Firstservice Corp Stock

Good day, and welcome to the second quarter investors conference call. Today's call is being recorded. Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward-looking statements and involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance or achievements contemplated in the forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's annual information form as filed with the Canadian Securities 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 July 23, 2026. [Operator Instructions]

I would now like to turn the call over to Chief Executive Officer, Mr. Scott Patterson. Please go ahead, sir.

Thank you, Lisa. Good morning, everyone. Thank you for joining our Q2 conference call. I'm on today with our CFO, Jeremy Rakusin. I'll kick us off with some high-level comments. Jeremy will follow with more detail.

Let me start by saying that we're generally pleased with our Q2 results in an economic environment that continues to be quite challenging. We're also pleased with the progress we made during the quarter on a few fronts that we believe puts us in a position to achieve a stronger second half of the year and gain momentum into 2027.

Total revenues for the second quarter were up 2% over the prior year, half organic growth. EBITDA for the quarter was up 3%, reflecting a consolidated margin of 11.2%, up 10 basis points over the prior year and better than expectation primarily within our Brands division. Jeremy will walk through the detail in his prepared comments. Finally, our earnings per share were up 2% over the prior year, in line with top line growth.

Looking at our divisional results. FirstService Residential revenues were in line with expectation and up 5% organically. The reported revenues were slightly less at 4%, reflecting the sale of our residential pool maintenance operations early in the quarter. We separated and sold residential accounts that have accumulated over the years to focus solely on commercial pool maintenance and management. Our core property management business continues to perform solidly on expectation, and we expect similar results for the balance of the year.

Moving on to FirstService Brands. Revenues for the quarter were up 1%, with strength at Century Fire, tempered by approximately flat results at our restoration and home service brands and largely offset by revenue declines within our roofing operation. I'll walk through each of the segments.

Revenues for our two restoration brands Paul Davis and FIRST ONSITE were down slightly from the prior year. As we pointed out at the last two quarter ends, we entered the year with a weakened pipeline due to the mild weather experienced in Q4 of last year, which has impacted us in the first half of this year. Towards the end of Q2 and into July, we made significant progress in signing work and bolstering our pipeline back to historically healthy levels. In particular, we won a number of large loss projects across North America that will convert to revenue over the next 12 to 18 months.

In addition, we're seeing opportunities for specialty construction projects that have arisen through our restoration work with certain customers and in certain verticals. Looking forward, we expect to show approximately 5% year-over-year growth in the back half of the year for our restoration brands. It's a modest outlook relative to the uptick in activity as it's difficult to forecast how quickly the recent backlog additions will convert to revenue.

Our experience suggests that scoping, permitting and insurance navigation could create delays in generating revenue. Storm and hurricane activity in the coming months could add to the backlog and improve this growth outlook.

Moving to our Roofing segment. Revenues for the quarter were down approximately 6% on a reported basis and 10% organically, lower than our expectation. There are a few factors that impacted our top line during the quarter. First and foremost, the market remains stubbornly weak and ultracompetitive, both the new construction market outside of data centers and the reroof market. And the market conditions are particularly acute in two of our larger branch regions, Las Vegas and Southwest Florida. In both markets, we have intentionally moved away from certain low-margin work that was in our pipeline.

The other factor during the quarter was the delay of a few large reroof projects that we expected to complete during the quarter. The delays accounted for half the miss relative to our expectation. All the projects remain in our backlog. The roofing market has been a challenge for us in the past year. It's been a difficult environment and with ongoing macroeconomic uncertainty it's unlikely to improve materially in the near term.

That said, we strongly believe that the long-term thesis is unchanged. Roofing is a huge market and an essential service with long-term tailwinds. We believe in our team and are focused on continuing to build the platform. As evidence of our ongoing belief in the opportunity, we closed on the acquisition during the quarter of Schefers Roofing in Kansas City. Schefers is a leader in the market, serving customers throughout Missouri and Northern Arkansas and strengthens our presence in the important Midwest region.

Looking forward to Q3, we expect our roofing operations to be down slightly with organic growth off in the mid-single-digit range.

Moving to Century Fire. We had another strong quarter that was right on expectation and mirrored our Q1 results with revenues up over 10% versus the prior year, including high single-digit organic growth. During the quarter, we announced the acquisitions of Titan Fire Protection based in Tampa, Florida and GSC Fire & Security based in Austin, Texas. Titan is a sprinkler installation company, serving commercial customers across Central Florida. GSC is an alarm installation and service company serving the Austin and San Antonio markets. In both cases, Century will look to partner with the management teams to broaden the service capability and provide both sprinkler and alarm install and service across the respective customer bases.

Looking forward for Century, we finished the quarter with an improved backlog sequentially and expect similar strong 10% plus year-over-year growth for the third and fourth quarters.

Now on to our home service brands, which as a group generated revenues that were up slightly versus a year ago, modestly better than our expectation. As a reminder, our home service brands include California Closets, CertaPro Painters, Floor Coverings International and Pillar To Post Home Inspection. Activity levels at these brands are closely tied to the housing market and consumer sentiment, both of which continue to hover around 10-year lows.

The teams continue to do a great job driving increases in close ratio and average job size to eke out revenue gains. We're not getting any helpful market improvement, and we're not expecting any over the back half of the year. Market indices and economic forecasts all suggest continued weakness in the housing market and consumer confidence.

Looking forward for our Home Services Group, we expect the teams to continue to take market share to drive similar results for the third and fourth quarters with revenues that are slightly up year-over-year. Let me now hand off to Jeremy.

Thank you, Scott, and good morning, everyone. As always, I'll provide details of our segmented financial performance, summarize our cash flow, capital deployment and balance sheet position and close out the commentary with a look forward. But first, a recap of our consolidated financial results. Revenues for the second quarter were $1.45 billion, up 2% year-over-year, and we reported adjusted EBITDA of $161.7 million, up 3% versus the prior year.

Adjusted EPS came in at $1.75, a 2% increase over Q2 2025. This brings our year-to-date consolidated financial performance for the first half of the year to revenues of $2.77 billion, an increase of 4% over last year. Adjusted EBITDA of $267 million, representing 3% growth over the $260 million last year, with a margin of 9.7%, down 10 basis points year-over-year. And adjusted EPS for the first half of the year sits at $2.69 versus $2.63 in the prior year period.

Our adjustments to operating earnings and GAAP EPS to calculate our adjusted EBITDA and adjusted EPS, respectively, have been summarized in this morning's press release and remain consistent with our disclosure in prior periods.

Reviewing the second quarter segmented financial performance, I'll lead off with our FirstService Residential division. Quarterly revenues came in at $617 million, up 4% over the prior year, and as Scott mentioned, up 5% organically. EBITDA for the quarter was $69 million, a 6% year-over-year increase with an 11.2% margin, up 20 basis points over the 11% margin in Q2 of last year.

For the first half of 2026, our division EBITDA margin sits at 9.9%, up 30 basis points compared to the equivalent prior year period. During the remainder of the year, we expect margin improvement to continue at similar pacing to the year-to-date performance as our teams continue to extract efficiencies in various areas of the enterprise.

Shifting to the FirstService Brands division. Our financial metrics for the second quarter were relatively comparable to last year's Q2, including revenues of $832 million and EBITDA at $96 million, both up 1%. Our margin during the quarter was 11.5%, down 10 basis points with the quarter-over-quarter performance better than both Q1 and our expectations heading into the current quarter. In particular, Home Services margins performed relatively better as we continue to optimize the balance of marketing and promotional investments in support of lead flow.

Turning to our cash flow profile. We generated $112 million in operating cash flow during the second quarter prior to working capital movements and in line with the prior year. Cash flow after accounting for working capital changes was $130 million for the quarter and sits at almost $220 million year-to-date.

Our capital expenditures during the quarter were a little over $30 million. And with our year-to-date total at $60 million, we expect our annual CapEx to be roughly $130 million less than our initial target of $140 million we provided at the beginning of the year. Acquisition spending on tuck-under deals during the quarter was just over $40 million. The combination of our recent free cash flow performance, together with conservative debt levels on our balance sheet, supported our decision during the second quarter to also execute share repurchases under our normal course issuer bid.

During the quarter, we purchased more than 1.8 million shares at a total cost of almost $250 million or an average price per share of USD 135.91. With these buybacks, our leverage, as measured by net debt to EBITDA increased modestly to 1.8x from the 1.5x level at the end of Q1. Our leverage remains conservative, and we still have ample liquidity with more than $800 million of cash on hand and undrawn bank credit facility balances. This current financial flexibility allows us to continue opportunistically repurchasing additional FirstService shares under the buyback program. When we see the valuation of our large, diversified enterprise trading at a meaningful discount to smaller private market businesses in our respective industries.

At the same time, we are focused on building our tuck-under deal pipeline to deploy growth capital when we see acceptable acquisition valuations and target return thresholds.

Concluding with an outlook, our FirstService Residential division will deliver growth in the balance of the year largely mirroring recent quarters, mid-single-digit top line growth with modest year-over-year margin improvement. For the Brands division, Scott has provided top line growth indicators for each of the operating businesses which aggregates to mid-single-digit revenue growth in the back half of the year. This performance will be skewed to the fourth quarter and influenced by the amount of restoration backlog to revenue conversion from the increased pipeline activity levels that Scott referenced as well as capitalizing on any potential seasonal spikes in weather activity in the coming months.

Putting it all together on a consolidated basis for the upcoming third quarter, we expect both revenue and EBITDA growth to be similar to the second quarter in the low single-digit range. For the full year, consolidated revenue growth is expected to be similar to or modestly better than our year-to-date top line growth, and we are anticipating mid-single-digit annual EBITDA growth over 2025. That concludes our prepared comments.

Lisa, you may now open the call to questions. Thank you.

[Operator Instructions] Our first question will be coming from the line of Stephen MacLeod of BMO Capital Markets.

I just wanted to just circle around on the Roofing business. Obviously, the backdrop is quite weak, and you referenced a continued competitive environment. I'm just curious if you see any -- I mean, I know you gave the outlook for the balance of the year, but just curious kind of what factors you're looking for to potentially see a light at the end of the tunnel with respect to some of the reroofing projects that have been delayed and how your backlog currently looks?

Yes. Let me start with the backlog, Stephen. It's down year-over-year, but it is up in June sequentially over May, and May was up sequentially over April. So we are moving in the right direction, but slowly and I would say battling headwinds. The misses in Q2 were really, as I suggested, from some jobs that were delayed. They all still remain in our backlog, but the -- but we don't have start dates. They've been -- there's a number of factors associated with each.

The largest is an insurance claim relating to hail damage, and it's caught up in negotiations between the owner and insurance carrier. It will take place. It's just a matter of when. And then as I suggested, we've intentionally moved away from jobs that were in our pipeline due to the tight pricing, which was beyond our comfort level, particularly in Southwest Florida.

Okay. That's helpful. And I guess you noted that one of the largest sort of projects in the backlog was related to an insurance claim. How much of the delays you're seeing are attributable to factors such as that versus the macro backdrop and companies just saying, we'll do this next year when we have better visibility.

I think the delays are primarily related to delays in construction and whether that's other contractors finishing their bid on time and pushing it out or insurance-related issues because all of these projects -- the projects I'm referencing were in our pipeline, and we expect it to complete. But in terms of building the pipeline more quickly, we're seeing softness in the market.

Okay. That's helpful. And then maybe just one for Jeremy. Just on the NCIB, you're obviously very active in the quarter. And I know you talked a little bit about the balance between funding M&A as well as being active when the stock price is materially dislocated from fair value. I'm just curious how you prioritize those two things. And how you -- how much -- how active do you expect to be on the buyback in the back half of the year?

