FirstService : INTERIM CONSOLIDATED FINANCIAL STATEMENTS - Form 6-K

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Second Quarter

June 30, 2022

Page 2 of 13

FIRSTSERVICE CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(in thousands of US dollars, except per share amounts) - in accordance with accounting principles generally accepted in the

United States of America

		Three months			Six months
		ended June 30			ended June 30
		2022			2021			2022			2021
Revenues (note 3)		$	930,707			$	831,630			$	1,765,279			$	1,542,696
Cost of revenues			638,475				554,676				1,214,309				1,045,488
Selling, general and administrative expenses			204,921				192,004				407,142				355,250
Depreciation			15,514				13,266				29,958				26,479
Amortization of intangible assets			11,398				10,408				22,864				20,420
Acquisition-related items			586				(107	)			2,147				(206	)
Operating earnings			59,813				61,383				88,859				95,265
Interest expense, net			5,041				3,971				9,407				8,158
Other expense (income), net			322				(888	)			(213	)			(2,756	)
Earnings before income tax			54,450				58,300				79,665				89,863
Income tax (note 6)			13,944				14,280				20,338				22,000
Net earnings			40,506				44,020				59,327				67,863
Non-controlling interest share of earnings (note 9)			2,450				1,596				3,015				5,363
Non-controlling interest redemption increment (note 9)			3,490				5,725				7,661				3,910
Net earnings attributable to Company		$	34,566			$	36,699			$	48,651			$	58,590
Net earnings per common share (note 10)
Basic		$	0.78			$	0.84			$	1.10			$	1.34
Diluted		$	0.78			$	0.83			$	1.09			$	1.32

The accompanying notes are an integral part of these financial statements.

Page 3 of 13

FIRSTSERVICE CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Unaudited)

(in thousands of US dollars) - in accordance with accounting principles generally accepted in the United States of America

		Three months			Six months
		ended June 30			ended June 30
		2022			2021			2022			2021
Net earnings		$	40,506			$	44,020			$	59,327			$	67,863
Foreign currency translation gain (loss)			(3,588	)			1,231				(2,026	)			2,291
Comprehensive earnings			36,918				45,251				57,301				70,154
Less: Comprehensive earnings attributable to non-controlling
interests			5,940				7,321				10,676				9,273
Comprehensive earnings attributable to Company		$	30,978			$	37,930			$	46,625			$	60,881

The accompanying notes are an integral part of these financial statements.

Page 4 of 13

FIRSTSERVICE CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands of US dollars) - in accordance with accounting principles generally accepted in the United States of America

		June 30, 2022			December 31, 2021
Assets
Current Assets
Cash and cash equivalents		$	145,106			$	165,665
Restricted cash			36,063				28,606
Accounts receivable, net of allowance of $8,666 (note 2)
(December 31, 2021 - $13,984)			538,507				551,564
Income tax recoverable			18,831				6,842
Inventories			190,820				161,387
Prepaid expenses and other current assets			56,408				50,596
			985,735				964,660
Other receivables			4,794				4,719
Other assets			16,872				16,379
Fixed assets			150,129				138,066
Operating lease right-of-use assets (note 5)			165,554				159,730
Intangible assets			358,192				382,107
Goodwill			845,649				843,362
			1,541,190				1,544,363
		$	2,526,925			$	2,509,023
Liabilities and shareholders' equity
Current Liabilities
Accounts payable		$	96,277			$	100,125
Accrued liabilities			273,538				286,404
Income taxes payable			391				2,554
Unearned revenues			131,877				116,415
Operating lease liabilities - current (note 5)			47,869				48,047
Long-term debt - current (note 7)			35,568				57,436
Contingent acquisition consideration - current (note 8)			15,557				7,491
			601,077				618,472
Long-term debt - non-current (note 7)			621,204				595,368
Operating lease liabilities - non-current (note 5)			128,127				122,337
Contingent acquisition consideration (note 8)			16,746				24,855
Unearned revenues			16,287				15,083
Other liabilities			44,883				71,981
Deferred income tax			40,679				42,070
			867,926				871,694
Redeemable non-controlling interests (note 9)			209,534				219,135
Shareholders' equity			848,388				799,722
		$	2,526,925			$	2,509,023

The accompanying notes are an integral part of these financial statements.

