Colliers International Group Inc (CIGI) 2006 Q1 法說會逐字稿

Welcome to FirstService Corporation first quarter financial results conference call. Today's call is being recorded. Forward-looking statements include the Company's financial performance, outlook, and statement regarding goals, beliefs strategies, objectives, plans, or current expectations.

These statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results to be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Such factors include general economic and business conditions, which will among other things impact demand for the Company's services, and the cost of providing services, the ability of the Company to implement it's business strategy including the Company's ability to acquire suitable acquisition candidates on acceptable terms, and successfully integrate newly acquired businesses with it's existing businesses, Changes in or the failure to comply with government regulations, and other factors which are described in the Company's filings with Ontario Securities Commission and the Securities and Exchange Commission.

At this time for opening remarks and introductions I would like to turn the call over the the President and Chief Executive Officer at FirstService Corporation, Mr. Jay Hennick. Please go ahead, sir.

Thank you. Good morning everyone, as the operator mentioned I'm Jay Hennick, the President and Chief Executive Officer of the Company, and with me today is John Friedrichsen, Senior Vice President and Chief Financial Officer.

This morning FirstService reported very strong first service results. Revenue, EBITDA, and earnings, and EPS were all up by at least 50%, and cash flow from operations was more than double what it was last year. The performance of our newly acquired commercial real estate platform Colliers International, was especially strong not only in North America, but also in the Far East, in Australia, and in New Zealand. Offering on a global scale was one of the important benefits of the Colliers acquisition, and provides us with many new opportunities for growth in the future.

While our results in commercial real estate were impressive we were also very pleased with the performances of our residential property management, and property improvement divisions. In fact across all of our service lines, we're well positioned for strong results this year as market leaders in our respective areas.

With this strong growth and the otherwise favorable operating conditions in our markets, we have decided to substantially increase our guidance again for the second time this year. We now expect our earnings per share to come in at between $1.05 and $1.15 per share, up from $0.90 last year. Taken at the midpoint of the new range. This year should be another year of at least 20% growth preferred service, the 11th time in our 13-year history as a public company, that we have been able to grow by more than 20%. This is a very good achievement that we're very proud of.

I'd also like to emphasize that these estimates do not include the benefit of any further acquisitions. Every acquisition we complete will be additive to these numbers, and I'm confident we'll be able to add at least another acquisition or two before year end. Needless to say, we had an excellent quarter ,and we're in great shape for the balance of the year and beyond, but before I expand on the operational highlights, I'd like to ask John to take you through the financial details of the quarter, as well as the assumptions underlying our decision to increase our outlook. Please hold your questions until the end of the call, and we'll be happy to take them then. John.

Thank you, Jay. As Jay just indicated, today we announced record consolidated results for our first quarter. Strong results that exceeded our expectations. Which are very pleased with these results and proud of our management partners and our teams that have contributed to our success. Our results once again reinforce the advantage that our service line diversification provides to our shareholders.

Consolidated revenues EBITDA and adjusted net earnings and earnings per share of continuing operations all showed significant gains in our first quarter compared to last year. Revenue is up 72% to 287.9 million, with 19% in term growth, and the balance related to acquisitions. EBITDA up 75% to 32 million with margins increasing from 10.9 to 11.1%.

Adjusted net earnings up 59% to 11.5 million, and adjusted diluted earnings per share up 50% to $0.36 per share. As outlined in prior conference calls, the adjustment to net earnings and earnings per share represents the non-cash amortization of short-lived and tangible assets, relating to pending commercial real estate brokers trends after new listings, recognized on the November 2004 acquisition of the Company's Commercial real estate services platform, operating as Colliers International.

Consolidated cash flow from operations was strong as well, up 86% before working capital changes, and more than 100% after working capital changes, as the cash flow in the quarter benefited from the timing of payments, which had adversely impacted our cash flow in our fourth quarter.