Yes. I mean, we've been buying at current levels, and you can be sure that we will continue to do so just given our balance sheet is still quite conservative under 2x. I mean, we feel comfortable going at least to the mid-2s level, like 2.5x would be a strong comfort level for us. We're always going to look at our pipeline. So if we see imminent deals that are of size and provide attractive returns that would take priority. But we think we can do both with our current balance sheet and the $800 million plus of liquidity we can do them in tandem. So a lot of flexibility to use the buyback program as well as not compromise our tuck-under acquisition prospects.

The next question is coming from the line of Stephen Sheldon of William Blair.

Scott, I wanted to dig in a little more on restoration and some of your comments in the prepared remarks. It sounds like sales activity pipeline has picked up there in the quarter and not tied to big storm activity. So can you just refresh us on the progress building out relationships with larger, more national accounts? Is that becoming more impactful to the trajectory of the business? And then I would also love more detail on where the team is finding success with more specialized and complex restoration services like you kind of alluded to in the prepared remarks.

Right. Well, certainly, we've been talking about it for a few years, how hard the team has been working in terms of developing and enhancing the national account roster, but also at the same time, really developing expertise in a number of different verticals, health care and government. And generally developing a reputation for large loss claims. And just really the last 4 to 6 weeks, I'd say, we've signed, as I said in my prepared comments, a number of large loss projects that will benefit us over the next 18 months or so.

The projects, they're not related in any way. They're all tied to various regional weather events or specific fire or water damage claims. The factories, large warehouses, government buildings, big box retail, multifamily across North America. So it is a significant sort of rally for us that certainly has enhanced our backlog. And as I said, not likely to help us materially in Q3. These projects are still being scoped. The sizes are not clear. We'll see some in Q4, but it's certainly going to help us in 2027. And you had a question right at the tail end, Stephen, can you repeat that?

Yes. I think you answered it just with like health care and government, but just, yes, where you're seeing, I guess...

Yes. You asked about the -- I made a comment about specialty contracting. And that really has evolved from our expertise and depth of experience in the health care sector. We have a number of team members that have specific certification and training around the mitigation and construction in a sensitive health care environment. And this expertise and reputation has led to other construction opportunities in health care. And then beyond that, other contracting opportunities in general. I'm talking about retrofits and capital improvements and some new construction opportunities. So we've been asked to submit bids on unique situations based on our experience, and we have a few wins with some pending and I would say, momentum building.

Got it. Very helpful. Maybe just following up on restoration then. I think you talked about 5% growth in the back half of the year. So I want to make sure I heard that right. And then I know you don't want to talk about next year, but I guess if some of these things are starting to pick up, I mean, I know a lot can happen to flow with big storm activity, but excluding that, I guess, are we -- as we think about heading into next year and especially the first half if some of the stuff picks up, would we be in line to have even better growth, I guess, and potentially even more than a storm activity gives you opportunities as well. I guess, just how you're thinking about it into next year?

Yes. I mean, we should. It's -- we're feeling good about our restoration because the pipeline where it is today, and we're just heading into storm season and who knows, right? But we do feel good about the position we're in heading into the back half and into '27 for sure.

And the next question is coming from the line of Daryl Young of Stifel.

I wanted to touch on residential and your new cross-selling initiative that you announced, I think it's called Resilience First that looks to be a concerted effort to cross-sell restoration with residential. Could you maybe expand on what that is and the opportunity and whether there's any other cross-sell opportunities you're pursuing expressly?

Yes. That effort and program is between FirstService Residential and our restoration brands and roofing operations. It is cross-selling, but I really think about it as a focus on bringing value to our managed communities and differentiating FirstService Residential from its competitors. And the goal is to reduce the frequency of loss events. And then some prevention and then minimizing the severity of losses.

So we're talking about complementary inspections, training, education, storm preparation, most of the losses we see in our communities are water losses and simply educating residents and property managers around water shutoff certainly when they leave on vacation or you get water into one unit, it seeps into neighboring units, and that's the typical loss scenario in our communities, and they can be prevented. And that's what we're focused on, access to a proprietary leak detection program for our communities. If we're successful, it will reduce the number of claims, reduce the severity of loss and drive down insurance costs for our communities. And again, the focus is on differentiating FirstService Residential.

Got it. Okay. And then just moving to margins. Performances, I'd say, continue to be quite strong despite maybe a softer organic growth environment. So I'm wondering if when organic growth recovers, can you hold the existing benefits? Or will there be some costs that maybe come back as activity levels pick up? I guess, said differently, is there operating leverage still to come from here?

Yes, Daryl, you got to look at it business by business, property management, it's a lot of variable costs as we grow. And that business is performing right down the fairway. We've got a little bit of margin expansion built in, as I said in my prepared comments.

On the brand side, pretty well every business, and we obviously speak about the optimistic outlook for growth in restoration. Those businesses do generate good operating leverage when you get the top line growth, even if there are some investments that come in support of that growth, it's a net positive to the margin.

Our next question is coming from the line of Erin Kyle of CIBC.

I just wanted to go back to the Roofing segment and maybe a follow-up on an earlier question. But maybe in your view in terms of what's impacting the segment from a macro perspective, what would you say is most meaningful or substantial to customer decisions there? Is it rates, inflation? Is it the Middle East complex and oil prices, all of the above, like what would you say really needs to change for a reroof activity to really start converting there?

Well, remember, Erin, that first of all, the new construction outside of data centers is down year-over-year. And that's a big chunk of the market. So that's a driver. And a lot of new construction-focused roofers have turned their attention to the reroof market. So the reroof market is probably flat nationally, but the level of competition around reroof has increased significantly. I think that everything you mentioned, interest rates, Mid-East war, inflation, all of that is impacting in both of those markets. And -- but reroofs could be deferred, but longer term, they're nondiscretionary. So it is a matter of time.

And I think that the competitive environment will normalize because some of the pricing is not sustainable and particularly in a few of our markets that I've referenced, Southwest Florida is a unique situation right now. I mean we know from our major suppliers that the market is particularly weak relative to the rest of the U.S. And in fact, the data we have, we're off less than the market in general.

And a lot of that -- there's a couple of things going on in Hurricane Ian effectively pulled forward a few years of reroof work and our businesses benefited at the time. But the last 2 years, we've seen declines of those peaks. And post-hurricane, there were a number of roofers that expanded to Florida to capitalize on the surge. So right now, there is overcapacity in that market, and every job is ultracompetitive.

We have a very strong position. And we'll be fine. We just need to let the market settle out and the capacity will normalize. We know operations are pulling out and closing their doors. So it's -- it will just take some time, but we'll be fine in Florida.

Okay. That's helpful there. And then maybe just on the M&A side. Just looking at the spend year-to-date. Last quarter, I think you flagged that there's been fewer bidders that some funds have pulled back in this environment. But FirstService M&A spend remains modest compared to historical. It's in line with 2025. So just looking back here. As you think about your capital deployment here, are you taking a more conservative approach as you're evaluating targets? Or how should we think about the M&A spend on a go-forward basis?

We're not necessarily taking a more considerable approach. We're sticking to our discipline being patient. Frankly, we're not seeing many quality companies come to market. And certainly, we're seeing fewer companies come to market.

So I think there are fewer opportunities. We're being very patient focusing on the right partnerships and ensuring that it's a fit both in terms of service line, geography and culture. So I'd sort of confirm that we expect this year to be similar to last year at this point based on the opportunities in our pipeline. But nothing has really changed for us. It's just the -- it's the number of opportunities that we're seeing.

Next question is coming from the line of Himanshu Gupta of Scotiabank.

So first on Century Fire, which has been strong for a few years now. I mean are we going to face tough comps at some point in time? I mean, just wondering how long these tailwinds can last in this business, what makes it so special?

Not -- it's not in our sight line, Himanshu. We continue to experience growth in both the sprinkler and alarm installation side, so half the business and on the repair, service and inspection side. We're seeing strength in multifamily. We've talked about some exposure to data center work, but it's -- approximately 15% of our backlog is data center. So it's not the key driver. We're really -- throughout our branch system, we just have a strong local branch network that are winning. And we grew the backlog sequentially in the second quarter, and it's well up over prior year. So we expect continued growth, as I said in my prepared comments.

That's a great color. And then moving to, obviously, roofing, a lot of questions have been asked. I think you mentioned already elaborated on the Florida branch. I'm just wondering on Las Vegas. We saw a fair bit of weakness last year as well in that branch. And again, I think you mentioned in Q2. Is there anything peculiar about this market, Las Vegas leading to the softness?

Well, again, there's a couple of things there. The market is weak, and we see that in our other businesses. So we know there's weakness in Vegas that is more significant than anything we might see nationally. The other issue for us in this market is that we're more weighted towards new construction. It's well over 50% versus 30% on average across our portfolio. So it's really that historical reliance on new construction that -- and we were strong in that business in '23, '24. So we're coming off 2 years in a row from that from some real strength -- new construction strength in Vegas, including some very large projects in '24.

Got it. That was very helpful. And then if I look at overall roofing, organic growth was down like 10% in Q2. Is it like new roofing is down like 20% or 30%? Is that the lion's share of all this underperformance happening for the entire segment I'm talking now?

Yes. I mean new construction. You know what, I actually haven't looked at it that way. Maybe Jeremy has, but it's -- yes, we would definitely weight towards new construction.

Yes. And industrial warehouse deliveries, if that doesn't improve next year, rather down double digits, so then that will further push new roofing in that regard.

Yes, I'm not sure I understand the question, Himanshu.

So I'm saying that if new roofing is tied to industrial warehouse construction, new construction. And if industrial warehouse construction is likely to be down double digits next year in the U.S., that will not help the roofing recovery in the near term.

Yes. It won't necessarily help our recovery, but we're -- our backlog is heavily weighted right now towards reroof. And so that's really our focus go forward. Our recovery is going to be driven by reroof. New construction will certainly help, agreed, when it happens.

Got it. And just one last question on capital allocation. Obviously, buyback is a big focus now. Have you reached a point when M&A is less accretive than buyback? Or are there verticals where you will still prefer M&A over buybacks?

Himanshu, it's really -- I mean, we target a mid-teens return on any of our capital deployment initiatives. And again, growing through tuck-in acquisitions and adding strategic assets to our brands is really the primary focus. But again, I said it earlier, we're able to do both at this juncture. And given the discount in the valuation of our business versus some other assets, we just think it makes -- it's compelling or highly compelling that we're buying back our stock at this juncture.

So we're not at the point with our conservative leverage to -- it's not an either or. We're able to do both at this point, and we're not going to compromise our normal bread-and-butter tuck-under program. It's just balancing that versus the opportunities. And as Scott said, some of the opportunities are a little lesser today. And so we're pursuing both paths equally.

Our next question is coming from the line of Frederic Bastien of Raymond James.

Scott, I believe you're in the midst of a brand-optimizing exercise at RCA sort of investing in the platform. Can you offer an update on that?

Yes, we're continuing and committed to it. It's really implementation of enterprise-wide financial system that pulls together 14 different operating systems. So it will give us much better information and ability to -- certainly ability to forecast and manage the businesses. So that continues. It's on track. And then there's -- we continue to invest in people. And generally, in the platform, Frederic, where we -- as I said in my prepared comments, we are -- we're committed about long-term opportunity in this business and continue -- committed to continue to invest.

Will that exercise yield in your view better growth opportunities or enhance margins or both?

I think it will enhance margins, not materially. It's not something we're sort of modeling out, but it just -- it's what we need to do to pull the business together and move forward strategically. We need better information. And it's very similar to what we did at FirstService Residential years ago and FIRST ONSITE more recently and Century Fire. It's a similar exercise, just puts us in a better long-term position to grow this business.

