Stephen Hardy Sheldon

Stephen Hardy Sheldon asked about the drivers behind FirstService Residential's strong margin trends, the potential for the division to achieve double-digit margins in the future, and the outlook for the roofing segment, particularly how long commercial properties can defer reroofing projects given the muted demand environment.

Answer

CFO Jeremy Rakusin explained that significant efficiency gains from offshoring, AI, accounting, and call center operations in 2024 and 2025 are now being lapped, leading to a flattish margin outlook for 2026, but acknowledged that double-digit margins are a multi-year opportunity. CEO D. Scott Patterson noted that reroofing cannot be deferred indefinitely, and the market has stabilized with a strong, reroof-weighted backlog, expressing optimism for sequential and year-over-year growth in the roofing segment.

Stephen Sheldon asked about the drivers behind FirstService Residential's strong margin trends, including offshoring and AI, and if there's an opportunity for margins to exceed 10% in the future. He also questioned what it would take for the reroofing market to pick up, given weak new construction, and how long commercial properties can defer reroofing projects.

Answer

CFO Jeremy Rakusin explained that much of the 'heavy lifting' for margin improvement in FirstService Residential occurred in 2024 and 2025, with margins now tapering. While not expecting significant expansion in 2026, he sees an opportunity for margins to exceed 10% over a multi-year horizon. CEO D. Scott Patterson stated that reroofing cannot be deferred for long, and the market has stabilized, with backlog heavily weighted towards reroof. He expects modest growth this year with sequential improvement.

Stephen Hardy Sheldon asked if the guidance increase was influenced by changes in Marriott rollout assumptions and sought more context on the factors driving strength in the managed food service (FSM) vertical for POS, including market size and competitive landscape.

Answer

Dave Wood, CFO, and Ramesh Srinivasan, President and CEO of Agilysys, clarified that the guidance increase was not Marriott-related, as it excludes Marriott PMS subscription revenue, and was driven by general sales momentum. Ramesh Srinivasan attributed FSM strength to re-engineered, modernized, and unified POS products, easier implementations, and effective new sales staff. He noted competition from smaller vendors but highlighted Agilysys's improving product sets and implementations. Stephen also asked about PMS product attach rates, to which Ramesh Srinivasan explained that higher attach rates for PMS are expected due to more add-on modules and the need for a unified guest experience, with popular add-ons including golf, spa, sales and catering, booking engine, and loyalty promotions.