I guess, how are you thinking about the long term or the medium term margin trajectory there?

Speaker #6: Got it . Makes sense . And then on roofing , I guess , how are you thinking about the margin trajectory over the coming years ?

Speaker #6: Is activity . Hopefully picks back up . Are there still a lot of levers to pull where there could be structural margin improvement over the medium term and a better backdrop of more pricing power , things like that ?

Speaker #6: I guess, how are you thinking about the long-term or the medium-term margin trajectory there?

Jeremy Rakusin: Yeah, I think short to medium term, meaning 2026, we've called the margin compression right from the outset, again, largely due to competitive pressures. Once we get through that, and once new construction, new development sort of resumes its normal course, we think the competitive pressures in reroof will abate. We'll get more pricing power. The other thing that's tempering our margins a little bit, we're pulling together one ERP financial reporting platform for all of our branches. That's a bit of investment that we knew about into 2026 and 2027. Once we get that, and again, a better environment, I think there are opportunities. There could be opportunities even on the cost synergy side around procurement, using our scale to garner materials at better prices. Just as we scale up the platform. I think that's too early to map out at this juncture.

Speaker #3: Yeah , I think short to medium term meaning 2026 , we've called the margin compression right from the outset . Again , largely due to competitive pressures .

Speaker #4: And once we get that and again, a better environment, I think there are opportunities. There could be opportunities even on the cost synergy side around procurement using our scale to garner materials at better prices.

Speaker #3: So once we get through that and once new construction , new development , sort of resumes , its normal course , we think the , the competitive pressures in Reroof will abate .

Jeremy Rakusin: The other thing that's tempering our margins a little bit, we're pulling together one ERP financial reporting platform for all of our branches. That's a bit of investment that we knew about into 2026 and 2027. Once we get that, and again, a better environment, I think there are opportunities. There could be opportunities even on the cost synergy side around procurement, using our scale to garner materials at better prices. Just as we scale up the platform. I think that's too early to map out at this juncture. Directionally to your question, yeah, there would be opportunities medium to long term.

Speaker #3: We'll get more pricing power . You know , the other thing that's that's tempering our margins a little bit . We're we're pulling together , you know , one ERP , financial reporting platform for all of our branches .

Speaker #4: And just as we scale up the platform, but I think that's too early to map out at this juncture. But directionally, to your question, yeah, there would be opportunities medium to long term.

Speaker #3: That's a bit of investment that we knew about into 26 and 27 . And once we get that and again , a better environment , I think there are opportunities .

Speaker #5: Great. Thank you.

Speaker #2: Thank you. Our next question coming from the line of Aaron Kyle with CIBC. Your line is now open.

Speaker #3: There could be opportunities even on the on the cost synergy side around procurement using our scale to garner materials at better prices . And just as we scale up the platform .

Speaker #6: Hi, good morning. Thanks for taking the questions. Jeremy, just to follow up on the margin side on the residential side, good to see that margin strength in the quarter.

Speaker #3: But I think that's too too early to map out at this juncture . But directly to your question , yeah , there would be opportunities medium to long term

Jeremy Rakusin: Directionally to your question, yeah, there would be opportunities medium to long term.

Speaker #6: Can you maybe expand a bit more on the labor and cost efficiencies we achieved? It was my understanding that most of those cost savings had already been implemented in 2025.

Stephen Sheldon: Great. Thank you.

Speaker #6: Great . Thank you

Operator: Thank you. Our next question coming from the line of Erin Kyle with CIBC. Your line is now open.

Speaker #6: So is it the AI efficiencies that you're speaking to that's kind of contributing to the efficiency in the quarter, or how do we think about that?

Speaker #1: Thank you . Our next question comes from the line of Aaron Kyle with CIBC . Your line is now open .

Erin Kyle: Hi, good morning. Just thanks for taking the questions. Jeremy, just to follow up on the margin side, on the residential side, good to see that margin strength in the quarter. Could you maybe expand a bit more on the labor and cost efficiencies you achieved? It was my understanding that most of those cost savings had already been implemented in 2025. Is it the AI efficiencies that you're speaking to that's kind of contributing to the efficiency in the quarter, or how do we think about that?

Speaker #4: Yeah, so a portion of the 50 basis points would have been a continuation of last year's initiatives, around client accounting that's offshoring a lot of some of the financial statement and accounting functions.

Speaker #7: Hi . Good morning . Thanks for taking the questions . Jeremy , just to follow up on the margin side , on the residential side , good to see that margin strength in the quarter .

Speaker #7: Could you maybe expand a bit more on the labor and cost efficiencies you achieved ? It was it was my understanding that most of those cost savings had already been implemented in 2025 .