On a segment basis, revenue from Residential Property Management Operations totaled $84.1 million an increase of 24% over the same period last year, with 19% of the growth generated internally. Our operations continue to deliver solid increases in revenues for both core management and ancillary services in all of our markets. EBITDA in the quarter was 8.6 million, compared to 6.6 million reported in the first quarter last year, an increase of 30%. EBITDA margins increased from 9.7 to 10.3%, primarily due to proportionally higher ancillary revenues and the favorable impact of acquisitions.

Turning to commercial real estate as Jay has highlighted, the Colliers International business that we acquired last November significantly exceeded our expectations. For the quarter, revenues were 99.3 million generating EBITDA of 11.8 million at a margin of 11.9%. The results benefited from an increase in both sales and leasing transaction volumes in our key markets, North America, Australia, and the Far East, where the demand for commercial real estate services remains strong. Though we did not own this operation in Q1 prior year, based on Colliers results for that period, year-over-year revenues in Q1 were up just over 40%.

In our property improvement services segment our operations extend their track record of better than expected performance in this seasonally important first quarter. First quarter revenues in property improvement services totaled 35.2 million, up 19% over the same period in the prior year with 14% of this growth generated internally, and the balance contributed by recently completed acquisitions.

Our California Closets and Paul Davis Restoration businesses were the primary contributor to the year-over-year growth. Meanwhile, EBITDA increased by 27% to 9.5 million in the quarter, versus 7.5 million last year, with margins increasing to 27.1% versus 25.5% last year. The increase primarily attributable to higher royalty revenues while limiting increases to our operating costs.

Integrated security services revenue decreased 5% to 32.5 million the first quarter, relative to the same period a year ago. The decline related primarily to delays in several systems integration projects, and in particular, two larger size projects in the U.S. The pipeline of system sales remains strong across our operations, and we expect our security business to report growth in revenues and EBITDA for the year. EBITDA in the quarter totaled 1.7 million compared to 2.6 million last year, both margins were 5.3 compared to 7.5% last year. The margin decline resulted from lower security system revenues which carry higher margins relative to security manpower revenues. Along with costs incurred to establish three new branches, In Jacksonville, Cincinnati, and Gulfport Mississippi, and that we'll extend our capability of servicing existing, and new national accounts.

Finally the business services revenues were up 4% to 36.7 million in the first quarter. However, EBITDA declined to 2.6 million from 3.5 million in the quarter last year. EBITDA margins were 7.1 compared to 9.9%, due primarily to start-up costs associated with the new student loan processing contract announced in May, and cost insured in connection with the project to streamline costs and improve cost of utilization in our fulfillment operations. Corporate costs were 2.3 million in the quarter compared to 2 million last year, with the increase due primarily to higher Sarbanes Oxley-related compliance costs and performance-related compensation expenses.

As outlined at the outset, our Cash flow from operations available for redeployment totaled just under 16 million compared to 7.6 million the same period last year. During the quarter we invested 6.8 million in capital expenditures, up from 4.1 million in the prior year period. While necessary to support the growth in our businesses, we will continue to carefully control CapEx and allocate capital within our self-imposed annual CapEx limit of not more than 2% of revenues.

Moving to our balance sheet, our net debt position at quarter end was 180 million and our leveraged expressed in terms of net debt to trailing 12-month EBITDA was 1.9 times. Well below our historical operating range of 2.5 to 3 times and providing ample capacity to grow our business. As we previously announced, in conjunction with our annual results for fiscal 2005, just after year end, we completed a private placement of 100 million in 5.44% senior notes, due in April 2015. And an amended revolving credit facility with our banking syndicate of 110 million for a 3-year term. Combined with our cash on hand at the end of the quarter and undrawn resolver, FirstService has about 170 million in liquidity to finance growth opportunities.