Understood. That's helpful. Jeremy, I have one for you. Can you clarify if the 1.8 million shares bought back include purchases in July? Or does that just pertain to the first 6 months of the year?

First 6 months of the year.

Can you indicate or tell us whether you've been active since?

No, we were in blackout. We had an automatic share purchase program, and the trigger points were not activated. We had to do it before we went into blackout. So the parameters were not, but we'll be out of blackout on Monday and then we can be active without our hands tied due to the blackout.

And our next question is coming from the line of Tim James with TD Securities.

Scott, I'm wondering, you've talked about fewer M&A opportunities coming to the market. I'm just wondering if you could talk about like in your view, why that is? It seems there are some particularly challenging conditions in roofing and to some extent in restoration, part of me would have thought that maybe would have kind of churned out a couple more opportunities and so either would be a greater set. But I'm just curious on your thoughts as to why you think there are fewer businesses coming to market.

Well, I think in those 2 areas, Tim, it's because they're not performing. And so the owners are -- they're coming off numbers that were better in '23, '24. And they want to get back there before they put the company on the market. And many of these businesses are owned by private equity. And so if the companies aren't performing, it means that they would need to crystallize a loss, and I think that they're reluctant to do that at this point.

Okay. That's helpful. My second question, really looking big picture here. Do you think there are any sort of structural changes in any of your businesses? Or structural changes in, I guess, the ability to roll out capital? And I guess what I'm thinking there is about PE and multiples being higher? Or would you say the challenges that the business -- across the business you're seeing today are just purely related to market forces that should normalize and kind of get you back on the path with kind of the same structural reasons for your strategy as has been the case for many years?

Well, I don't think that there are structural changes in the business models. As it relates to acquisitions, certainly, the level of private equity capital that we're competing with increases every year. So that has changed over the years. And I guess, could be defined as a structural change in how we operate. But in terms of our businesses and the fundamentals, I don't see any change. Does that get at what you were asking?

Yes. Yes. I'm just thinking if we want to kind of look forward and then pick our time when we think market conditions normalize, there's no reason to think FirstService is any different than it was prior to this challenging period.

No again, right?

Okay.

Thank you, and that does conclude today's programming. Thank you all for participating. You may now disconnect.

Good day, and welcome to the first quarter investor conference call. [Operator Instructions] 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. 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 April 23, 2026.

I would now like to turn the call over to Chief Executive Officer, Mr. Scott Patterson. Please go ahead, sir.

Thank you, Olivia. Good morning, everyone. Thank you for joining our Q1 conference call. We reported solid results this morning that were generally in line with expectations. 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. EBITDA for the quarter was up 2%, reflecting a modest an expected decline in our consolidated margin. Jeremy will walk through the detail in a few minutes. 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. 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 modest declines in ancillary services, 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.

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. 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. We expect a similar result in Q2 with single-digit top line growth from acquisitions and approximately flat revenue organically relative to a 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. 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 in repair, service and inspection revenues supported by solid growth in installation and contract revenues. The backlog is robust 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. 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 margin. 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 a year ago. It's expected to 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 2 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. As a reminder, we've had company-owned operations at Paul Davis and California Closets for many years now. We selectively acquire franchises and 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.

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, top line performance in each of our brands matched our expectations, as you just heard from Scott's walk-through 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 '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.

Turning now to the segmented results for our 2 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. 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. 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. The performance in 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 business, 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 and 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. 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 the spending 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 frontline teams. While we delivered revenues in line with prior year, job volumes declined, and we were reluctant to flex our labor cost 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, 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. 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 1.5x compared to 1.6x at prior year-end, and versus the 2x level at Q1 last year. We have a well-balanced mix of floating and fixed rate and varying maturities of debt instruments.

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.

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. 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 and 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.

[Operator Instructions] Our first question coming from the line of Stephen MacLeod with BMO Capital Markets.

Thank you. Just wanted to ask about the roofing vertical, which obviously you're seeing some pressure and -- both in the end markets as well as from competitive intensities. 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?

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. 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 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're -- we have a very solid branch network, and we're poised to really take advantage when the market improves.

Okay. That's helpful color, Scott. And then 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 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.

Yes, Stephen, it's Jeremy. Yes. No, it's 1 of the alternatives that's always in the forefront of our minds, particularly over 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. 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 it influences stock market valuations.

Okay. That's great. 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? Or do you see other alternatives in your other verticals as well?

No, I really think it's tuck-unders in the other verticals. Nothing has really changed as we approach the company-owned strategies at Paul Davis or California Closets. Those will be very episodic, 1 or 2 a year at each brand. So we're not looking to accelerate that.

Our next question coming from the line of Daryl Young with Stifel.

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

No. The growth has really been in the service, repair and 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 the branches that were primarily installation focused. 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.

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? Because I would have thought there's a lot of white space from a geographic expansion perspective.

No. I mean I think we are definitely holding our own. These storm events are all very, very different from 1 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. 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. So there's potential upside. But based on where our backlogs are, we do think the revenues will be flat, perhaps even down a bit in Q2.

Our next question coming from the line of Stephen Sheldon with William Blair.

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

Yes. Stephen, Jeremy. In our brands businesses, obviously, we've done it in residential, as you're aware, and that's part of the efficiencies. And the brands businesses, all of them are exploring tools to be more efficient on the front lines. I can point out 1 example, restoration, where in walk-throughs, job estimating and scoping, AI tools are being used to speed the process, be more productive for those estimating teams and also helping enhance the accuracy, making sure nothing is missed and we captured in that scoping exercise. That would be 1 example to call out, but all of our brands are using AI in an early stages, incremental way as we speak.

Got it. Makes sense. And then on roofing, I guess how are you thinking about the margin trajectory over the coming years? Those 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 and things like that? I guess what -- how are you thinking about the long term or the medium term margin trajectory there?

Yes. 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 reroof will abate, we'll get more pricing power. The other thing that's tempering our margins a little bit, we're pulling together 1 ERP financial reporting platform for all of our branches. 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. There could be opportunities even on the cost synergy side around procurement, using our scale to garner materials at better prices 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, yes, there would be opportunities medium- to long term.

Our next question coming from the line of Erin Kyle with CIBC.

Jeremy, just a 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 we achieved. It was my understanding that most of those cost savings have already been implemented in 2025. 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?

Yes. So a portion of the 50 basis points would have been a continuation of last year's initiatives around client counting 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 head count in our call centers and enhanced 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 ancillary, commercial maintenance and pool reno services. Those are lower margins. So we get a little bit of a tick up. And then really, a little pockets. We're a 20,000 associate division, very labor-intensive. So both the timing around contract wins and when we add head count to support that as well as just incremental pockets of efficiencies across our 100-plus offices. Those would be the sort of 3 or 4 reasons that aggregate to the 50 basis points. We'll see more of it in Q2 and then I believe, it will flatten out to second half of the year.

That's helpful color. And then maybe just on the M&A side. If I go back to M&A spending and looking forward for the rest of the year, Jeremy, you touched on the 2 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?

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. 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. Certainly, in roofing and restoration, we've seen deals pull back. Results are generally down. So sellers are waiting until there's a rebound. But we do have prospects in the pipeline across most of our segments and believe we will close incremental tuck-unders over the next 3 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 1 step at a time as transition makes sense for those owners and families.

Our next question coming from the line of Tim James with TD Cowen.

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 was 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?

Right. 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 in many of our businesses just with the reluctance to allocate CapEx to major projects and the deferral. We are entering seasonal period, and we'll see a resumption 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. 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, and there were a few contracts and 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. 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, 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, and we expect to see incremental sequential improvement through the year.

Okay. That's super helpful. Just turning to the home services and the promotional activity that you kind of kicked up in the first quarter 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 a matter of refreshing on kind of the success that, that drove and how it works.

Yes. 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 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. 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 and inflation. 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. 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.

Okay. 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 1 particular aspect here. 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?

The 1 thing I would say 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, 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.

Our next question coming from the line of Himanshu Gupta with Scotiabank.

So first on the restoration business. It looks like organic growth is likely to be flat in the first half 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.

Jeremy, why don't I let pass that to you.

Yes. 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. 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 from quarter-to-quarter. And also, we exited, we exited '25 on a very mild weather year. So the backlog that Scott mentioned, entering 2026 we're quite low. 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, 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, and we've captured share over the years. So that's why we feel confident in doing better in the half of the year and for the year than we do in the front half of the year being flat.

Got it. Thank you for the little [indiscernible] color. Okay. And then now moving on to roofing segment, 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?

Yes. It's down modestly from a year ago, really due to the shift from having some new construction of backlog down to primarily reroof. And -- but it's stable in the last few quarters and starting to build. Our branches are 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 reroof market, the fundamental demand drivers are there. And we feel like we're in a great position to capitalize on it.

Got it. And is the new roofing, mostly tied to industrial warehouses in a new supply, construction cycle? Is it a thought to add exposure to data center here, I mean, given we've just seen a fair amount of construction?

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

Yes, fair enough. And I assume you don't have much exposure to the data center within the roofing segment. So it that...

Not on the roofing side. No, we don't, Himanshu.

Yes. And there is no thought to add exposure in that segment anytime soon?

Well, it's not so easy to add exposure. The operations that comprise Roofing Corp of America, have not historically participated in data centers. And part of the reason is that the focus has been reroof and repair and maintenance. That's our strategic focus long term. So I mean we will be opportunistic, but it's not something we're aggressively pursuing, no.

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 3 months or 6 months? Any color there?

Yes. We have visibility in that business, absolutely. And as I said in my comments, I believe, we will be -- show growth at similar or up in Q2 and for the balance of the year.

Next question in queue coming from the line of Daryl Young with Stifel.

Just 1 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? Or is it still a core vertical for the long term?

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 were familiar with and have a have a view on in terms of their position in their local markets. 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.

Our next question coming from the line of Stephen MacLeod with BMO Capital Markets.

Just 1 follow-up question. I just wanted to ask about -- I just want to confirm on the FSR margin side. Because I believe you talked about inorganic sales growth being up and sequentially improving through the year. 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. Were there -- those anomalies to the high side?

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 or magnitude. I wouldn't assume anything more than that. And then I think we've flattened out in the back half of the year, Q3 and Q4 on a year-over-year basis.

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, and you may now disconnect.

Welcome to the FirstService Corporation Annual and Special Meeting of Shareholders. Today is Wednesday, April 1, 2026. And at this time, for opening remarks and introduction, I would like to turn this meeting over to FirstService's Founder and Chairman, Mr. Jay Hennick. Please go ahead, sir.

Good morning. I'm Jay Hennick, the Founder and Chairman of FirstService Corporation, and I will be the Chair of this meeting. Thank you to everyone for joining us today. This meeting is being held in a virtually only format via live webcast. Participating for the company in this meeting today are Scott Patterson, the CEO and also a Director; Jeremy Rakusin, CFO; and Abel Escobar, the Corporate Secretary.

Instructions on how to ask questions and the voting procedure will appear on your screens. As with any technology, unexpected glitches may occur, but our service providers for this platform at Lumi are experienced and will assist if needed. It is now just past 11:00 a.m., and the Annual and Special Meeting of the Shareholders of FirstService will now come to order.

With the consent of the meeting, I will act as Chair and in accordance with FirstService's bylaws, Abel Escobar will act as Secretary of the meeting. In addition, I appoint Rosa Garofalo of TSX Trust Company to act as scrutineer of the meeting. I'm now tabling a copy of the audited consolidated financial statements of FirstService for the year ended December 31, 2025. If requested, you will have received them separately or viewed them online with the consent of the meeting, we will dispense with the reading of the auditor's report and the financial statements shall be received.