Speaker #4: Lower cost opportunities there. As well as AI-driven portfolio management efficiencies where we can and enhance portfolio manager productivity. So that's just a continuation. And then a little bit on the mix, Scott spoke about the exit from low-margin accounts at the beginning of the year around our ancillary commercial maintenance and pool rental services.

Speaker #7: So is that the AI efficiency that you're speaking to ? That's kind of contributing to the efficiency in the quarter ? Or how do we think about that

Jeremy Rakusin: Yeah. A portion of the 50 basis points would have been a continuation of last year's initiatives around client accounting that's offshoring a lot of some of the financial statement and accounting functions. Lower cost opportunities there. As well as AI-driven portfolio management efficiencies, where we can reduce headcount in our call centers and enhance portfolio manager productivity. That's just a continuation. A little bit on the mix. Scott spoke about the exit from low margin accounts at the beginning of the year around ancillary commercial maintenance and pool rental services. Those are lower margins, so we get a little bit of a tick up. Really, little pockets. We're a 20,000 associate division, very labor intensive.

Speaker #3: Yes . So , you know , portion of the 50 basis points would would have been a continuation of last year's initiatives . You know , around client counting .

Speaker #3: That's offshoring a lot of some of the , you know , financial statement and accounting functions , lower cost . Opportunities there , as well as AI driven portfolio management efficiencies where we can reduce headcount .

Speaker #4: Those are lower margins, so we get a little bit of a tick up. And then really, a little pockets. We're at 20,000 associate division, very labor-intensive.

Speaker #3: In our call centers and enhance portfolio manager productivity . So that's , that's just a continuation . And then , you know , a little bit on the mix Scott spoke about the , you know , the exit from low margin accounts at the beginning of the year around our ancillary commercial maintenance and poor services .

Jeremy Rakusin: That's just a continuation. A little bit on the mix. Scott spoke about the exit from low margin accounts at the beginning of the year around ancillary commercial maintenance and pool rental services. Those are lower margins, so we get a little bit of a tick up. Really, little pockets. We're a 20,000 associate division, very labor intensive.

Speaker #4: So both the timing around contract wins and when we add headcount to support that, as well as just incremental pockets of efficiencies across 100-plus offices, those would be the sort of three or four reasons that aggregate to the 50 basis points.

Speaker #4: We'll see more of it in Q2 and then I believe it'll flatten out second half of the year.

Speaker #3: Those are lower margins . So we get a little bit of a tick up and then really , if little pockets , we're 20,000 associate division , very labor intensive .

Speaker #6: Thank you. That's helpful color. And then maybe just on the M&A side, if I go back to M&A spending, I'm looking forward for the rest of the year here.

Jeremy Rakusin: Both the timing around contract wins and when we add headcount to support that, as well as just incremental pockets of efficiencies across 100-plus offices, those would be the sort of three or four reasons that aggregate to the 50 basis points. We'll see more of it in Q2, and then I believe it'll flatten out in H2.

Speaker #3: So both the timing around contract wins and when we add headcount to support that , as well as just incremental pockets of efficiencies across 100 plus offices , those would be the sort of 3 or 4 reasons that aggregate to the 50 basis points .

Speaker #6: You touched on the two tuck-in acquisitions of franchise operations that was announced a few weeks ago. Just wondering maybe more broadly, what you're seeing in terms of the broader market if valuations remain elevated and what the strategy would look like in case that if deals do remain elevated, do you expect to do more of those franchise operation acquisitions?

Speaker #3: We’ll see more of it in Q2, and then, I believe, it’ll flatten out in the second half of the year.

Erin Kyle: Thank you. That's helpful color. Maybe just on the M&A side. If I go back to M&A spending and looking forward for the rest of the year here. You touched on the two tuck-in acquisitions of franchise operations that was announced a few weeks ago. Just wondering maybe more broadly what you're seeing in terms of the broader market, if valuations remain elevated, and what the strategy would look like if deals do remain elevated. Do you expect to do more of those franchise operation acquisitions?

Speaker #7: Thank you . That's helpful . Color . And then maybe just on the M&A side , if I go back to M&A spending , I'm looking forward for the rest of the year here .

Speaker #4: I think this year, we'll play out similar to last year where we allocated about 100 million for acquisitions. Multiples do remain high across all the platforms.

Speaker #7: You know you touched on the two tuck in acquisitions of franchise operations . That was announced a few weeks ago . Just wondering , maybe more broadly you're seeing in terms of the broader market , if valuations remain elevated and what the strategy would look like in case that if deals do remain elevated , do you expect to do more of those franchise operation acquisitions

Speaker #4: And the market, it's still active, but it's still slower than we've seen in previous years. I think many sellers are waiting for more stability in the economy.