Looking forward to the balance of the year we are increasing the outlook we presented during our fiscal 2005 fourth quarter conference call. Based on our operating results to-date and expectations for the balance of the year, we now estimate revenues to be between 1.1 and 1.15 billion, EBITDA of 97 to 104 million, and diluted earnings per share for continuing operations of $1.05 to $1.15. The foregoing amounts exclude the impact of any acquisitions or divestitures that may be completed between now and our year-end of March 31, 2006.

No material changes in current economic conditions in our major markets, particularly the demand for commercial real estate services, and average exchange rate of US$0.80 to C$1 . I'm also obligated to remind you that these amounts are forward-looking, and that actual results may differ materially from those stated in our outlook. Now I would like to turn things back over to Jay. Jay.

Thanks, a lot, John. The highlight of the quarter has to be the strong performance of our newly acquired Colliers International, Commercial real estate platform. Revenues were up significant for the quarter and profits were more than double what they were last year. And given the strength of the commercial real estate sector globally and the markets within which we operate, we fully expect Collier's to continue to outperform for the balance of the year.

We are very excited about the possibilities of this new business segment. Collier's employs more than 4,000 people spanning 80 offices in 20 countries around the world, including operations in North America, Asia Pacific, Central Europe, and Latin America. Colliers International, is one of the most recognized brand names in the global commercial real estate market, and it's one of the top three commercial real estate players in the world.

More importantly it has a strong and committed management team who are leaders in their industry, but they also own a significant equity stake in the business, giving them a real incentive to drive the growth and development of the business well into the future, these were just some of the reasons why we thought Collier's fit so nicely with the FirstService business model. We intend to work diligently with our partners to aggressively grow this business and we'll do it by increasing our market share in existing operations, by acquiring other commercial real estate players, and by adding complimentary services, all of which we can now do on a global basis.

While the results in commercial real estate were very strong the results in Residential Property managements were also impressive. As you know we are the largest player in the Residential Property management business in North America. We manage more than 3,000 properties including over 550,000 homes, and we do that from 35 offices in 16 U.S. states. Along with managing these properties, we also administer a budget of more than $2 billion annually, money that's used to operate and maintain our client's properties.

Our management team, led by Gene Gomberg, Richard Strunin, and Chip Sollins have done a terrific job in building our business into the absolute industry leader. Our strategy for this business remains the same as it has always been. To add units under management both internally and through acquisition, and then leverage our management relationship to do more for our clients. The way we see it, the more we can do in the form of additional services, the stronger our client relationships become and the greater our competitive advantage.

All of these strengthen our Company for the benefit of our employees through additional opportunities for advancement, and for the benefit of our shareholders through higher revenues and profits. Our business continues to be strong across the board, and we continue to take advantage of the current boom in new home and high-rise construction, particularly in the Sunbelt states.

However, we have also been busy winning new business in more traditional ways, from our competition, from self-managed communities who decide to outsource to professional property managers, and more recently from a number of building owners that have decided to convert their residential properties into condominiums, and then to other forms of common-ownership properties. All of these help our business grow. In fact about two/thirds of our growth this year has come from these traditional methods of growth, with the balance coming from new home construction.

And we're successful because we continue to look for ways to add value to our clients. One of the ways we do this is by reducing their operating costs. Providing additional services like lockbox, account collections, insurance brokerage and residential property transfers, all help to reduce our clients' costs while creating an important competitive advantage for us.

The acquisitions we completed last year in Chicago and in Las Vegas are both doing well. We're particularly pleased with the results of our new platform in Las Vegas, which is enjoying very strong growth as one of the fastest growing markets in America. When I told Steve Rogers, the CEO of our property improvement division that his results for the quarter were third best, he didn't believe me, and I can understand why. Property improvement earnings were up 28% over the prior year, with margin improvement better by almost 200 basis points, and he was still in third place. Generating royalties for more than 1800 franchisees worldwide, business owners who operate their business under our well-known brand names is an excellent recurring revenue service business, and one that we're particularly good at.