Please note that after the formal portion of this meeting, our CEO and CFO, Scott Patterson and Jeremy Rakusin, will make a short presentation. Following that presentation, management will be available to answer questions. Accordingly, during the formal portion of this meeting, I will ask you to limit your questions to those matters directly relating to the specific matters being considered. Notice and proxy materials for this meeting were mailed to shareholders. Additional copies may be obtained upon request at www.sedarplus.ca. The secretary will report whether there is a quorum present.

According to the bylaws of FirstService, a quorum for any meeting of shareholders is two or more individuals holding or representing by holding by proxy, not less than 5% of the votes attached to all outstanding shares of FirstService entitled to be voted at the meeting. In accordance with the preliminary scrutineer report figures received from the scrutineer and our transfer agent, it is clear that we have a quorum of shareholders. A copy of the final report of the scrutineer will be annexed to the minutes of this meeting.

I'm advised that there's a quorum present. As a quorum is present, I declare this meeting to be regularly called and properly constituted for the transaction of business. In view of the need to attend to the formal matters, certain shareholders have volunteered to move and second resolutions. While this procedure will facilitate the handling of the formal matters, any registered shareholder or proxy holder may ask questions or provide comments on a matter when that matter is before the meeting. Should you like to address the Chair on any motion, please type in your question or comment in the message section. If there is any discussion or question, the secretary will read the question aloud.

We reserve the right to moderate questions, including combining questions on the same topic or where appropriate, ignoring them entirely when submitting your question. Please note that your name and whether you are a registered shareholder or a proxy holder. We will conduct the votes on all matters by a poll. On a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder. We will be concluding on the motions at the end of the meeting once we have been through all of the agenda items. Voting polls on the agenda items for today's meeting will be closed together at the end of the formal portion of the meeting.

The poll will now be open for all resolutions at this time. Lumi, would you please open the voting. The first item of business is the election of 8 directors. These directors will hold office until the close of the next Annual Meeting of Shareholders or until their successors are elected or appointed or they otherwise cease to hold office. The management information circular states that there are 8 proposed candidates. The Secretary will now read their names.

The names of the director nominees are Yousry Bissada, Elizabeth Carducci, Steve Grimshaw, Jay Hennick, Scott Patterson, Fred Reichheld, Joan Sproul, Erin Wallace.

Thank you. I remind shareholders that the directors are to be voted on individually in accordance with FirstService's majority voting policy.

I now recognize Angela Bai.

Angela Bai, shareholder. Mr. Chair, I nominate each of the 8 persons whose names have been read to this meeting for election as directors of FirstService to serve until the close of the next Annual Meeting of Shareholders or until their successor is elected or appointed or he or she otherwise ceases to hold office.

Is there any discussion on this matter or any further nominations?

Mr. Chair, there are no questions or further nominations.

Since there's no further nominations, I declare the nominations closed. May I have a motion in favor of the election of each of the 8 persons nominated?

Ryan Bedrich, shareholder.

Mr. Chair, I move that each of the persons nominated be individually elected as directors of FirstService until the next close of the next Annual Meeting of Shareholders or until their successor is duly elected or appointed or he or she otherwise ceases to hold office, subject to and in accordance with FirstService's bylaws and majority voting policy.

Angela Bai, shareholder. Mr. Chair, I second the motion.

The meeting will now vote on the election of each director. Please make sure to record your vote on each director nominee using the voting buttons on Lumi.

[Voting]

The next item of business is to consider a resolution appointing PricewaterhouseCoopers LLP as auditors of FirstService at a remuneration to be fixed by the directors. In order to be approved, the resolution must be passed by a majority of the votes cast.

May I have a motion for the approval of this resolution?

Mr. Chair, I move that PricewaterhouseCoopers be appointed as auditors of FirstService to hold office until the close of the next Annual Meeting of Shareholders at a remuneration to be fixed by the Board of Directors of FirstService.

Angela Bai, shareholder. Mr. Chair, I second the motion.

Is there any discussion on this matter?

Mr. Chair, there are no questions.

The meeting will now vote on the motion. Please make sure to record your vote on this resolution using the voting buttons on Lumi.

[Voting]

We will now consider the item of the special business before this meeting. You will have seen from the management information circular that FirstService is seeking approval of a resolution approving amendments to the FirstService stock option plan. The amendments will insert an annual limit of grants of options to nonemployee directors and increase the maximum number of common shares received for issuance pursuant to the exercise of stock options granted by an additional 2 million shares.

As noted in the circular, the stock option plan currently provides that the aggregate number of shares that can be issued upon the exercise of the options will not exceed 7.3135 million shares. If this resolution is approved, that total would increase to 9.3135 million shares, of the current 7.3135 million shares authorized for issuance, almost all have been previously allocated, exercised or terminated. The form of the resolution is set out on Page 43 of the circular. In order for this resolution to be passed, it must be approved by a majority of the votes cast.

The amendments to the stock option plan must also receive exchange approval. In order to be effective, the Toronto Stock Exchange has approved these items, subject to obtaining shareholder approval today. May I have a motion for the approval of this resolution?

Angela Bai, shareholder. Mr. Chair, I move that the resolution approving the amendments to the FirstService stock option plan, the form of which is set out on Page 43 of the management information circular furnished to shareholders in respect of this meeting be approved.

Ryan Bedrich, shareholder. Mr. Chair, I second the motion.

Is there any discussion on this matter?

Mr. Chair, there are no questions.

The meeting will now vote on the motion. Please make sure to record your vote on the resolution using the voting buttons on Lumi.

[Voting]

The final item of business before this meeting is the consideration of a nonbinding advisory resolution on FirstService's approach to executive compensation.

Despite being an advisory vote, the Board and the Compensation Committee will take the results of the vote into account when considering future compensation policies, procedures and decisions and in determining whether there is a need for further change to its engagement with shareholders on executive compensation and related matters. The form of the advisory resolution is set out on Page 43 of the information circular. In order for this advisory resolution to be passed, it must be approved by a majority of the votes cast.

May I have a motion for the approval of the advisory resolution.

Ryan Bedrich, shareholder. Mr. Chair, I move that the advisory resolution that shareholders accept the approach to executive compensation disclosed in the management information circular delivered in advance of this meeting, the form of which is set out on Page 43 of that circular be approved.

Angela Bai, shareholder. Mr. Chair, I second the motion.

Is there any discussion on this matter?

Mr. Chair, there are no questions.

The meeting will now vote on the motion. Please make sure to record your vote on this resolution using the voting buttons on Lumi. If you have not already voted, please complete the electronic ballot on Lumi, and we will give you 10 more seconds.

[Voting]

Lumi, would you please close the voting? The polls are now closed.

The scrutineer has provided its preliminary report of the results of the voting at today's meeting. On the matter of the election of directors, I'm advised by the secretary that a majority of the votes cast have been voted in favor of the election of each director nominated. I declare that this motion is carried with respect to each of them.

On the matter of appointing PricewaterhouseCoopers LLP as auditors, I'm advised by the secretary that a majority of the votes cast have been voted in favor of this resolution as well, and I declare that this motion is carried. On the matter of the amendments to the FirstService -- plan, I'm advised by the Secretary that a majority of the votes cast have also been voted in favor of this resolution, and therefore, I declare that this motion is also carried.

Finally, on the matter of the advisory resolution on FirstService's approach to executive compensation, I'm advised by the Secretary that a majority of the votes cast have been voted in favor of this resolution, and I therefore declare that this motion is also carried.

As there is no further business, I declare the formal portion of this meeting to be terminated. We will now have a short management presentation.

Welcome again to our Annual General Meeting for 2025. It was an interesting year for us at FirstService, a challenging year that highlighted the resilience of our business model. Many of our brands were faced with a soft demand environment resulting from trade tensions, geopolitical conflict and a weak housing market. In addition, our restoration and roofing brands experienced an unusually mild year in terms of claim volume and weather-related damage. Despite these headwinds, we grew our revenues by 5%, increased EBITDA by 10% and delivered earnings per share growth of 15%. We're very proud of how we performed in 2025 in the face of these macro challenges.

The growth and increased profitability are, first and foremost, a testament to the commitment of our teams. And secondly, a positive reflection on the diversification of our brands and durability of our businesses. Over the years, we have demonstrated our ability to win and grow in difficult markets, and our results in 2025 are yet another example. We view the current economic uncertainty and challenging demand environment not as a setback, but rather as an opportunity to invest and further differentiate our brands from the competition. During 2025, we continue to invest in all our brands with a long-term growth mindset.

We invested in systems to drive efficiencies, talent to position us for future growth and tuck-under acquisitions for geographic expansion. Our focus continues to be on building iconic brands over the long term, one step at a time through tough markets and through buoyant markets.

I'd now like to invite Jeremy Rakusin, our CFO, to review our overall financial performance, capital allocation and balance sheet liquidity, and then I'll return with some closing comments.

Thank you, Scott. Good morning, ladies and gentlemen. We delivered solid annual consolidated financial results in 2025, which included revenues of $5.5 billion, a 5% increase over 2024. Adjusted EBITDA at $563 million, up 10% year-over-year and driving a 40 basis points margin improvement to 10.2% in 2025 versus 9.8% in the prior year. And finally, adjusted earnings per share came in at $5.75, up 15% versus 2024. Our earnings per share year-over-year growth exceeded the top line and EBITDA performance with the benefit from lower interest costs driven by our strong free cash flow and balance sheet deleveraging, which I will walk through in a little further detail towards the end of my commentary.

Now some brief perspectives to put last year's financial results in the context of our long-term growth track record, particularly around organic top line growth and EBITDA margin improvement. While macro headwinds tempered our ability to generate organic top line growth across some of our brands in 2025, this performance represents a distinct outlier against our long-term trend. We have averaged more than 6% organic revenue growth, both over the past 5 years and for more than 10 years. Our focus on organic growth is a key foundation of our business model and has typically underpinned our long-term financial track record. And so we believe that going forward, we will resume our more typical trend of mid-single-digit organic growth.

Also of note in 2025 was our ability to counter the market-driven softer top line growth by delivering strong operating margin improvement and double-digit earnings growth. This was an impressive performance by our operating leaders and teams in driving efficient and disciplined job execution. In particular, our FirstService residential property management operations captured 50 basis points of margin enhancement through AI and other client service-focused efficiencies. And our restoration brands realized margin improvement despite lower year-over-year revenues with their technology platform investments yielding ongoing cost efficiencies across multiple fronts.

It also marks the third consecutive year of consolidated EBITDA margin expansion at FirstService, reflecting the collective effort of our operating teams on driving profitable growth. All of our brands remain committed to delivering incremental margin enhancement over time as we build further upon our long-term track record of strong profitability. During 2025, we also generated $445 million in operating cash flow, a 56% increase over the prior year. We deployed a total of approximately $285 million towards our 3 key investment areas. First, maintenance capital expenditures of a little more than $125 million to support the organic growth of our brands, resulting in roughly $320 million of free cash flow. Second, tuck-under acquisition investments exceeding $100 million to advance the market position and growth initiatives of our operating platforms.

And third, return of capital approaching $50 million to our shareholders by another annual dividend hike of 10%, maintaining our track record of such dividend increases for more than 10 years. Given our strong free cash flow, we were steadily able to delever our balance sheet by paying down over $200 million in debt through the year. Our 2025 year-end leverage measured by net debt to EBITDA now sits at a very conservative 1.6x, down from 2x at the prior year-end. Our capital structure is well balanced with floating and fixed debt instruments and long-dated maturities.

And finally, our liquidity to fund future growth is approaching $1 billion, the highest level in the history of the company. This significant balance sheet strength is a cornerstone of the FirstService operating philosophy, and we are very well positioned to be assertive in deploying capital as opportunities emerge.

Now back to Scott for his closing remarks.