Page 5 of 13

FIRSTSERVICE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

(in thousands of US dollars, except share information)

		Common shares									Accumulated
		Issued and												other
		outstanding						Contributed						comprehensive
		shares			Amount			surplus			Deficit			earnings (loss)			Total
Balance, December 31, 2021			44,013,031			$	797,428			$	68,249			$	(67,920	)		$	1,965			$	799,722
Net earnings			-				-				-				14,085				-				14,085
Other comprehensive earnings			-				-				-				-				1,562				1,562
Common Shares:
Stock option expense			-				-				5,821				-				-				5,821
Stock options exercised			179,500				12,705				(2,672	)			-				-				10,033
Dividends			-				-				-				(8,952	)			-				(8,952	)
Balance, March 31, 2022			44,192,531			$	810,133			$	71,398			$	(62,787	)		$	3,527			$	822,271
Net earnings			-				-				-				34,566				-				34,566
Other comprehensive earnings (loss)			-				-				-				-				(3,588	)			(3,588	)
Subsidiaries' equity transactions			-				-				23				-				-				23
Common Shares:
Stock option expense			-				-				4,035				-				-				4,035
Stock options exercised			400				34				(7	)			-				-				27
Dividends			-				-				-				(8,946	)			-				(8,946	)
Balance, June 30, 2022			44,192,931			$	810,167			$	75,449			$	(37,167	)		$	(61	)		$	848,388

Page 6 of 13

FIRSTSERVICE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued)

(Unaudited)

(in thousands of US dollars, except share information)

		Common shares									Accumulated
		Issued and												other
		outstanding						Contributed						comprehensive
		shares			Amount			surplus			Deficit			earnings (loss)			Total
Balance, December 31, 2020			43,587,554			$	770,032			$	59,303			$	(171,085	)		$	2,148			$	660,398
Net earnings			-				-				-				21,891				-				21,891
Other comprehensive earnings			-				-				-				-				1,060				1,060
Subsidiaries' equity transactions			-				-				23				-				-				23
Common Shares:
Stock option expense			-				-				2,787				-				-				2,787
Stock options exercised			241,152				13,018				(2,771	)			-				-				10,247
Dividends			-				-				-				(7,999	)			-				(7,999	)
Balance, March 31, 2021			43,828,706			$	783,050			$	59,342			$	(157,193	)		$	3,208			$	688,407
Net earnings			-				-				-				36,699				-				36,699
Other comprehensive earnings			-				-				-				-				1,231				1,231
Subsidiaries' equity transactions			-				-				(10	)			-				-				(10	)
Common Shares:
Stock option expense			-				-				4,903				-				-				4,903
Stock options exercised			3,425				385				(121	)			-				-				264
Dividends			-				-				-				(7,999	)			-				(7,999	)
Balance, June 30, 2021			43,832,131			$	783,435			$	64,114			$	(128,493	)		$	4,439			$	723,495

Page 7 of 13

FIRSTSERVICE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands of US dollars) - in accordance with accounting principles generally accepted in the United States of America