Scott Patterson: I think this year will play out similar to last year, where we allocated about $100 million for acquisitions. Multiples do remain high across all the platforms. The market, it's still active, but it's still slower than we've seen in previous years. I think many sellers are waiting for more stability in the economy. Certainly, in roofing and restoration, we've seen deals pull back. Results are generally down, so sellers are waiting until there is a rebound. We do have prospects in the pipeline across most of our segments, and believe we will close incremental tuck-unders over the next three quarters. Probably not incremental franchise acquisitions, because we're just not aggressively pursuing those. We obviously know all our franchisee owners, and we're taking that one step at a time as a transition makes sense for those owners and families.

Speaker #4: Certainly, in roofing and restoration, we've seen deals pull back. Results are generally down. So sellers are waiting until there is a rebound. But we do have prospects in the pipeline.

Speaker #2: I think this year we'll play out similar to last year, where we allocated about $100 million for acquisitions. Multiples do remain high across all the platforms and the market.

Speaker #4: Cross most of our segments. And believe we will close incremental tuck-unders over the next three quarters. Not probably not incremental franchise acquisitions. Because we're just not aggressively pursuing those.

Speaker #2: It's still active, but it's still slower than we've seen in previous years. I think many sellers are waiting for more stability in the economy, certainly in roofing and restoration.

Scott Patterson: Results are generally down, so sellers are waiting until there is a rebound. We do have prospects in the pipeline across most of our segments, and believe we will close incremental tuck-unders over the next three quarters. Probably not incremental franchise acquisitions, because we're just not aggressively pursuing those. We obviously know all our franchisee owners, and we're taking that one step at a time as a transition makes sense for those owners and families.

Speaker #2: We've seen deals pull back . Results are generally down , so sellers are waiting until there is a rebound . But we do have prospects in the pipeline across across most of our segments .

Speaker #4: I mean, we obviously know all our franchisee owners. And we're taking that one step at a time as a transition makes sense for those owners and families.

Speaker #2: And believe we will close close incremental tuck unders over the next three quarters . Not probably not incremental franchise acquisitions because we're just not aggressively pursuing those those I mean , we obviously know all our franchisee owners and we're taking that one step at a time as , as a transition makes sense for those owners and families

Speaker #6: Thanks, Scott. I will pass the line. Thank you.

Speaker #2: Thank you. Our next question coming from the line of Tim James with City Colin. Your line is now open.

Speaker #5: Hi, thanks very much. Good morning. First question, just returning to the residential segment. You mentioned some headwinds there, in property management related to pool construction and some commercial maintenance, I think it was.

Erin Kyle: Thanks, Scott. I will pass the line. Thank you.

Speaker #5: I'm just wondering if you could elaborate on what the drivers of that are or what you think they may be. And kind of how sustainable that you expect that pressure to be as you go through the balance of the year.

Speaker #7: Thanks , Scott . I will pass the line . Thank you .

Operator: Thank you. Our next question coming from the line of Tim James with TD Cowen. Your line is now open.

Speaker #1: Thank you . Our next question coming from the line of Tim James with City Cowan . Your line is now open .

Tim James: Thanks very much. Good morning. First question, just returning to the residential segment. You mentioned some headwinds there in property management related to pool construction and some commercial maintenance, I think it was. I'm just wondering if you could elaborate on what the drivers of that are or what you think they may be, and kind of how sustainable you expect that pressure to be as you go through the balance of the year.

Speaker #4: Right. Well, we've been in the pool management, renovation, construction business for many, many years. And the renovation construction side of it is facing the same headwinds we're facing in roofing and many of our businesses just with the reluctance to allocate CapEx to major projects.

Speaker #5: Thanks very much .

Speaker #8: Good morning . First question , just returning to the the residential segment , you mentioned some headwinds there in property management related to pool construction and some commercial maintenance .

Speaker #8: I think it was just wondering if you could elaborate on what the drivers of that are or what you think they may be , and kind of how sustainable that you expect that pressure to be as you go through the balance of the year .

Scott Patterson: Right. Well, we've been in the pool management, renovation, construction business for many, many years. The renovation construction side of it is facing the same headwinds we're facing in roofing and many of our businesses just with the reluctance to allocate CapEx to major projects and the deferral. We are entering the seasonal period, and we'll see a resumption of that activity, probably not at the same level as prior years. It will continue to be a bit of a drag on our organic growth. Then we referenced the other ancillary service, which is the provision of janitorial front desk personnel to the multifamily market, primarily in the Northeast. There were a few contracts and they tend to be REITs and owners of several buildings. Often when you win or lose a contract, it can be for a number of buildings.

Speaker #4: And the deferral. We are entering the seasonal period and we'll see a resumption of that activity probably not at the same level as prior years.