Strong year-over-year results from franchise systems, California Closets, Paul Davis Restoration, Pillar to Post Home Inspections, as well as our painting operations, all contributed nicely during the quarter. We also enjoyed strong growth in revenue and profits from our company-owned California Closets branchises. Together, our branchise operations operate in 9 regions across North America, and generate about $40 million per year in revenue. Our strategy of selectively repurchasing California Closets franchises in markets where we see additional growth opportunities has been very successful, and we expect to continue to add units as opportunities present themselves.

John has already taken you through the results for the quarter for both integrated security and business services. Both came in a little weaker for the quarter than we expected, but in both cases we're confident we're in excellent shape and well-positioned to deliver strong growth this year and beyond. In security we opened three new offices in the U.S. and our backlog remains at record levels.

In Canada we recently signed a five-year contract with the Royal Bank of Canada to design and install a very sophisticated access-control CCTV and a Tribune system, at their more than 1,000 branches across the country. This is a very significant new opportunity for our security operations and one that could translate into additional revenue streams from other players in the financial services sector.

At Resolve, our results were impacted by the startup costs on though new 10-year student loan servicing contract that we announced last quarter, which is now up and running and generating nice revenue streams. Results were also impacted by the cost associated with an initiative we implemented during the quarter to improve our margins, and increase our capacity utilization in our fulfillment operations.

Overall, the results for the first quarter emphasize once again one of the most important characteristics of the FirstService business model, our diversification. FirstService is diversified by geography, now more than ever with the addition of Collier's International, we are truly a global company, with all of the opportunities and synergies that go with it. We are also diversified by customer, no one customer represents more than 1.5% of our overall revenues, and finally we're diversified by service line. FirstService can continue to deliver solid results to our shareholders, year after year by offsetting weaker results in any one of our service lines, with stronger performances in the others. It's a great benefit that has paid huge dividends for FirstService shareholders for many years.

Those were the highlights for the quarter, and now we would be pleased to open it up to any questions that you have. Operator.

[OPERATOR INSTRUCTIONS]

We'll go first to the site of David Newman with National Bank.

Good morning, gentlemen. Fabulous quarter.

Thank you.

On the business service side, with the re-engineering of your operations what sort of EBITDA margin potential do you think we could expect and any cost savings, thereof?

You know, David I couldn't categorize it as a re-engineering. We had a data point, coming up which was a very significant facility that was coming off of lease. I believe it finished, John, at the end of June. So the end of June. So we used that as an opportunity to streamline some of the operations, adjust down some of our people issues, and rearrange some of our existing fulfillment operations to take advantage of some of the excess capacity and basically move some capacity from this branch, into some of our other branches.

So that obviously costs a little bit of money and -- and so we decided to take advantage of that with that one data point that we had, and it's hopefully behind us, I think we'll feel it a little bit this quarter, but as you know the fourth quarter for business services was very strong last year -- or last year at the March quarter, and we should see margins move to where we expect them to be faster than you think.

Okay. Very good. And -- just in general, the synergies that I see, you know, between the commercial and your RPM division, et cetera, even security, and property improvement services, it seems to me there's a natural sort of synergistic, and there's lots of opportunities to tap into that.

I guess the first question is -- is what sort of synergies have you tapped into, what do you think you could potentially do between the two divisions, in particular the commercial real estate, to perhaps even immunize yourself against any sort of potential downturn, and I guess following on that the business services side does seem to look like a bit of an outlier, how does that fit into your future portfolio?

In terms of the synergies, there's -- there's lots of synergies in commercial real estate, we're just scratching the surface, really. And our strategy for that is to just focus on the base business, pick some cherries, I guess in the first year, year and a half, but really capitalize on the opportunities and the guys are doing a terrific job at Colliers, and we're quite excited about just the base businesses, and the opportunities to continue to enhance it.

There was always loss of synergy between Property management in particular, and security, and our property improvement area, which are basically franchisees that can provide services to our managed communities, that has happened nicely over the years and continues to build, just ballparking it, and we can get you, maybe, some better numbers, I would say that there is probably $50 million of the business that has gone back and forth between our property management business, having security services provided by security, and having painting and restoration, et cetera services provided by property improvement, but remember in the franchise part of it, we only earn royalties on that revenue.