Thank you, Jeremy. As we look forward, we believe economic uncertainty will continue to impact the demand environment throughout 2026; however, we fully expect to deliver another solid year of top and bottom line growth. We remain committed to our long-term goal to grow our revenues at an average annual rate of at least 10% with incremental growth at the EBITDA and earnings per share lines. We've exceeded this target for more than 30 years, and we're confident we will continue delivering on this goal for years to come. And the long-term track record is something I've been fortunate to be a part of. 2025 marked an important personal milestone for me, my 30th year with FirstService and my 10th year serving as Chief Executive Officer.

I've been proud to be part of this organization from the day I joined, and it's my honor and privilege to lead it as CEO. My greatest source of pride is our people, our culture and our unwavering focus on serving our customers, our communities and one another. We're a service company. We have over 30,000 associates, and we know our people are our greatest asset.

The unique FirstService culture is our day-to-day differentiator and the foundation of our success for more than 30 years. It fuels our passion around service excellence and drives consistent organic growth, and it gives us confidence we will sustain the success in the future. In closing, I'd like to thank our operating leaders for their shared passion for building iconic winning brands and our team for living our values and delivering on our brand promises every day. Thank you.

Before concluding, we will be pleased to answer any questions submitted on the Lumi virtual meeting platform. I'm Abel Escobar, Corporate Secretary, and I have with me Mr. Scott Patterson, CEO; and Mr. Jeremy Rakusin, CFO. Are there any questions? There are no questions.

This concludes this year's meeting. Thank you for joining us today.

Welcome to the fourth quarter investors conference call. Today's call is being recorded. Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's annual information form as filed with the Canadian Securities Administrators and in the company's annual report on Form 40-F as filed with the U.S. Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is February 4, 2026.

I would now like to turn the call over to Chief Executive Officer, Mr. Scott Patterson. Please go ahead, sir.

Thank you, Tanya. Good morning, everyone, and welcome to our fourth quarter and year-end conference call. Thank you for joining us today. Jeremy Rakusin is on the line with me and will follow my overview comments with a more detailed review of our financial results for the quarter and the full year. We're pleased with how we closed out the year in an environment that continues to challenge us across several of our businesses. Our fourth quarter results in aggregate were modestly better than our expectation that we communicated at the end of Q3 with revenues up 1%, EBITDA flat with the year ago and earnings per share up 2% to $1.37.

For the year, we reported solid results that we're proud of in the face of tough macro headwinds. Revenues finished 5% up over the prior year. Consolidated EBITDA was up 10%, double the revenue growth, reflecting a 40 basis point improvement in margins and earnings per share reflected further leverage with year-over-year growth at 15%. Looking now to separate divisions for the quarter. Revenues at FirstService Residential were up 8% in aggregate, with organic growth at 5%, matching our expectations and the results for Q3. The growth was broad-based across North America and generally reflects net contract wins versus losses.

Looking forward, we expect organic growth to continue in the mid-single-digit range. There could be modest movement from quarter-to-quarter with seasonality and fluctuation in ancillary services, but on average, for 2026, we're expecting mid-single-digit organic growth similar to our full year results for 2024 and 2025. We will face organic growth pressure early in the year relating to declines in certain amenity management services that we provide to some of our managed communities, but primarily to multifamily rental and other commercial customers.

These services include pool construction and renovation, which is being impacted by the same economic headwinds we're seeing in roofing and home services. It also includes contracts to provide custodian and front desk concierge labor. Several contracts primarily with multifamily apartment owners were not renewed at year-end, some voluntary and a few involuntary, all primarily due to pricing. These cancellations will impact our revenue, but will have little impact to profitability. We expect to be at the bottom end of our mid-single-digit range at 3% or 4% for Q1. This is unrelated to our core community management business, which we believe will carry the division to mid-single-digit organic growth for the year.

Moving on to FirstService Brands. Revenues for the quarter were down 3% in aggregate and 7% organically with organic growth at Century Fire more than offset by organic declines with our restoration brands and our roofing platform. Looking more closely at restoration. Paul Davis and First Onsite together recorded revenues that were flat sequentially compared to Q3 and down 13% versus the prior year, somewhat better than expectation due to our pickup in claim activity during the quarter with our Canadian operations.

We benefited in the prior year quarter from Hurricanes Helene and Milton and generated about $60 million in revenue from the storms. Excluding these specific events, our restoration brands were up modestly year-over-year. As I described on last quarter's call, revenues from named storms have on average, exceeded 10% of our total restoration revenue since 2019. For 2025, revenues from named storms amounted to less than 2% of total restoration revenues. We finished the year down 4% in restoration relative to an industry that we believe was down over 20%. Our platform investments and focus on day-to-day service delivery continues to drive gains in wallet share with key national accounts and overall market share.

Looking forward, we expect to show growth for the full year 2026, assuming we return to historic average weather patterns. Our restoration brands have grown on average by 8% organically since 2019, and we expect that to continue on average going forward. Our backlog at year-end was down from the prior year, pointing to a revenue decline for Q1. However, we've seen an uptick in activity over the last week from the expansive winter storm. It's still very early, but based on activity levels and the nature of the quick response mitigation work, we expect to show Q1 results that are modestly up over the prior year.

Moving to our Roofing segment. Revenues for the quarter were up a few percentage points, the result of tuck-under acquisitions made during the year. However, as expected, revenues were down organically by over 5%. The demand environment in roofing remains muted. New commercial construction outside of the data center and power verticals is down significantly. On the reroof side, we continue to see tighter capital expenditure budgets amongst our customers and delays with some larger projects.

As I noted last quarter, we're confident that our market position and relationships remain strong. Bid activity is solid and our backlog has stabilized. Our expectation is that we will show modest organic growth this year with sequential improvement quarter-to-quarter. Looking to Q1, we expect revenues to be up mid-single digit versus the prior year and approximately flat organically. Now to our home service brands, where revenues were up by 3% over the prior year, better than expectation and a result we're proud of in an environment where consumer confidence remains depressed.

The consumer index was down again in December, marking 5 months of sequential decline. As I set out on the last few calls, our teams are doing more with less by incrementally improving lead to estimate ratios, close ratios and average job size. Current economic and industry indicators do not suggest an improved environment through 2026. Our lead flow in the last several weeks is flat to slightly down with prior year. If this continues, our current conversion metrics would suggest that we will drive higher revenue year-over-year in the low to mid-single-digit range for Q1 and 2026.

And I'll finish with Century Fire where we had a strong Q4 and finish to the year. Revenues were up over 10% versus the prior year with high single-digit organic growth. Century continues to experience solid growth on both sides of its business, that is installation and repair service and inspection. The growth is broad-based across almost all our branches at Century. We're benefiting on the installation side of our business from solid activity in multifamily and warehouse with some positive exposure to data center construction. Our backlog is strong and activity levels remain buoyant. Looking forward, we expect another year of 10% growth or more spread evenly across the quarters.

Let me now call on Jeremy to review our results in detail and provide a consolidated look forward.

Thank you, Scott, and good morning, everyone. As you just heard for the fourth quarter, we delivered on our expectations provided on our Q3 call, which culminated in solid annual operating and financial performance. As we look back at our consolidated annual results for 2025, we are pleased with the growth we delivered on the earnings lines, notwithstanding the top line headwinds we were facing throughout the year.

I'll first walk through a summary of these financial metrics and then move on to reviews of our segmented divisional performance as well as our cash flow and balance sheet. Note that my upcoming comments on our adjusted EBITDA and adjusted EPS results, respectively, reflect adjustments to GAAP operating earnings and GAAP EPS, which are disclosed in this morning's release and are consistent with our approach in prior periods.

During the fourth quarter, our consolidated revenues were $1.38 billion, up 1% versus the prior year period. Our adjusted EBITDA of $138 million was in line with Q4 2024, yielding a margin of 9.9%, slightly down from the 10.1% level during the prior year. Our Q4 adjusted EPS was $1.37, up from $1.34 in last year's fourth quarter. For the full year, consolidated revenues increased 5% to $5.5 billion, and adjusted EBITDA came in at $563 million, up 10% over the prior year and delivering a 10.2% margin, up 40 basis points compared to 9.8% in 2024. Adjusted EPS for the 2025 fiscal year was $5.75, up 15% versus 2024.

This 5%, 10%, and 15% top to bottom line annual growth profile reflects the exceptional efforts of our operating leaders across every brand. As they emphasized efficient job execution in the face of market challenges and drove margin improvement where possible. Turning now to a segmented walk-through of our 2 divisions. FirstService Residential revenues during the fourth quarter were $563 million, up 8%, and the division reported EBITDA of $51.5 million, a 12% increase over the prior year period.

Our margin for the quarter was 9.1%, modestly up from the 8.8% in Q4 2024. The quarterly performance largely mirrored the full year growth profile for the division. We closed out the year with annual revenues of $2.3 billion, up 7% over 2024 including 4% organic growth. Annual EBITDA increased 13% with our full year margin at 9.8%, up 50 basis points over the 9.3% margin for 2024. In summary, the FirstService Residential division achieved key financial targets for the year, getting back to mid-single-digit annual organic top line growth while also driving profitability to the upper end of our 9% to 10% annual margin band.

Looking next at our FirstService Brands division, the fourth quarter included revenues of $820 million, down 3% compared to Q4 2024, and EBITDA was $88.5 million, down 12% year-over-year. These year-over-year decreases were due to declines in organic top line performance and the related negative operating leverage at our restoration and roofing brands, partially offset by another strong quarter of organic growth and profitability at Century Fire Protection.

The Brands division margin during the quarter was 10.8%, down 110 basis points from 11.9% in the prior year quarter. For the full year, revenues were $3.2 billion and EBITDA came in at $354 million, both up 4% over prior year. As a result, our full year Brands margin remained in line with the prior year at 11%. Finally, 2 remaining points to highlight regarding profitability below the operating division lines that contributed to the 15% annual EPS growth.

First, we reported significantly lower corporate costs both during the current fourth quarter and annually for 2025 versus the comparable prior year periods. Most of the variance was attributable to the positive impact of non-cash foreign exchange movements largely reversing the negative impacts we saw in 2024. Second, our annual interest costs were lower throughout all periods in 2025 compared to the prior year due to lower debt levels on our balance sheet and declining interest rates.

I'll now summarize our cash flow and capital deployment. During Q4, operating cash flow was $155 million, a 33% increase over the prior year quarter and contributing to annual cash flow from operations of more than $445 million, which was up 56% versus 2024. Our capital expenditures during 2025 totaled $128 million, and we expect 2026 CapEx to be approximately $140 million, an increase proportionate to the collective growth of our businesses.

Our acquisition spending during the year totaled $107 million as we remain selective and disciplined in a competitive acquisition environment. Finally, we announced yesterday, an 11% dividend increase to $1.22 per share annually in U.S. dollars up from the prior $1.10. Beyond financing these capital outlays, our strong free cash flow contributed to further strengthening of our balance sheet throughout the year.

At 2025 year-end, our leverage sits at 1.6x net debt to adjusted EBITDA, down from 2x at prior year-end. With cash on hand and undrawn capacity within our bank revolving credit facility aggregating to $970 million, we maintained significant liquidity to direct towards attractive investment opportunities as they emerge. Finally, in terms of outlook, Scott has already provided detailed commentary on the top line growth indicators for the individual brands. On a consolidated basis for the upcoming first quarter, we are forecasting revenue growth to be in the mid-single-digit range. In subsequent quarters, throughout the year, we expect to see an uptick with high single-digit year-over-year increases in revenue, primarily driven by organic growth.