Speaker #2: Right ? Well , we've been in the pool management renovation , construction business for many , many years . And the , the renovation construction side of it is facing the same headwinds we're facing in , in roofing .

Speaker #4: So it will continue to be a bit of a drag on our organic growth. And then the we referenced the other ancillary service, which is the provision of janitorial front desk personnel to the multifamily market, primarily in the northeast.

Speaker #2: And many of our businesses just with the , you know , reluctance to allocate CapEx to major projects and the we are entering the seasonal period .

Speaker #4: And there were a few contracts in with they tend to be REITs and owners of several buildings and often you when you win or lose a contract, it can be for a number of buildings.

Speaker #2: And we'll see a resumption of , of that activity . Probably not at the same level as prior year . So it will continue to be a bit of a drag on our organic growth .

Scott Patterson: It will continue to be a bit of a drag on our organic growth. Then we referenced the other ancillary service, which is the provision of janitorial front desk personnel to the multifamily market, primarily in the Northeast. There were a few contracts and they tend to be REITs and owners of several buildings. Often when you win or lose a contract, it can be for a number of buildings.

Speaker #2: And then the , you know , we , we referenced the other ancillary service , which is the provision of janitorial front desk personnel to the multifamily market , primarily in the northeast .

Speaker #4: And we just made a decision on price to move away from some contracts which will continue to be a drag a modest drag. But we feel very good about where we are with our core management business.

Speaker #2: And there were a few contracts and with they tend to be REITs and Owners of , you know , several buildings and often you .

Speaker #4: Solid quarter and end of '25 in terms of renewals retention and wins. And expect that it will the core business will hold our growth in this division at mid-single digit.

Speaker #2: When you win or lose a contract , it can be for a number of , of buildings and we just made a decision on price to move away from some contracts , which will continue to be a drag .

Scott Patterson: We just made a decision on price to move away from some contracts, which will continue to be a drag, a modest drag. We feel very good about where we are with our core management business. Solid quarter and end of 2025 in terms of renewals, retention, and wins, and expect that the core business will hold our growth in this division at mid-single digit. We expect to see incremental sequential improvement through the year.

Speaker #4: And we expect to see incremental sequential improvement through the year.

Speaker #5: Okay. That's super helpful. Thank you. Just turning to the home services and the promotional activity, that you kind of kicked up in the first quarter there.

Speaker #2: You know , a modest drag , but we feel very good about where we are with our core management business . Solid quarter and end of 25 in terms of renewals , retention and wins and expect that it will the core business will hold our growth in this division at mid-single digit .

Speaker #5: It sounds like that's due to sort of the macro environment, the overall demand environment. I'm just trying to understand when you step up promotional activity, in an environment that's impacting all your competitors, is the idea here that your competitors are getting more aggressive on pricing and therefore you're trying to offset some of that and sort of get the brand back in front of them?

Speaker #2: And we expect to see incremental, sequential improvement through the year.

Tim James: Okay. That's super helpful. Thank you. Just turning to Home Services and the promotional activity that you kind of kicked up in Q1 there. It sounds like that's due to sort of the macro environment, the overall demand environment. I'm just trying to understand when you step up promotional activity in an environment that's impacting all your competitors, is the idea here that your competitors are getting more aggressive on pricing and therefore you're trying to offset some of that and sort of get the brand back in front of them? Or I'm just trying to understand. I know you've had experience with this in the past, so maybe it's more of a matter of refreshing on kind of the success that that drove and how it works.

Speaker #8: Okay . That's super helpful . Thank you . Just turning to to home services and the the promotional activity that you kind of kicked up in the first quarter there .

Speaker #5: I'm just trying to understand. I know you've had experience with this in the past, so maybe it's more of a matter of refreshing on kind of the success that that drove and how it works.

Speaker #8: It sounds like that's due to sort of the macro environment , the overall demand environment . I'm just trying to understand when you step up promotional activity In an environment that's impacting all your competitors is , is the idea here that your competitors are getting more aggressive on pricing and therefore you're trying to offset some of that and sort of get the brand back in front of them .

Speaker #4: Yeah. Certainly, there's some of what you suggest. The key the real key for us is try to maintain momentum. And take share in a very tough environment.

Speaker #4: And then keep our teams busy. I mean, we invest a lot in training our people. And with the lack of clarity we have today, we don't want to move quickly to adjust that unless we have more clarity about the market that we're dealing with.

Speaker #8: I'm trying to understand. I know you've had experience with this in the past, so maybe it's more a matter of refreshing on kind of the success that that drove and how it works.