So it's great for our franchisees because they generate good revenue streams from a big commercial client, our property management operations, but from FirstService perspective we earn a loyalty stream on the incremental revenues that they generate. So it's wonderful. It's helps our franchisees, it generates additional revenue streams for us, which you are seeing in -- which you are seeing in the property improvement area, but it doesn't really add material revenues. I think the security component might be above 10 million of the 50.

Okay.

So 40 would be revenue generated by our various franchisees in different markets. So that is that.

In terms of the -- the last part of your question, the business services/Resolve question. We love that business, we have a great management team. We have great future opportunities there. We really see it as a business that is similar from an operating standpoint, to our other services. It's primarily labor management. It's contractual revenue. In fact about 95% of the revenue is contractual, which is close to the high side of our revenue streams. The synergy back and forth is less -- you know, because they are not -- it's not a property-related service area, but you know, we just -- we see it as a business that operates in the same way as the balance of our service lines.

Okay. Very good. I'll let somebody else have the line, I'm sure you're going to get a question on the acquisitions, what you plan to do with the money.

But just one last question on the back of that on the commercial real estate are you just sort of letting it settle in, get some traction, or is there any potential that you can actually start backfilling some of the access control and CCTV into the broker's transaction, post the deal?

You know, our property management group at Colliers is doing business with our security operations, but it's really just, you know -- in materiality, it is not material. So we have connected them as we do with our other service lines. We have encouraged the -- the cross-selling, it is happening, but you know, in the overall scheme of things, David it's relatively insignificant.

Okay. Very good. Thanks, Jay, thanks, John. Great quarter.

Thank you. We'll go next to the site of Frederick Bastian, Raymond James.

Good morning.

How are you?

My question related to the guidance that you provided, -- is all of the or I guess most of the change that you -- you described here is this mostly attributable to Collier's or are you also more bullish on some of the other segments of your business?

Mostly Collier's but based on the results particularly in residential property management and property improvement services, they certainly did contribute, albeit less so than Collier's to the reason that we increase our guidance.

Great -- and I guess is it fair to say the contract you just signed with RBC for your security services had something to do with the relationship you developed with them through Resolve?

Not really.

No.

It's an independent situation, you know, -- done directly by both business units. Just coincidence.

Okay. But it does show good example of your cross-selling capabilities, I guess.

Yes.

Yes.

Okay. Great. Thanks. I'll get back in queue.

Thank you.

Thanks we'll go next to the site of David Gold, Sidoti & Co.

Good morning. Couple of questions for you on Collier's, kind of look at that -- first you look into this quarter, which seasonally I guess we're coming into a strong second half of the calendar year. Do you see the momentum continuing to build visibility-wise, or do you think we pulled some business forward, and we can just stay at this level for the next couple of quarters?

No. I mean, David, we have not seen a contraction in the pipeline of opportunities. It continues to be very firm and is building in-line with what we would expect it to during the course of the year, and this business as you pointed out is somewhat seasonal, and will build toward the end of the year. We did not see any, I guess dilution in that activity.

Having said that as you know and as we disclosed previously. December of last year for Collier's was a significant month, and you know we would love to be in the same position to report the same kind of results that we did last December, and you know, things are heading the right direction for sure.

Okay. And the strength that you saw there was it primarily brokerage or was it across the board or -- ?

Brokerage, primarily.

Okay.

And a lot -- a lot of sales transaction and related commissions.

Okay. And lastly just looking at the margins there, I know it may be tough, but is there a sense you can give us what margin would have looked like last year, and where you think we can go based on the operating leverage in that business?

