A MESSAGE FROM OUR CEO
FirstService Corporation is a provider of essential property services with a long track record of consistent growth and profitability. We enjoy strong leadership positions in huge, highly fragmented property service verticals - yet our market shares are modest. These market structures are conducive to consistent long-term organic growth and significant acquisition opportunities across our service lines. Our outstanding performance in 2016 reflects this dynamic and continues our 22-year history of strong top and bottom line growth.
Our 2016 highlights include:
Strong Revenue Growth
Revenue grew 17% driven by continued solid organic growth across all our business lines and enhanced by several acquisitions in both divisions. Especially noteworthy was the addition of Century Fire Protection, an exciting new operating platform for us.
Expanded EBITDA Margins
EBITDA grew by 27%, while margins expanded by 60 basis points to 8.8%. This year, once again, our biggest mover was FirstService Residential, which continued to drive operating efficiencies throughout its business leading to an 80 basis point increase in divisional EBITDA margin. Our journey towards creating a national operating platform with a recognized brand continues.
Record Year for Acquisitions
2016 was by far our most successful year in terms of acquisition activity. We closed 13 acquisitions in 2016 and invested almost $100 million of capital at valuation multiples that were in line with our disciplined criteria. Our current transaction pipeline positions us for another strong growth year in 2017.
Entry into Fire Protection
In April, we closed the acquisition of Century Fire Protection, and later in the year we followed with the strategically important acquisition of Advanced Fire, which expanded our footprint into the Florida market. We are very excited about this new platform which complements our existing portfolio of essential property services and significantly expands our growth opportunities for the future.
Advancement of Company-Owned Strategies
During the year, we made significant progress in advancing our company-owned strategies at California Closets and Paul Davis Restoration.
- At California Closets, we closed the acquisitions of our Los Angeles and Washington D.C. franchises, two key major markets, bringing our total number of company-owned operations to 13. Our goal is to own the major markets which account for about 25% of the California Closets operations across North America. During the year, we also made great strides in driving efficiencies, quality and turnaround times at our Phoenix-based Western Manufacturing Facility, moving closer to our target metrics for this facility. We look forward to opening our Eastern Manufacturing Facility in Grand Rapids, Michigan in the second quarter of this year which will enable us to serve all of our North American company-owned operations.
- At Paul Davis Restoration, we closed the acquisitions of our North Florida and Connecticut franchises plus Paul Davis National, our large-scale disaster recovery operation, bringing to four the number of operations we own. Similar to our strategy at California Closets, we ultimately want to own the major markets and create a national company-owned platform. During the year, we also continued to invest in the operational foundation of this platform to enhance our ability to integrate and operate future Paul Davis add-on acquisitions.
Robust Free Cash Flow
We generated very strong operating cash flow, which enabled us to invest aggressively in the business through acquisitions, capital expenditures and organic growth initiatives, while maintaining our leverage ratio at a conservative 1.5x net debt to EBITDA - the same level as the prior year-end. In addition, we increased our annual dividend to US$0.49 per share, an increase of 10% for the second consecutive year in our brief history as a new public company. Our cash and bank revolving credit availability, aggregating $140 million at year-end, provides substantial capacity for future investment and acquisitions.
Strong Stock Price Performance
Strong operating results for 2016 translated into a 20% increase in our stock price during the year. Since our June 2015 spin-off into a new public company, our stock is up approximately 70%. The ability to drive consistent increases in shareholder value is a testament to our business model - one which features highly visible, recurring and contractual revenue and an ability to achieve organic growth with modest capex.
Our many successes during 2016 - and over the last 20+ years - are a strong reflection of our relentless focus on employee engagement and service excellence. We know that our greatest differentiator is the quality of our service delivery which is wholly dependent on the professionalism and engagement of our people. Engaged and aligned employees create happy, loyal customers and word of mouth referral - the single most important driver of our organic growth! During 2016, we significantly increased our investment in recruiting, onboarding and training to continue to build a team and culture that clearly separates us from our competition. Our aspiration is to define "service excellence" in every market that we operate in and our investments in people and process are consistent with this goal.
We are very excited about the year ahead. Our businesses are enjoying healthy market fundamentals and we believe we are very well-positioned to capitalize across all service lines. Our long-term goal is to grow our revenues at an average rate of at least 10% per year with incremental growth at the EBITDA and earnings per share lines. We have achieved and exceeded this growth goal over a 22-year period and are committed to build on this track record during 2017 and for years to come.
We thank our operating partners, our 17,000 associates and the 15,000 employees and owners of our franchises for a fantastic 2016. We also thank our loyal customers for entrusting their business to us and our shareholders for their continued support.
D. Scott Patterson
Chief Executive Officer