Scott Patterson: Yeah. Certainly, there's some of what you suggest. The real key for us is try to maintain momentum and take share in a very tough environment. Keep our teams busy. We invest a lot in training our people. With the lack of clarity we have today, we don't want to move quickly to adjust that unless we have more clarity about the market that we're dealing with. As I said in my prepared comments, we do believe it could turn positive quickly with some stability and clarity around the Middle East and inflation. We're currently trying to ride out the storm, as I said. We've got our fingers on the dial around the marketing spend and the cost structure. Jeremy mentioned it in his prepared comments. If we do see or believe that this is a prolonged downturn, we'll adjust quickly. We-

Speaker #2: Yeah , I certainly there's some of , of what you suggest . The key , the real key for us is try to maintain momentum and take share in a very tough environment .

Speaker #4: And as I said, my prepared comments, we do believe it could turn positive quickly with some stability and clarity around the Middle East and inflation.

Speaker #2: And then keep our teams busy . I mean , we invest a lot in training our people . And with the lack of clarity , we have today , we don't want to move quickly to adjust that unless we have more , more clarity about the market that we're we're dealing with .

Speaker #4: So we're currently trying to ride out the storm, as I said. We've got our fingers on the dial around the marketing spend and the cost structure.

Speaker #4: And if we Jeremy mentioned it in his prepared comments, if we do see or believe that this is a prolonged downturn, we will adjust quickly.

Scott Patterson: As I said in my prepared comments, we do believe it could turn positive quickly with some stability and clarity around the Middle East and inflation. We're currently trying to ride out the storm, as I said. We've got our fingers on the dial around the marketing spend and the cost structure. Jeremy mentioned it in his prepared comments. If we do see or believe that this is a prolonged downturn, we'll adjust quickly. We-

Speaker #2: And as I said in my prepared comments , we do believe it could turn positive quickly with some stability and clarity around the Middle East .

Speaker #4: But.

Speaker #5: Okay. Thank you. The last question, just turning back and you've touched on the kind of the M&A environment, but I just wanted to kind of focus in on one particular aspect here.

Speaker #2: And inflation . So we're , you know , we're currently trying to ride out the storm . As I said , we've got our fingers on the dial around the marketing spend and the cost structure .

Speaker #5: And I'm wondering if you're seeing any evidence or hearing of any evidence that kind of the recent challenges related to funding for private equity, if that's had any impact on their approach to M&A in the markets, in the industries where you're looking, in terms of their activity levels, their pricing behavior, just if you're seeing any sort of knock-on effect from that at all.

Speaker #2: And if we , you know , Jeremy mentioned it in his prepared comments . If we do see or believe that this is a prolonged downturn , we will we'll adjust quickly .

Speaker #2: But

Tim James: Okay. Thank you. The last question, just turning back, and you've touched on the M&A environment. I just wanted to focus in on one particular aspect here. I'm wondering if you're seeing any evidence or hearing of any evidence that, kind of the recent challenges related to funding for private equity, if that's had any impact on their approach to M&A, in the markets, in the industries where you're looking, in terms of their activity levels, their pricing behavior, just if you're seeing any sort of knock-on effect from that at all?

Speaker #8: Okay . Thank you . The last question , just turning back and you've touched on the kind of the M&A environment , but I just wanted to kind of focus in on one particular aspect here .

Speaker #4: The one thing I would say is that while it appears that the multiples are not trending up or down, they remain very high. But the number of bidders for opportunities is probably lower right now as you suggest.

Speaker #8: And I'm wondering if you're seeing any evidence or hearing of any evidence that the recent challenges related to funding for , for private equity , if that's had any impact on their approach to M&A , you know , in the markets , in the industries where you're looking in terms of their activity levels , their pricing behavior , just if you're seeing any , any , any sort of knock on effect from that at all .

Speaker #4: Some funds and buyers have pulled back. So there aren't as many people at the table. But the valuations appear to be holding. The other thing I would say is that for the first time, we're seeing and hearing about distressed platforms particularly in the roofing space where the bank is getting involved either through their special loans group or in one instance even taking control

Scott Patterson: The one thing I would say is that, while it appears that the multiples are not trending up or down, they remain very high. The number of bidders for opportunities is probably lower right now. As you suggest, some funds and buyers have pulled back. There aren't as many people at the table, but the valuations appear to be holding. The other thing I would say is that for the first time, we're seeing and hearing about distressed platforms, particularly in the roofing space, where the bank is getting involved, either through their special loans group or in one instance, even taking control.

Speaker #2: The one thing I would say is that while it appears that the multiples are , are not trending up or down , they remain very high , but the number of bidders for opportunities is , is probably lower right now , as you suggest , some funds and buyers have pulled back .

Speaker #2: So there aren't as many people at the table . But the valuations appear to be appear to be holding . The other thing I would say is that for the first time , we're seeing and hearing about distressed platforms , particularly in the roofing space , where the bank is getting involved either through their special loans group or in one instance , even taking control

Speaker #5: That's great. That's really helpful. Thank you. Those are all the questions I have.