Well as you know we didn't own the business last year, and there is I guess information out there in terms of what their margins looked like. There was a lot of things impacting that business in particular last year, during the comparative quarter they were going through a sales process, there were a number of costs they were incurring with that, so it's really hard to tell on an apples-to-apples basis. If you look at the numbers straight out, they were operating the margin somewhere around 8%. We're obviously doing considerably better, given the higher volumes and the fact there is some operating leverage in this business as you increase volumes.

So you know, on a go-forward basis, if we can continue to generate these same time of margins that we're at now, we'll be very, very pleased.

Got you. Okay. Thanks a lot.

Thank you we'll go next to the site of Bill MacKenzie with TD Newcrest. Go ahead, please.

Hi, guys, just following up a little bit on the last question with respect to Collier's seasonality, and I know this business is still new to you and maybe a little tough to forecast, but it's my impression that the typical seasonality in this business would be -- the profitability would be split kind of between Q4 -- calendar Q4 and in Q2 and Q3 combined with Q1 not really being much of a contributor. Is that sort of the seasonality that we would be looking at for this year. Or with Q2 -- with this quarter being so strong, Q2 on a calendar basis, Strong has the seasonality changed relative to what it's been historically?

No. It hasn't. I this think, you know, obviously these results were better than we expected, but when you talk about trying to map out the seasonality and looking at, I guess, the calendar Q2 and Q3 on a combined basis equating to what they would typically generate in Q4.

I mean that pattern as far as we can tell will continue to hold. We don't see any change. But having said that we're going to obviously just see how the next several months unfold before we can categorically state that yeah it's -- it's the same, but there's no reason to believe that it has changed.

Okay. Great. Okay. That's great. Just turning to security for a second the two large systems projects in the US that you talked about, have they been delivered since the end of the quarter, and can you just give us a ballpark size as to what size they are?

With the two very significant jobs, they have not yet started. In 1 case, it is -- we can't by contract disclose who they are. One of -- in 1 case it's the US government, can't disclose which segment of the U.S. Government. There's some re-engineering happening, which we expect will be good for us in terms of additional work, but they really don't want, for obvious reasons, cost-wise to have us go and do a plant twice, for example, when -- you know, to go back and upgrade it subsequently, so they are trying to tie the two of the them together, so -- and it's happening in both cases, that there's upgrades in security installations.

That's the nature of our business with our national accounts in particular. It's one of the reasons why we continue to open up some of these newer branches. We opened three this year. National accounts is a strong part of our business, but you need to be in different geographic reasons, not just to install but more importantly to service the systems after the fact. They are long-term relationships once you get them in.

So, this is the nature of this business. It's not the same in Canada this is strictly a US situation. It's the nature of the business. We have to take the good with the bad, and there's tons of good here. So it's a temporary bliss, as we see it. We think our security division will have a good year this year.

Do you think that -- that business will start kicking in next quarter or is it going to be sort of back end weighted in the year?

Because of the size of them it's probably going to be, you know, third, fourth quarter for us.

Okay.

But there's other stuff that we're working on every day that should help us in the second quarter but these are significant jobs, and by the way will last several quarters once they get underway.

Okay. Okay. Great. And then just sort of -- I guess a financial housekeeping question, John. The other income on the income statement I think it was around 600,000 or sew so.

A small dilution gain on the sales of some additional shares in one of the subsidiaries to management, and the result are a pick-up on some investments, non-consolidated investments that Colliers has, so now you get a total of 600,000.

There will be a portion of that that will be recurring going forward?

You know, half a million of that will be recurring, even though the number will not recur itself, but the nature of the income will recur in future quarters.

We'll go next to the site of Sheila Broughton with Pacific International Securities.

Hi Jay, and John, great quarter. You mentioned the reason for the delays on the 2 big security projects. But it sounded some other projects were delayed for similar reasons to those?

No it's really just the two.

Okay. Just the two. And with the -- the lease and your fulfillment capacity moved over, what kind of capacity utilization are you operating at now on the fulfillment side?

I think 75?

John -- John thinks 75. I think it might be a little higher than that.

