FirstService's Roofing Backlog Builds, But Restoration Set to Rally
Q2 shows weakness in roofing, strength in residential and fire, and a new 'Resilience First' cross-sell amid aggressive buybacks.
FSV · Earnings Call · 2026-07-23
A Mixed Quarter with Promise
FirstService Corporation reported Q2 2026 revenues of $1.45 billion, up 2% year over year, with adjusted EBITDA up 3% to $161.7 million and EPS up 2% to $1.75. The residential division posted 5% organic growth, while the brands division was essentially flat. The standout drag was once again the Roofing operations, which declined 6% reported and 10% organically. CEO Scott Patterson acknowledged the challenging environment but emphasized the long-term thesis remains intact.Roofing: Stubbornly Weak but Positioned for Recovery
The roofing market remains "stubbornly weak and ultra competitive," with particular weakness in Las Vegas and Southwest Florida. The company intentionally walked away from low-margin work, and a few large reroof projects were delayed, accounting for half the miss. Patterson noted, “We have intentionally moved away from jobs that were in our pipeline due to the tight pricing, which was beyond our comfort level.” — D. Scott Patterson, CEO · 2026-07-23 The backlog is building sequentially—June up over May, May up over April—but conversion remains slow. Despite current headwinds, the company acquired Sheffer's Roofing in Kansas City, demonstrating confidence in the platform.Restoration: Pipeline Strengthens with Large Loss Projects
The restoration brands saw revenues dip slightly, but the pipeline has improved dramatically. Patterson stated, “We won a number of large loss projects across North America that will convert to revenue over the next 12 to 18 months.” — D. Scott Patterson, CEO · 2026-07-23 These projects span factories, warehouses, government buildings, and multifamily across the continent. The team is also winning specialty construction work, as Patterson noted, “We have been asked to submit bids on unique situations based on our experience, and we have a few wins.” — D. Scott Patterson, CEO · 2026-07-23 The storm activity in coming months could add to the backlog and further improve the outlook, though the company guides to only ~5% growth in the back half as scoping and permitting may delay revenue.Capital Allocation: Aggressive Buybacks amid a Thin M&A Pipeline
Cash flow remains robust, with $130 million generated in Q2 after working capital changes. The company executed a significant buyback, purchasing 1.8 million shares at an average price of $135.91, totaling nearly $250 million. CFO Jeremy Rakusin commented, “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 US dollars $135.91.” — Jeremy Alan Rakusin, CFO · 2026-07-23 Leverage ticked up to 1.8x, still conservative, and the buyback program remains active. M&A opportunities are scarce, as sellers wait for better valuations, but the company is disciplined and patient.Yes. I mean, we have 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 would feel comfortable going at least to the mid twos level. Like, 2.5x would be a strong comfort level for us.