Speaker #1: Thank you. My next question. Coming from the lineup, Himanshu Gupta with Scotiabank, Jalan is now open.

Speaker #6: Thank you. And good morning. So first on restoration business, it looks like organic growth is likely to be flat in the first half of the year.

Speaker #6: What are your expectations for full year 2026? I think previously we got an impression that it could be high single-digit growth business for the year.

Tim James: That's great. That's really helpful. Thank you. Those are all the questions I have.

Speaker #8: That's great . That's really helpful . Thank you . Those those are all the questions I have .

Operator: Thank you. Our next question coming from the line of Himanshu Gupta with Scotiabank. Your line is now open.

Speaker #1: Thank you . My next question coming from the line of Himanshu Gupta with Scotiabank and is now open .

Speaker #4: Jeremy, why don't I pass that to you?

Himanshu Gupta: Thank you, and good morning. First, on restoration business. Looks like organic growth is likely to be flat in H1 of the year. What are your expectations for full year 2026? I think previously we got an impression that it could be high single-digit growth business for the year.

Speaker #5: Yeah. I mean, Himanshu, our expectation is mid to high. Historically, we've looked at it since we've owned the commercial restoration business and we've averaged about 8% organic growth.

Speaker #9: Thank you and good morning . So first on restoration business looks like organic growth is likely to be , you know , flat in the first half of the year .

Speaker #9: What are your expectations for full year 2026 ? I think previously we got an impression that it could be high single digit growth business for the year

Speaker #5: But it's not a business that goes in a straight line Scott spoke about the weather-driven events where we're positioned. Where our branches are. So a quarter to quarter fluctuation is one thing that people should realize this business can be a little more have greater fluctuations in terms of top line and bottom line.

Scott Patterson: Jeremy, why don't I pass that to you?

Speaker #2: Jeremy , why don't why don't I let pass that to you ?

Jeremy Rakusin: Yeah. Himanshu, our expectation is mid to high. Historically, we've looked at it since we've owned the commercial restoration business, and we've averaged about 8% organic growth. It's not a business that goes in a straight line. Scott spoke about the weather-driven events, where we're positioned, where our branches are. A quarter-to-quarter fluctuation is one thing that people should realize. This business can have greater fluctuations in terms of top line and bottom line from quarter to quarter. We exited 2025 on a very mild weather year. The backlogs that Scott mentioned entering 2026 were quite low. We did get a shot in the arm from Winter Storm Fern, but it was a small event. It's still an early part of the year. The backlogs from last year, again, lower due to mild weather.

Speaker #3: Yeah . I mean , Himanshu , our expectation is mid to high . You know , historically we've looked at it since we've owned the commercial restoration business and we've averaged about 8% organic growth .

Speaker #5: From quarter to quarter. And also, we exited '25 on a very mild weather year. So the backlogs that Scott mentioned entering 2026 were quite low.

Speaker #3: But it's not a it's not a business that goes in a straight line . You know , Scott spoke about the , you know , the weather driven events where we're positioned , you know , where our branches are .

Speaker #5: We did get a shot in the arm from winter storm Fern, but it was a small event. So it's still an early part of the year.

Jeremy Rakusin: A quarter-to-quarter fluctuation is one thing that people should realize. This business can have greater fluctuations in terms of top line and bottom line from quarter to quarter. We exited 2025 on a very mild weather year. The backlogs that Scott mentioned entering 2026 were quite low. We did get a shot in the arm from Winter Storm Fern, but it was a small event. It's still an early part of the year. The backlogs from last year, again, lower due to mild weather. We just think that the randomness of weather is one aspect. On average, we do expect weather events to resume their normal level of activity. We've captured share over the years. That's why we feel confident in doing better in H2 and for the year than we do in H1 being flat.

Speaker #3: So a quarter to quarter fluctuation is one thing that , you know , people should should realize this business can be a little more have greater fluctuations in terms of top line and bottom line from quarter to quarter .

Speaker #5: The backlogs from last year, again, lower due to mild weather. And we just think that the randomness of weather is one aspect. But on average, we do expect weather events to resume their normal level of activity.

Speaker #3: And also , you know , we exited , we exited 25 on a very mild weather year . So the backlogs that Scott mentioned entering 2026 were quite low .

Speaker #5: And we've captured share over the years. So that's why we feel confident in doing better in the back half of the year and for the year than we do in the front half of the year being flat.

Speaker #3: We did get a shot in the arm from winter storm Fern, but it was a small event. So it's still an early part of the year.

Speaker #3: The backlogs from last year , again lower due to mild weather and you know , we just think that the you know , the randomness of weather is , one aspect .