Okay. That's great so it is really moving up. That's terrific.

Yes it is, yes.

Thank you [OPERATOR INSTRUCTIONS] And we'll go next to the site of Matt Litfin, William Blair and Company.

Good morning gentlemen. On Collier's I have a question there, update us on what you are hearing from your broker force, given the changes that you've made since the acquisition, and also wanted to know where turnover was tracking at Collier's in the brokerage force during the Q2?

Well, hopefully there is not much news at the broker level, other than we now have a very strong partner to help them drive the business to the next level, something that they hadn't had before.

And the second but related is we have been activity recruiting in several markets right now, and you know, that has been difficult for this business for the past couple of years for obvious reasons, and we have been quite aggressive in terms of recruiting, which will hopefully pay us dividends in future years.

It doesn't -- in fact it costs us money in the early period, because it takes people time to get started, and build relationships under a new company, but we have been doing some aggressive recruiting, and that is having another positive impact on the brokers. It's the place to be. There's some other peers out there that are -- notwithstanding market conditions are having trouble, and that's been an advantage for us, and we're one of the top players in the world, so it's a place that people want to be at. And so I think there's generally a very good feel.

Retention rates for Colliers have always been almost 10% better than the comparative places, because in part these guys do own an equity stake in the business. There's about 400 active brokers that own shares in the company, and secondly, it's a more, I would say, entrepreneurial environment than one or two of it's larger peers, and so that has created a lot of staying power in the forces. I don't know what their retention rate changes have been over the past, probably quarter or two. But I suspect they are better than they were historically.

Okay. Another question, drilling down on the 19% internal growth at RPM, was that type of growth one-time in the quarter? Or do we need to ratchet up our expectations of that segment's growth rate for some specific reasons?

That's -- that's very high growth and beyond our -- our expectations so I would not ratchet up your growth rate. I think as we have indicated before, Matt, I mean high single digits, low double digits when everything is working well, is an on-going growth rate in that business. We did very, very well this past quarter.

Yeah, I appreciate that forecast and the conservatism, I guess what I'm trying to figure out is what were the drivers that give you 10 percentage points more than you usually get in revenue growth in the quarter, and that will help me assess whether that's one-time?

You know, a number of new accounts have come on I think we talked about the fact that in sub-floor, the market is expanding so significantly and a number of new management clients coming on. A lot of it, you know, has come to fruition and has hit in the quarter with ongoing efforts to cross-sell our other services and they have had a great deal of success, so maybe some of this is timing, but I would not -- you know, I certainly don't think 19% is an ongoing sustainable rate, though, though it was obviously achieved in the last quarter.

Let me add one or two thoughts there. The first is and maybe I wasn't as clear as I wanted to be in my prepared comments. Historically new construction growth for us has been about 10% of our annual growth. Maybe 15% of our annual growth. It has moved up considerably in the last, probably year or 18 months, so some of that is new buildings coming on-stream.

And secondly, I think the other data point for the quarter was that some of the ancillary services that we provide have higher margins, and we have enjoyed some of the benefits as we bring new acquisitions into our system, and convert them on to our lockbox program, and on to our insurance -- brokerage programs, all of those create incremental revenue streams that aren't significant on a 1-for-1 basis, but on an aggregate basis, become more significant, so as we add units under management, and that's the big -- you know, the big strategy for us is units under management internally and through acquisition, the incremental margin we can pick up by adding those additional services.

That's helpful, Jay. I don't want to beat this dead horse but of the 19 percentage points of growth it sounds like you are saying the vast majority of that is unit growth, can you make any comment on the pricing you are getting in the RPM segment?

Pricing is flat. I think we get CPI increases annually by contract, but make no mistake about it, it's a very competitive marketplace, and the reason we have been able to move our margins is by doing more for the clients.

Okay. One more if I might and this maybe is for John. Just given that financial leverage is down from historical levels, does that make you more apt to execute on the share repurchase authorization that you have outstanding at all?