Any tuck-under acquisitions during the year will contribute further to this top line growth profile. In terms of consolidated EBITDA for the first quarter, we expect to be roughly in line with Q1 2025. For the balance of the year, we anticipate EBITDA year-over-year growth in the high single digits at similar rates or slightly better than revenue growth. Consolidated EBITDA margin for the full year is expected to be relatively flat compared to the 10.2% annual margin we just reported for 2025. Operator, this concludes the prepared comments. You can now open up the call to questions. Thank you very much.

[Operator Instructions] Our first question will be coming from Frederic Bastien of Raymond James.

Scott and Jeremy. Just want to talk about M&A. I mean cracks appear to be showing in private equity various reports suggesting that mid-market firms are holding on to investments, they can't sell and then struggling to raise capital to buy businesses. That in theory, should be positive for strategic buyers like FirstService? From your perspective, are you seeing any change? Is the company -- is the competitive landscape improving from, say, where it was 3, 6, 12 months ago?

We haven't seen it yet, Frederic. It's definitely a slower market than, say, 12 months ago, particularly in roofing, but really across the board. We know of a number of opportunities that have been pulled or delayed until the environment improves. And there's no indication that multiples are trending higher or lower. They still remain high across the board. We haven't seen mid-market private equity deals come to the market. I'm just thinking about it. Really, it's, we haven't seen it yet, I would say, Frederic.

Now obviously, recognizing it's still tough out there. Where do you see the best place to deploy future capital? Is it in newer platforms like roofing or restoration or go back to the more long-dated franchises like California Closets. I know you bought like the 20 or so largest franchises in the early probably 10 years ago -- 5, 10 years ago, where do you stand on potentially consolidating the rest of the California Closets franchises?

Yes. I mean definitely, we want to own the major markets over time, particularly if they're underperforming. But it's -- that will be sort of one step at a time as those families are ready to sell. It's been a few years since we pulled in our California Closets franchise. But I think on average, we would expect to pull in one a year. And I think the same at Paul Davis, too, in the best interest of the brand if there's an underperforming market, we will look to pull that franchise in and operate it. And we would expect to see 1 or 2 of those a year as well. Otherwise, it would be tuck-under within our existing platforms. That's our focus. I would say that we are being very patient in the current environment. Multiples are high, and there aren't a high number of quality companies coming to market. So we are focused on picking our spots and finding the right partners, if there's a situation where the founder is looking to exit, that's not a great fit for us. We're focused on partnering and then driving sustainable growth.

And our next question will be coming from Stephen MacLeod of BMO Capital Markets.

I just wanted to just focus in on the margins a little bit with respect to the outlook. Would it be fair to say that your margin outlook in kind of both segments is sort of flattish through the year? Presumably, it sounds like not much movement in the FSR margin, but maybe you'll see some headwinds in Q1. But on a full year basis in Brands, would you expect both segments to be sort of flattish year-over-year?

Stephen, it's Jeremy. Correct. Full year, both divisions are roughly in line and hence, the consolidated margin in line. The first quarter, we expect residential margins to be roughly in line, again, consistent with the full year and a decline in Brands margins in the first quarter, and hence, the sort of flat EBITDA with a little bit of revenue growth in the first quarter. So Brands margin a little declining and then picking up in sequential quarters as we see a commensurate uptick in revenue growth.

And then just with respect to Scott, you talked about just the recent freeze that we saw through North America and potentially an uptick in activity. I know early days, but is there any way to kind of quantify what that potentially could look like as the year progresses?

No. It's still very early in taking shape and some of the areas are impacted, they're still frozen. So there is an opportunity when the thaw starts, but very hard to quantify at this point. I mean we've attempted it for Q1 just based on some of the activity. As I said, we expect our revenues to be up modestly. Our backlog at year-end was down because we didn't have a carryover from Q4 storms, which was pointing to a soft Q1. We do think the activity will take us back to -- through prior year modestly. But mitigation work comes in, we respond and move on. And for the most part, the jobs are smaller at this point. And the unknown is the reconstruction. Will there be any? Will we get to work and how much revenue will it generate? So that will evolve in the coming weeks and months, but it's still too early to really give you any more than that.

Yes, that's fair. I figured that would be the case. And would it be fair to assume that like in Q4, you had basically 0 revenues from named storms relative to $60 million last year. Is that right?

Yes.

And then maybe just finally, just speaking of capital allocation, would you consider sort of being active on the buyback given where the stock is and given the NCIB you have outstanding?

That is not something that we've discussed. That would be a Board level discussion and it hasn't come up.

And our next question will be coming from Stephen Sheldon of William Blair.

First, just on kind of margins, great year-over-year margin trends in residential once again this quarter. And then full year results came in closer to the high end of that 9% to 10% margin range you've historically talked about there. So can you unpack some of the levers driving that? Is that still mainly being driven by some of the offshoring and AI leverage and I think you talked about accounting and call center operations. And has your thinking on the margin trajectory over the next few years changed at all? I mean, you already talked about kind of flattish for 2026. But is there an opportunity down the road you think you could potentially get the margin in residential into the double-digit range above 10%?

Yes, Stephen, Jeremy again. The progression, we've done a lot of the heavy lifting in those areas. In fact, they started in '24 and really started to play out on the margin improvement in '25. We're starting to lap those now. So a lot of the -- you saw the margins start to taper towards the margin expansion start to taper towards the back end of the year, which is indicative that we've squeezed a lot of the low-hanging fruit. Team is always working on related initiatives to those that you just called out as well as others. And again, we don't see much for '26. But in terms of going above 10%, yes, that's an opportunity over a multiyear time horizon for sure. And we'll continue to evaluate the team's progress in that and then call out the opportunities as we see them coming through.

And then I wanted to ask about just the roofing side. And I guess from your view, I guess, the new construction piece, that's something that you can look at permits and starts and that's -- it's been very weak and not a lot of pickup that we're expecting here over the next year or 2. But I guess on the reroofing side, what could it take for that to pick up? I guess the question would really be how long can commercial properties wait and push out reroofing as I would assume that, that can only be delayed for so long before that owner or manager takes on bigger risk related to it with a bigger loss potential. So I guess, how long can reroofing really stay kind of depressed?

Yes, certainly, it can't be deferred for long, Stephen. And we do think the market has stabilized. Our backlog certainly has stabilized, and it's heavily weighted towards reroof as you would expect. Historically, we've been 2/3 reroof and 1/3 new construction. And so we're very much focused on the reroof side of that. So the overall market has shrunk certainly. But our momentum in reroof has stabilized. And as I said, we expect to grow this year and look for sequential improvement quarter-to-quarter. And generally, we feel optimistic. We're bidding work. We feel good about our market position. We believe in our leadership locally, branch to branch. And certainly, we will continue to invest in the platform this year and hopefully in further tuck-under acquisition. So we're feeling optimistic that we'll start to see quarter-over-quarter and year-over-year growth from here.

And our next question will be coming from Erin Kyle of CIBC.

I just want to stick on the Roofing Segment here. Maybe start with more of a macro question. I guess your views as it relates to the new construction cycle in the U.S. And the question is kind of on the basis of if new construction remains depressed here, as it's looking to be -- do you anticipate competition in like the reroof segment to intensify further than it's already been? Or I know you mentioned it's stabilizing, but just anything you can add to speak to just competition in that space would be helpful.

Yes. I mean the competition has intensified. Certainly, there are fewer opportunities and more companies bidding, and it has compressed gross margins. And so we don't expect that to alleviate in the near term until there is an uptick in the new construction market. And I don't know that I can give you more than that, Erin.

No. That's helpful there. Maybe I'll switch gears on M&A as well. And you mentioned it in response to your previous question. But for 2026, is roofing still a focus area for tuck-in M&A? And then maybe more broadly here, if we think about your commercial maintenance businesses that you currently operate in, what is the appetite maybe for another large platform deal in an adjacent space or any larger M&A?

I think we're focused primarily on tuck-under right now and certainly roofing is an area where we're committed to. Again, I said we're picking our spots. We're very patient and it's about the leadership and the partnership. We're open-minded to larger acquisitions, certainly, and it would be an adjacency. And I'm not sure it would be a platform per our description, which would be sort of a separate operating team. It's more likely to be within restoration or within roofing or within fire, but we're open-minded certainly, but also being cautious around valuation and in a market that's still, in our mind, overheated.

And our next question will be coming from the line of Tim James of TD Cowen.

My first question, going back to M&A for a minute. I appreciate the comments on kind of the competitiveness in that market. Can you talk about if valuations do remain high, whether it's through '26 into '27. Does that change your approach at all? And what I'm thinking about rather simplistically is, do you change the risk profile of the businesses you buy? Or do you pay higher valuations. How do you approach it as multiples and as the competition for M&A remains relatively elevated?

We would approach it the same way we did this past year. As Jeremy said, we allocated over $100 million on tuck-under, but these are solid good add-ons with great leadership that fills white space for us or adds to our service line. And these are at valuations that we're comfortable with. And in most cases, we were able to differentiate ourselves from private equity. And increasingly, we're seeing opportunities to do that with families and owners that want to be in a family where they're not resold. They want a forever owner. And so we're seeing more opportunities like that. And so I would -- we're not going to change our risk profile unless the returns change to hit our hurdle rates. We'll continue to work hard. And I would think that in 2026, it may well be a capital allocation year similar to '25, and we're comfortable with that.

And then is there any sort of silver lining here potentially in the roofing business with -- you talked about it being very competitive gross margin pressure. Are you seeing any silver lining in that, that maybe is kind of shaking out some businesses to look for a sale opportunity? Or is it too early to see that yet in the marketplace.

No, I think that's true. I think that's true. There are -- we're seeing opportunities that they're reluctant to transact because their revenue and EBITDA may be down from previous years, but it's -- the market is not going to change dramatically in '26, certainly. And so we are seeing opportunities where the seller comes to grips with a lower valuation based on results that are lower than the past few years.

[Operator Instructions] Our next question will be coming from Daryl Young of Stifel.

Just wanted to circle back on margins for a second. I might have expected to see more margin expansion as opposed to the guide for flattish this year, just given the operating efficiencies you've had. And I wonder if possibly you're toggling between the price volume equation in some of your end markets and maybe giving away some price in order to keep the growth going. Is that the right way to think about it? Or is there something else going on that's keeping margins, call it, lower for longer?

Daryl, I assume you're talking more on the Brand segment?

Well, even within resi as well.

Okay. Well, I'll touch on Brands. Scott touched on it in Roofing. The competitive environment, a lot of our competitors that were accustomed to getting a lot of new construction work migrating to reroof and putting pressure on bidding and gross margin. So we're going to see roofing margins, notwithstanding the uptick in the top line through the year, a compression in margins in that business. And that will be offset in the Brands segment by better margins year-over-year in '26 for restoration, again, a function of higher normalized activity levels, higher revenue growth and so forth. So that's really the puts and takes for the most part in the year in Brands.

And then in residential, we don't get a lot of pricing in that business. It's a very high variable cost business. So growing revenues and EBITDA in lockstep is the typical path we happen to garner a lot of efficiencies in '25 in the areas that we've spoken about through the year, and we're starting to lap that now. Again, I mentioned it earlier, we'll continue to look at other opportunities for efficiencies, but I wouldn't be baking in a lot of that into the baseline model for 2026.

And then you touched on data centers in one of your remarks. Are these projects getting big enough and fast enough that you could potentially have a cross-sell or a go-to-market approach between, say, Century Fire and Roofing and maybe even restoration where you kind of create national account strategy across all of your divisions to tackle the data center build-out?