Jeremy Rakusin: We just think that the randomness of weather is one aspect. On average, we do expect weather events to resume their normal level of activity. We've captured share over the years. That's why we feel confident in doing better in H2 and for the year than we do in H1 being flat.

Speaker #6: Got it. Thank you for the lead through. I think for the color. Okay. And then now moving on to roofing segment. And I know a bit of discussion already has happened so far.

Speaker #3: But on average , we do expect weather events to resume , resume their normal level of activity and we captured share over the years .

Speaker #6: Can you speak about the roofing backlog? I mean, in terms of quality of the backlog or directionally how is it trending?

Speaker #3: So that's why we feel confident in doing better in the back half of the year . And for the year than we do in the front half of the year .

Speaker #4: Yeah. It's down modestly from a year ago, really due to the shift from having some new construction in the backlog down to primarily re-roof.

Himanshu Gupta: Got it. Thank you for the lead through. I think that's a color. Okay. Now moving on to Roofing segment. I know a bit of discussion already has happened so far. Can you speak about the roofing backlog? In terms of quality of the backlog or directionally, how is it trending?

Speaker #3: Being flat .

Speaker #9: Got it . Thank you for the read through . I think for the color . Okay . And then now moving on , on to roofing segment .

Speaker #4: And but it's stable the last few quarters and starting to build. Our bidding work and generally active and winning. And as I said, we're feeling optimistic that we just need to battle through this period of uncertainty because the re-roof market, the fundamental demand drivers are there.

Speaker #9: And I know a bit of discussion already has happened so far . Can you speak about the roofing backlog ? I mean , in terms of quality of the backlog or directionally , how is it trending ?

Scott Patterson: Yeah. It's down modestly from a year ago, really due to the shift from having some new construction in the backlog down to primarily reroof. It's stable the last few quarters, and starting to build. Our branches are bidding work and generally

Speaker #2: Yeah , it's down modestly from a year ago . Really due to the shift from having some new construction in the backlog down to primarily reroof and but you know , it's it's stable .

Speaker #2: The last few quarters and starting to build up our branches are , are bidding work and , and generally active and , and winning .

Speaker #4: And we feel like we're in a great position to capitalize on it.

Speaker #6: Got it. Thank you. And is the new roofing mostly tied to industrial warehouses? New supply, construction cycle? Is there a thought to add exposure to data center here?

Speaker #2: And as I said , we're feeling , we're feeling optimistic that we just need to battle through this , this period of uncertainty because the reroof market , the , the fundamental demand drivers are there .

Speaker #6: I mean, given what you're seeing a fair amount of construction.

Speaker #4: I mean, the new construction outside of data centers, office, retail, industrial, those markets are all weak. If you look across North America, there are pockets of activity.

Speaker #2: And , and we feel like we're in a great position to , to capitalize on it .

Speaker #9: Got it . Thank you . And is the new roofing , you know , mostly tied to industrial warehouses , you know , new supply construction cycle ?

Speaker #4: But generally, those areas are weak. Data centers is it's a big driver of the new construction market.

Speaker #9: Is there a thought to add exposure to data centers here? I mean, given which is seeing a fair amount of construction.

Speaker #2: I mean , the new construction outside outside of data centers , you know , office , retail , industrial , those markets are all weak .

Speaker #6: Yeah. Fair enough. And I assume you don't have much exposure to the data center within the roofing segment. So is there a thought?

Speaker #4: Not on the roofing side. No, we don't, Himanshu.

Speaker #2: If you look across North America , there are pockets of activity . But generally those areas are weak Data centers is , you know , it's a big driver of of the new construction market

Speaker #6: Yeah. And there's no thought to add exposure in that segment anytime, so.

Speaker #4: Well, it's not so easy to add exposure. The operations that comprise roofing corporate of America have not historically participated in data centers. And part of the reason is that the focus has been re-roof and repair and maintenance.

Speaker #9: Yeah . Fair enough . And I assume you don't have much exposure to the data center within the roofing segment . So is there a thought

Speaker #2: Not on the roofing side ? No . We , we don't . Himanshu .

Speaker #4: That's our strategic focus long-term. So I mean, we will be opportunistic, but it's not something that we're aggressively pursuing. No.

Speaker #9: Yeah. And there's no thought to add exposure in that segment anytime soon.

Speaker #10: Well .

Speaker #2: It's not so easy to add exposure . The , you know , the operations that comprise roofing , corporate America have not historically participated in , in data centers and part of the reason is that the focus has been reroof and repair and maintenance .

Speaker #6: Thank you. And my last question is on FSR, on the residential side. I mean, do you have visibility in terms of new contract wins or losses in the next three months or six months?

Speaker #6: Any kind of.