I guess we have to look at that from time to time, Matt, and if the market does not reflect the value that we believe exists within the FirstService shares, we'll certainly be in a position to buy back, and you are right, we have excess capacity. Arguably our leverage is a little bit low, well below where we have operated historically. I think it's probably prudent to operate at a somewhat lower level than we have historically given the nature of our current line of businesses, but, you know, when it makes sense, we'll do it.

For what it's worth I completely agree with that -- with the new mix of commercial real estate in there, but for what it's worth. Thank you very much and congratulations.

Thank you we'll go next to the site of Bill MacKenzie with TD Newcrest. Go ahead, please. Mr. MacKenzie, your line is open.

I'm sorry. John, can you tell us how much of your cash is currently held at the corporate entity versus down at the subs. Do you have that information?

Most of it would be at First Service within our mirrored system that we operate. So I don't have the precise figure, but a significant majority.

Okay. Great. That's it, thanks.

Thank you. We'll go next to the site of David Newman with National Bank.

Just a quick couple of followups guys. On the new construction site you say you moved from 10 to 15, up to let's say 25, 30. Are you getting to be -- sort of the property manager of choice? In other words your brand name recognition getting out there now across the US? Is that -- are you getting some traction on that front?

David I don't understand what we're talking about. Can you try me again on that?

Yeah, in other words obviously Colliers has a fabulous brand name, right? In Florida and elsewhere you are moved up your ratio of being able to secure new properties on new construction. Are the builders -- I guess it's the builders are, they working more with you directly that -- when a condominium goes up, that they actually opt for you guys because you have garnered such a good reputation in the market?

Now, I understand. In property management, one of the great things that we have that nobody else really has in this business, and that's because it's a new business that we, we were -- in part helped create, is we have a national presence, so we can deal with some of the large national homebuilders, and serve their new communities in many markets across the U.S., we still don't California. We would love to we still won't serve the Northwest, we would love to.

But for the most part we have significant presence in most markets and that's been a benefit in terms of national accounts, dealing with one firm that is able to outsource their property management in a variety of markets without having to find a local provider, or set up operations on their own.

The other thing that's benefiting us is the high-rise construction nationally. I mean, Las Vegas is one example, but it's happening in Phoenix and some of the other markets, Tampa, Orlando. It's happening in Jacksonville. New construction of high-rise condominiums and co-ops are something that is new to many of these markets on the residential side, and there's only some players that have experience in managing the high-rise marketplace, and that's something that we're pretty good at.

So, you know, Vegas comes to mind particularly because we needed to be in that market because a lot of our national clients were starting to build significant condominium developments there, and they needed to have a service provider like us to help them execute. So yes, we have enjoyed a lot of that. That's part of -- you know, part of our growth, new construction growth. And what is nice is we're placing it in different geographic regions.

That's excellent. And in terms of that -- I mean is there -- you have got a pretty significant war chest right now in being able to execute on acquisitions. Is there platforms -- you mentioned California and what not? I mean are the valuations relatively reasonable, and if you had to take the next incremental dollar that you spend on acquisitions, have you prioritized where you would like to go with that money? And is there any holes you need to fill that you are really targeting?

David you have followed us for a lot of years, and you'll know that our way is not to force things, because if there's a target that you want you can't really force it because if you force it you're going pay way too much money, and they come when they come and you have to be patient, or you have to buy something that is not as good as you would like, and do a lot of work, so you wait 3 years before it finally matures, or you wait for the prize, and so our philosophy has been wait.

We were very successful last year in Chicago. We were very successful last year in Las Vegas, and hopefully we'll be able to bring something home this year in a couple of new geographic regions. But we have to pick our spots because we really do want to enter the market with a leader, not a follower.

Great. Excellent. Thanks guys.

It appears we have no further questions.

Thank you very much, everyone for attending this conference call, and we'll see you again at the second quarter conference call. Thank you.

That concludes today's conference. You may now disconnect.