No, we're not approaching it that way, Daryl. Century has long-term relationships with a few large general contractors that are involved in new construction of warehouses and also engaged in data center construction. So Century is benefiting from the data center boom. But definitely picking their spots and being cautious about balancing this work in these customers with other day-to-day customers. And I don't see us tilting more to data centers than the current mix reflects. Roofing doesn't have the same relationships. And I think we're very cautious about really leaning in rather than focusing on durable, sustainable growth. We've seen a few of our competitors jump in, and it really consumes them and they've let down their day-to-day customers. So we're approaching it in a different way and only at Century Fire at this point.

And this concludes today's program. Thank you for participating. You may now disconnect.

Welcome to the FirstService Corporation Third Quarter Investors' Conference Call. [Operator Instructions] 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.

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 October 23, 2025. I would like to turn the call over to Chief Executive Officer, Mr. Scott Patterson. Please go ahead, sir.

Thank you, Didi. Good morning, everyone, and welcome to our third quarter conference call. Thank you for joining us. I'm on with our CFO, Jeremy Rakusin. And together, we will walk you through the results we reported this morning. I'll begin with an overview and some segment-by-segment comments. Jeremy will follow with additional detail.

Total revenues were up 4% versus the prior year, driven by tuck-under acquisitions completed over the last 12 months. Organic growth was flat overall, as gains at FirstService Residential and Century Fire were offset by organic declines in our restoration and roofing platforms. EBITDA for the quarter was up 3% to $165 million, reflecting a consolidated margin of 11.4%, generally in line with the prior year on a consolidated basis. Finally, our earnings per share were up 8% to $1.76.

Looking at divisional results. FirstService Residential revenues were up 8% with organic growth at 5%, in line with expectation. Solid net contract wins versus losses have led to an improvement in organic growth sequentially. We expect similar growth for Q4 in the mid-single-digit range.

Moving on to FirstService Brands. Revenues for the quarter were up 1% in aggregate, with growth from tuck-under acquisitions largely offset by organic declines of 4%. Revenues for our two restoration brands, Paul Davis and First Onsite, were up sequentially relative to Q2, but down versus the prior year by 7%.

I mentioned last quarter that we were pleased with the level of activity, both day-to-day at the branch level and in terms of our wallet share gains with national accounts. That continued into Q3. Industry-wide claim activity and weather-related damage was very modest across North America and generally down in every region, but we still generated higher revenue sequentially than the first 2 quarters of this year. We believe we're capturing market share gains during this prolonged period of mild weather.

We were down from the prior year, as we were up against a very strong quarter, particularly in Canada, that benefited from significant flood and wildfire restoration work. As well, storm-related revenues in the U.S. were minimal this quarter compared to Q3 of 2024, when we generated about $10 million of revenue from named storms, primarily Hurricane Ian. Looking to Q4, absent widespread inclement weather or named storms over the next few months, we expect to be down from the prior year quarter by about 20%. We generated $60 million of revenue from Hurricanes Helene and Milton in Q4 of last year.

On average, since 2019, our revenues from named storms has exceeded 10% of total restoration revenues. Based on our visibility today, we anticipate this year's revenues from named storms to land at less than 2%, a big drop that impacts Q4 in particular. Apart from cat storm events, which we all believe will, on average, increase in frequency, we continue to grow and improve our platform and believe we're in an excellent position to capitalize on the long-term opportunity in restoration.

Moving to our Roofing segment. Revenues for the quarter were up mid-single digit, driven by acquisitions. Organically, revenues declined 8%, an improvement over Q2, but below expectations. We simply did not convert backlog into revenue at the rate that we anticipated. We continue to see the deferral of large commercial projects and a general reduction in new construction.

Our 3 largest operations all benefited last year from several large industrial roof projects that have not been replaced this year. Most of our year-over-year decline relates to these specific operations. Bid activity remains solid, but award activity has been delayed. We're confident that our market position and relationships remain strong. The uncertainty in the macro environment is definitely impacting new commercial construction and causing delays in reroof and maintenance decisions.

We continue to believe that the demand drivers in roofing and generally in commercial building maintenance are compelling, and we remain focused on investing in this segment. As evidence of that, we were pleased during the quarter to announce the acquisitions of Springer-Peterson Roofing in Lakeland, Florida and A-1 All American Roofing in San Diego, California. These operations extend our presence and capability in two key markets. The Springer-Peterson and A-1 teams will continue to operate the businesses, and we're excited to have them on board with us. They jumped right in, collaborating and creating value with our existing operations in the regions.

Looking ahead to Q4, we expect total roofing revenues to be up modestly from prior year, again due to acquisitions. Organically, we expect continued weakness, with revenues down 10% or more in the seasonally weaker quarter.

Moving on to Century Fire. We had another strong quarter, with revenues up over 10% versus the prior year. Growth continues to be broad-based across the branch network and again, is supported by robust repair, service and inspection revenues. Our backlog remains strong at Century, and we expect similar double-digit year-over-year growth for Q4.

Now on to our home service brands, which as a group generated revenues that were flat with year ago, right on expectation, and a result we're proud of in the current environment with weak existing home sales and broad economic uncertainty. Consumer sentiment remains depressed and is down from Q2. Our lead flow reflects this trend. Our teams have held revenue steady by driving a higher close ratio this year, combined with a higher average job size. They are executing extremely well in a challenging environment. Looking forward, we expect a similar result in Q4, with revenues roughly matching the prior year quarter.

Let me now hand it over to Jeremy.

Thank you, Scott. Good morning, everyone. Leading off with a recap of our consolidated third quarter financial results, we recorded revenues of $1.45 billion, up 4%, and adjusted EBITDA of $165 million, a 3% increase relative to the prior year period. Our consolidated EBITDA margin for the quarter was 11.4%, down slightly from last year's 11.5% level. Adjusted EPS during Q3 was $1.76, resulting growth of 8% quarter-over-quarter. The growth on the bottom line exceeded our EBITDA performance as we saw the benefit of reduced interest rates on lower outstanding debt compared to prior year. I'll provide more details on our balance sheet in a few moments.

For the 9 months year-to-date, our consolidated financial performance includes revenues of $4.1 billion, up 7% over the $3.85 billion in the prior year; adjusted EBITDA at $425 million, a 13% increase year-over-year, with our overall EBITDA margin at 10.3%, up 50 basis points versus a 9.8% margin for the prior year period. And lastly, our adjusted EPS year-to-date is $4.39, reflecting 20% growth over the $3.66 reported for the same period last year. Our adjustments to operating earnings and GAAP EPS in providing adjusted EBITDA and adjusted EPS, respectively, are disclosed in this morning's press release and are consistent with approach in prior periods.

I'll now walk through the third quarter performance within our two divisions. At FirstService Residential, we generated revenues of $605 million, resulting in 8% growth over the prior year period. EBITDA was $66.4 million, a 13% increase over the third quarter of last year. Our current quarter EBITDA margin came in at 11%, up 50 basis points over the 10.5% in Q3 '24, extending the year-to-date margin improvement we have realized through ongoing operating efficiencies and streamlining efforts across our property management platform.

Our teams have done a terrific job of execution, driving to a year-to-date margin expansion of 60 basis points. For the upcoming fourth quarter, we expect some tapering of these favorable impacts, leading to margins roughly in line to slightly up versus prior year.

Shifting over to our FirstService Brands division. We generated revenues of $842 million during the current third quarter, up 1% versus the prior year period. EBITDA for the division was $102.1 million, down from the $105.8 million last Q3. Our margin of 12.1% compressed 50 basis points compared to the 12.6% margin in last year's third quarter. The lower margin was attributable to negative operating leverage resulting from tempered activity levels and declines in organic top line growth at our restoration brands and roofing operations. Our Home Improvement and Century Fire Protection brands continue to deliver healthy margins, roughly in line with prior year.

Reviewing our cash flow profile, we generated more than $125 million in cash flow from operations during the third quarter, driving to a total of $330 million year-to-date, a significant year-over-year increase of roughly 65% compared to prior year period's. Capital expenditures during the quarter totaled $34 million, and spending year-to-date sits at a little under $100 million. We expect to be in line with our annual target of $125 million in CapEx for 2025. Acquisition investment during the quarter was approximately $45 million, largely encompassing the roofing tuck-under acquisitions that Scott noted.

Our balance sheet at quarter end included net debt of $985 million, resulting in leverage at 1.7x net debt to trailing 12 months EBITDA. Maintaining a strong balance sheet has always been a cornerstone of FirstService's operating philosophy and has been aided by the ability of our businesses to collectively generate strong and relatively consistent free cash flows in any type of environment. This has played out once again over the past almost 2 years since our Roofing Corp of America platform investment at the end of 2023, with the steady quarterly deleveraging bringing us now back in line with our long-term historical trend. We also have more than $900 million of total cash and credit facility capacity, providing us with ample financial flexibility and liquidity.

In terms of outlook, to close out 2025, Scott has provided top line indicators by brand, which will aggregate to revenues roughly in line with prior year for our upcoming fourth quarter. This will culminate in mid-single-digit growth in consolidated annual revenues for the full year. We expect that our 2025 consolidated annual EBITDA growth will be in the high single digits, approaching 10% compared to prior year. During our February year-end earnings call, we will provide indicators on our outlook for 2026.

And that now concludes our prepared comments. Didi, can you please open up the call to questions?

[Operator Instructions] And our first question comes from Daryl Young with Stifel.

I just wanted to touch on the divergence in the performance between Century Fire and the roofing business. And I would have expected that both of those would have had similar end markets, and so it's just a bit interesting to see the performance delta between the two. Is there a specific end market versus industrial versus data center or something like that, that is maybe driving the difference between the two divisions?

Daryl, there's a few things. I'll start with the fact that Century, close to 50% of the business is service repair and inspection, more recurring in nature. And then you've heard from us over the last couple of years that Century has been very successful in driving consistent growth in this aspect of the business.

Century does have a piece of its business, again, close to half, it's tied to new construction. It's been more resilient than our Roofing Corp of America platform, in part based on the verticals that it focuses on, as you alluded to in your question. Century has benefited from the growth in data centers. And also, they have a strong multifamily business that has been -- remained solid through the year. Their strong results are hiding the fact, though, that a number of jobs continue to be delayed, deferred at Century, similar to what we're seeing in our roofing platform. Work is not being released at the same rate as the prior year, although bid activity remains strong. Hopefully, that answers your question.

Yes. That's good color. One more for me, just on margins. The margins in the Brands division were actually, I would say, fairly healthy in the context of the weak restoration and roofing results. So just wondering if you can give me a little bit of color on where the strength is coming from in margins in that platform?

Yes. Thanks, Daryl. I'll take that. I touched on it, home improvement, a lot of initiatives over the last year or 2, 1.5 years and in a tough environment for the top line have really produced superlative profitability. Century Fire, we have top and bottom line, a terrific performance throughout.

We've made great strides in restoration over the last couple of years. And even in periods of mild weather patterns like we're experiencing, just the focus on the brand, the platform, the client relationships, the national accounts that Scott touched on, a lot of efforts around that. And then there has been some streamlining and headcount reductions in appropriate places as we've centralized a lot of functions. So just terrific execution there, and notwithstanding the mild weather patterns that we've seen year-to-date.

And our next question comes from Stephen MacLeod of BMO Capital Markets.

Just a couple of questions I wanted to follow up on. Maybe the first one is kind of in line with what you were just -- or dovetails with what you were just talking about, Jeremy, just on the restoration side. You talked about having gained some share in the market despite the weak backdrop. And I'm just curious if you can point to kind of where that's coming from?

I think it's a lot of the things that Jeremy just referred to. It's the hard work our teams are doing in positioning with national accounts, solidifying the account base. We have evidence that we are gaining wallet share with a number of our larger accounts, and we're signing new national accounts. It feels healthier across the board. We just have more activity across the branch network. We're not relying on any one event or one region to drive results. And I think it sets us up well to continue gaining momentum in mild weather conditions, but also to really benefit during more significant weather conditions.