Speaker #2: That's our strategic focus long term . So I mean , we will be opportunistic , but it's not something that we're aggressively pursuing .

Speaker #4: Yeah. Yes. We have visibility in that business. Absolutely. And as I said in my comments, I believe we'll be show growth that's similar or up in Q2.

Speaker #2: No .

Speaker #9: Thank you . And my last question is on SSR on the residential side . I mean , do you have visibility in terms of new contract wins or losses in the next three months or six months ?

Speaker #4: And for the balance of the year.

Speaker #6: Awesome. Thank you. And that's all from my side. Thank you.

Speaker #1: Thank you. Next question in queue coming from the lineup. Daryl Young with Staple. You're on the snow open.

Speaker #9: Any color there ?

Speaker #10: Yeah .

Speaker #2: Yes . We have visibility in that business . Absolutely . And you know , as I said in my comments , I believe we'll be show growth at similar or up in Q2 .

Speaker #7: Yeah. Thanks. Just one quick follow-up. You mentioned some distress in roofing. What would your appetite be to take on a more complicated acquisition that maybe has some distress and then secondly, has your appetite in roofing to deploy capital into roofing changed at all just given the market dynamics you've seen over the last 12 months?

Speaker #2: And for the balance of the year .

Speaker #9: Awesome. Thank you. And that's all from my side. Thank you.

Speaker #1: Thank you . Next question in queue coming from the line of Darryl Young with CFO . Your line is now open .

Speaker #7: Or is it still a core vertical for the long term?

Speaker #4: It's very much a core vertical for the long term. We're focused on an active in terms of looking at opportunities. And certainly, most of these businesses we're familiar with and have a view on in terms of their position in their local markets.

Speaker #5: Yeah , thanks . Just one quick follow up . You mentioned some distress and roofing . What would your appetite be to to , to take on a more complicated acquisition that maybe has some distress and then secondly , has your appetite in roofing to deploy capital into roofing changed at all ?

Speaker #4: So we're keeping a finger on the pulse of all the activity in the roofing space. And absolutely interested in opportunities as they present.

Speaker #5: Just given the market dynamics you've seen over the last 12 months , or is it still a core vertical for the long term ?

Speaker #2: It's very much a core vertical for the long term . We're focused on and active in terms of looking at opportunities , and certainly , you know , most of these businesses were familiar with and have a have a view on in terms of their position in their local markets .

Speaker #7: Got it. Thanks very much.

Speaker #1: Thank you. Our next question coming from the lineup, Stephen McLeod with BMO Capital Markets. You're on the snow open.

Speaker #8: Thank you. Just one follow-up question. I just wanted to ask about I just wanted to confirm on the FSR margin side. Because I believe you talked about organic sales growth being up and sequentially improving through the year.

Speaker #2: So, we're keeping a finger on the pulse of all the activity in the roofing space, and absolutely interested in opportunities as they present.

Speaker #8: So just on the margin side, would you expect a similar trend on margins? Just noting that last year you had very strong kind of margins in the 11% range in Q2 and Q3.

Speaker #5: Got it . Thanks very much

Speaker #1: Thank you. Our next question comes from the line of Stephen McLeod with BMO Capital Markets. The line is now open.

Speaker #8: Were those anomalies to the high side?

Speaker #4: Thank you . Just just one follow up question . I just wanted to ask about I just wanted to confirm on the FSR margin side , because I believe you talked about , you know , organic sales growth being , you know , up and sequentially improving through the year .

Speaker #4: Well, I said in my prepared comments and in some of the Q&A, we expect the trend in Q2 to resemble Q1. So we're up 50 basis points, something of that order of magnitude wouldn't assume anything more than that.

Speaker #4: So just on , on the margin side , would you expect a similar trend on margins ? Just noting that last year you had very strong margins in the 11% range in Q2 and Q3 were there were those an anomalies , anomalies to the high side

Speaker #4: And then I think we flatten out in the back half of the year, Q3 and Q4, on a year-over-year basis.

Speaker #8: Okay. That's very helpful. Thanks, Jeremy.

Speaker #1: Thank you. And I'm showing no further questions in the queue at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.

Speaker #3: Well , I , I said in my prepared comments and in some of the Q&A , we expect the trend in Q2 to resemble Q1 .

Speaker #3: So we're up 50 basis points . Something of that order of magnitude wouldn't assume anything more than that . And then I think we flatten out in the in the back half of the year , Q3 and Q4 on a year over year basis .

Speaker #4: Okay . That's that's very helpful . Thanks , Jeremy

Speaker #1: Thank you And I'm showing no further questions in the queue at this time . Ladies and gentlemen , this concludes today's conference call .

Q1 2026 FirstService Corp Earnings Call

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