Right. Okay. That's helpful, Scott. And then maybe just on the margins and looking at the FirstService Residential business, you guided to sort of flattish margins year-over-year for Q4. And I'm just wondering if some of the streamlining that you've seen that's led to the improvements in recent quarters, is that kind of coming to an end? Or is that more reflective of the seasonal Q4 weakness? And I guess, would you expect those kind of benefits to continue into 2026?

Stephen, I'll take that one. 2026, we'll go through budgets with the businesses, so I'll defer on that point. But in terms of the outlook for Q4, I think we've known all along that the performance should taper. We've been working on these initiatives or the teams have at FirstService Residential for the better part of a year or more. And we saw it carry through. We've had significant margin improvement.

There's also some moving parts in the quarterly fluctuations. And so what we're seeing in Q4 between the mix of higher-margin ancillaries, the timing in terms of hiring teams in face of contract wins, when we're going for contract renewals and getting pricing, there's a whole bunch of moving parts in this large enterprise. So it's just what we're seeing, but we're always working on initiatives. And again, I think we'll have more to speak about in terms of margin outlook for '26 on the February call.

Okay. That's helpful. Thanks, Jeremy. And then maybe just one more, if I could. Just maybe more higher level when you think about restoration and roofing, where we're seeing some of the near-term temporary macro headwinds. Do you believe this is just, particularly in roofing, just a delay of work that people are -- your customers are putting off? And I just want to confirm, is that more of a delay that you expect to get back over time?

We certainly expect to get back, but we need some -- we need macroeconomic stability to see improvement in commercial construction and to give buyers more comfort and confidence to release work. It's -- we're in an uncertain environment, and it's definitely impacting roofing. And of course, in restoration, we need some weather. And I said in my prepared comments that this is the lightest year that we've seen since we took the big step with our acquisition of First Onsite in 2019. And -- so we expect both to improve.

When we made these decisions, originally, our focus was and remains on the long-term opportunity in both these spaces. There is more fluctuation quarter-to-quarter and year-to-year. But on the flip side, there are more tailwinds and opportunity as well. So we remain focused on the long term in these businesses. We believe that there's a huge opportunity in both of them. And we've got the right teams and the right platforms to capitalize on them.

And our next question comes from Stephen Sheldon of William Blair.

Maybe just starting on the M&A front. Can you talk some about the level of competition you're seeing for tuck-under deals? And is it generally getting tougher to deploy capital towards M&A at attractive valuations in this environment? So yes, just be helpful to get any color on what you're seeing there in terms of competition across the different segments, if you could.

Yes, Stephen, I think it's definitely competitive. Multiples remain high, particularly in fire protection and residential property management. They've been at elevated levels for a few years now. Very competitive environment. Multiples are trending higher in roofing. I've indicated previously that there are literally dozens of private equity-owned roofing platforms that are competing for acquisitions. So similarly, very competitive in that space.

The one thing I would add is that activity has actually slowed in roofing this -- in the last couple of quarters, slowed considerably due to the uncertain environment and the fact that most roofing companies are experiencing exactly what we are and are down year-over-year. So there's a number of processes that have been pulled this year or deferred until results improve. But those are all private equity-owned, generally. And they'll be back to market.

But to answer your original question, it is very competitive. I don't know if it's increasingly competitive. But as always, we've got to make smart decisions and pick our spots. And we've been in that place the last few years. And we have opportunities in the pipeline, and we'll deploy capital every year. We'll find a way.

Got it. That's helpful. And then just maybe to dig in a little bit more on the slowdown in roofing awards. I guess you kind of answered earlier, it seems like it's kind of macro factors. I guess, any more detail you can give on some of the bigger factors weighing down roofing projects moving forward even with the strong bid activity? And this is not -- this would be a tough question to answer, but just how long do you think it could take for decisions there to be made and activity to move forward, especially on the reroofing side? I mean, I get new construction permitting starts are down. But on the reroofing side, it seems like -- how long could this kind of be a pause in activity?

Yes. I mean, I don't know the answer to that. Certainly going to carry through Q4. I do think we need macroeconomic stability. Some of these reroof projects can be patched and sort of prepared and kicked down the road for a time. So it's -- I would say it's uncertain right now.

For us, I mean, the good news is that we have 24 branches, and most of them are performing at approximately year-ago levels or even better. We do have these 3 large branches that last year, were benefiting from significant large new construction and reroof work. And some of these jobs are $10 million to $15 million. So if they're not replaced, it can skew a quarter.

But generally, backlogs in roofing are stable. They are weighted towards reroof. As a reminder, we're generally 1/3 new construction, 2/3 reroof and repair and service. Our backlogs are weighted at that even more heavily towards reroof. And so it's going to take some time. We just don't know. But again, I'll just repeat, the long-term demand prospects are excellent. Our thesis has not changed. The aging building stock, increased frequency of weather events, increased legislation around building codes and other drivers.

The other thing I would add is that last year in Q4, our Florida operations were benefiting from weather, and we're not seeing that this year. And so that's 1 of the 3 operations that are down. And that is -- they're missing a few of their large roof projects, but it's also being impacted by weather. So weather would certainly help in a few areas for us.

And our next question comes from Himanshu Gupta of Scotiabank.

So just a follow-up on the roofing weakness here. Is there any commercial asset class, specific commercial asset class or geography which is where you're seeing most of the contract deferrals and weakness? I think you did mention Florida, but any other region or within...

One of our larger branches is in Las Vegas, and that market is very soft. And we see that, Himanshu, in all of our other brands. We're weak in Vegas, really across every business that we operate. So that's -- each of these branches has a little bit of a different story. In terms of the asset classes -- I think I can only really speak to new construction, and it's down everywhere except for data centers, and that's not a vertical where we have participated historically in our roofing platform.

Got it. And I mean, assuming that the new construction cycle is further delayed, like without the help of new construction cycle, how much organic growth can you deliver, assuming the strength in reroofing business comes back?

Organic growth in roofing?

That's right, yes.

Well, we've been down every quarter this year, in part because we were surging in a few areas last year. But we'll reset here and get -- and we'll start growing. We'll get to a point. Our branches are strong. The leadership at our branches are strong. It's -- this is market-driven. We're in a good position, and we'll start to see the growth come back. I just can't tell you -- I can't give you dates in time. We need more clarity in the marketplace.

Got it. And is Roofing still a segment where you want to grow from an M&A point of view? Or would you wait for this weakness to pass and then get more active on the M&A side?

We're definitely interested. I mean, our thesis really hasn't changed at all. We're very pleased with the transactions we did last quarter. We continue to look -- we have priorities. We're focused on white space areas to build out the platform. We're very focused on fit with our culture and the people at any business that we'd be interested in. If we find the right opportunity, absolutely, we will participate.

Got it. And then turning attention to restoration business. Can you comment on the backlog? I mean, in terms of the magnitude or directionally speaking, like, how is the backlog today versus last year or versus last quarter? And also, if I exclude the strong activity, how is the backlog looking?

The backlog is about the same as prior quarter and a little off from last year. And it's off from last year for some of the reasons I talked about in my prepared comments, just the strength we had in Canada with -- and some remaining named storm work. And at the end of September, we did start to see a little bit of Helene and Milton get into the backlog. So we're a little off from last year, but solid and healthy based on the environment we're in. I feel good about it.

Got it. And my last question is on FSR, FirstService Residential. I mean, good to see organic growth back to 5% level this quarter. Question is, is Florida also at mid-single-digit level? Or is it a bit slower than the rest of the portfolio? And I remember, you've been talking about budgetary pressures in Florida a bit more than some of the other regions, so just to check how Florida is doing.

Yes. Florida is, I'd say, in line. And the budgetary pressures have been relieved a bit because the insurance market stabilized. It's still a difficult one because there are many communities that are underfunded. So it's our largest region, and it can influence results for the division, and we've seen that. But it's holding its own right now and is up low- to mid-single digit in the prior quarter, Q3.

And our next question comes from Tim James of TD Cowen.

Just wondering if you could talk about the relationship between sort of pricing and costs in each of the different segments? And I realize that involves kind of different brands to talk about on one side of the business. But I'm just thinking about as we look forward or into next year and beyond, is there -- do you feel fairly confident that kind of your pricing power, if I can call it that, is going to be or is suitable to offset any cost pressures? Or is there potentially an opportunity to push pricing and actually use that as a lever to push margins slightly higher?

Jeremy, over to you.

Yes, Scott, I can take that. Well, right now, we think we're in a good equilibrium with FirstService Residential. We've always talked about that business being a very price competitive industry, always has been, and currently is in line with historical trends. So we're always needing to look for efficiencies even to maintain margins, and the teams have been very successful with that over time.

In terms of the Brand side of the business, the Brands division, Century Fire, I think quarter in, quarter out, year in, year out, has been getting good pricing power in their business, and don't see any pressures there. Home improvement, it's a watch for us. Obviously, the top line, Scott spoke about lower lead flow, but we're converting at a higher rate, and the top line is holding in there. We will flex pricing there accordingly to ensure that we keep revenue -- top line growth and profitability intact. And right now, we're not using promotional activities extensively, with the exception of some local marketing. So we see that holding.

I think the one area where we could see it is in roofing, the availability of labor, subcontractors in some of our operations versus self-perform, resulting in a little bit of an uptick in our cost there and perhaps competing more for reroof jobs with our competitors. Pricing and margins could come in a little bit there. But we're going to go through budgets with all of our businesses in November and through the end of the year, and we'll have greater visibility for '26, which we'll communicate in the appropriate fashion with you on the February call.

Okay. That's really helpful. My second question, and kind of along a similar track. Again, the margins are actually, I think, really good considering the challenges that the business had. But are there any particular initiatives that we should think about on the cost side or on the efficiency side? And I guess I'm thinking more about in the Brands business sort of going forward, where you're looking to focus on -- again, not maybe to drive net margin improvement, but to kind of stand still or to keep just making the business more efficient or making sure that you're keeping as cost competitive as possible.

I mean -- and that's exactly what we've been doing. I mean, we do it every year, year in and year out. The businesses are focused on healthy profitability. The last year, we pointed out the strides we made in home improvement. Longer term, I alluded to it in one of the earlier questions around the performance in the restoration brands over the last couple of years, focusing on the brand, focusing on accounts, but also streamlining costs.

So every brand -- and including FirstService Residential, the strides we've done this year, always looking for ways to be more efficient. I wouldn't call anything major out for significant margin improvement in the Brands division heading into 2026. And if we do -- if any of that surfaces during the budget discussions, again, we'll build that into our thinking and communicate it in February.

[Operator Instructions] And our next question comes from Sean Jack of Raymond James.

Just quickly switching back to roofing. If the short-term macro has been softening for a while, do you expect this to make acquisitions easier in the space coming up, especially and like specifically with mom-and-pops?

I don't see that. And again, it's because of the number of private equity-owned roofing platforms that are in the market. Private equity firms have made a bet on the space. They are all focused on adding to their platforms. And so we need to differentiate ourselves and focus on the long-term brand-building strategy that we have. I don't think it will be -- we'll value it appropriately, based on the results of the business. But I don't see us having an advantage or it being any easier to buy the companies.

Fair, fair. Looking at that brand-building strategy you mentioned, is there any new offensive strategies you guys are employing to position or gain share while the broader macro is weak?

Nothing of note. I mean, we -- the strategy, the focus we have on building iconic brands over time is all focused on people and customer service, building culture and incrementally improving the platform, and that does take time. But we approach these investments with a very long-term focus and timeline.

Thank you. I'm showing no further questions at this time. This concludes the question-and-answer session and today's conference call. Thank you for participating, and you may now disconnect.