		Three months ended			Six months ended
		June 30			June 30
		2022			2021			2022			2021
Cash provided by (used in)
Operating activities
Net earnings		$	40,506				44,020			$	59,327			$	67,863
Items not affecting cash:
Depreciation and amortization			26,912				23,674				52,822				46,899
Deferred income tax			(581	)			(981	)			(1,204	)			(1,730	)
Other			4,703				5,024				11,476				7,998
Changes in non-cash working capital:
Accounts receivable			(3,100	)			(46,938	)			21,734				(38,686	)
Inventories			(21,548	)			(3,911	)			(25,169	)			(17,706	)
Prepaid expenses and other current assets			(3,162	)			4,944				(5,725	)			403
Payables and accruals			4,500				18,552				(35,450	)			(8,368	)
Unearned revenues			17,846				27,348				15,229				39,642
Other liabilities			(4,277	)			8,280				(29,740	)			10,408
Net cash provided by operating activities			61,799				80,012				63,300				106,723
Investing activities
Acquisitions of businesses, net of cash acquired (note 4)			-				(37,082	)			-				(39,603	)
Purchases of fixed assets			(19,795	)			(15,766	)			(36,378	)			(29,103	)
Other investing activities			(7,855	)			(2,210	)			(13,969	)			(4,276	)
Net cash used in investing activities			(27,650	)			(55,058	)			(50,347	)			(72,982	)
Financing activities
Increase in long-term debt			819				40,248				75,729				38,095
Repayment of long-term debt			(25,000	)			(20,500	)			(70,000	)			(56,000	)
Purchases of non-controlling interests, net			(13,415	)			(2,009	)			(19,179	)			(5,400	)
Contingent acquisition consideration			(957	)			-				(1,118	)			(650	)
Proceeds received on exercise of options			27				264				10,060				10,511
Financing fees paid			-				-				(2,333	)			-
Dividends paid to common shareholders			(8,949	)			(7,999	)			(16,981	)			(15,191	)
Distributions paid to non-controlling interests			(2,602	)			(5,286	)			(2,602	)			(7,156	)
Net cash provided by (used in) financing activities			(50,077	)			4,718				(26,424	)			(35,791	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			503				323				369				533
Increase (decrease) in cash, cash equivalents and restricted cash			(15,425	)			29,995				(13,102	)			(1,517	)
Cash, cash equivalents and restricted cash, beginning of period			196,594				177,426				194,271				208,938
Cash, cash equivalents and restricted cash, end of period		$	181,169				207,421			$	181,169			$	207,421

The accompanying notes are an integral part of these financial statements.

Page 8 of 13

FIRSTSERVICE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

(in thousands of US dollars, except per share amounts)

1. DESCRIPTION OF THE BUSINESS - FirstService Corporation (the "Company") is a North American provider of residential property management and other essential property services to residential and commercial customers. The Company's operations are conducted in two segments: FirstService Residential and FirstService Brands. The segments are grouped with reference to the nature of services provided and the types of clients that use those services.

FirstService Residential is a full-service property manager and in many markets provides a full range of ancillary services primarily in the following areas: on-site staffing, including building engineering and maintenance, full-service amenity management, security, concierge and front desk personnel; proprietary banking and insurance products; and energy conservation and management solutions.

FirstService Brands provides a range of essential property services to residential and commercial customers in North America through franchise networks and company-owned locations. The principal brands in this division include Paul Davis Restoration, FIRST ONSITE, California Closets, Century Fire Protection, Certa Pro Painters, Pillar to Post Home Inspectors, and Floor Coverings International.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - These condensed consolidated financial statements have been prepared by the Company in accordance with the disclosure requirements for the presentation of interim financial information pursuant to applicable Canadian securities law. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America have been condensed or omitted in accordance with such disclosure requirements, although the Company believes that the disclosures are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021.

These interim financial statements follow the same accounting policies as the most recent audited consolidated financial statements. In the opinion of management, the condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as at June 30, 2022 and the results of operations and its cash flows for the three and six month periods ended June 30, 2022 and 2021. All such adjustments are of a normal recurring nature. The results of operations for the three and six month periods ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

Accounting policy for Credit Losses

The allowance for credit losses is based on the Company's assessment of the collectability of customer accounts. The measurement of expected credit losses is based on relevant information about past events, including historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may impact a customer's ability to pay.

A reconciliation of our allowance for credit losses is found below:

(In thousands)		2022
Allowance for credit losses, December 31, 2021		$	13,984
Bad debt expense			1,649
Write-offs to accounts receivable			(6,916	)
Recoveries to accounts receivable			21
Other			(72	)
Allowance for credit losses, June 30, 2022		$	8,666

Page 9 of 13

3. REVENUE RECOGNITION - Within the FirstService Brands segment, franchise fee revenue recognized during the six months ended June 30, 2022 that was included in deferred revenue at the beginning of the period was $2,293 (2021 - $2,285). These fees are recognized over the life of the underlying franchise agreement, usually between 5 - 10 years.

External broker costs and employee sales commissions in obtaining new franchisees are capitalized and are amortized over the life of the underlying franchise agreement. Costs amortized during the six months ended June 30, 2022 were $975 (2021 - $994). The closing amount of the capitalized costs to obtain contracts on the balance sheet as at June 30, 2022 was $7,943 (2021 - $6,966). There were no impairment losses recognized related to those assets in the quarter.

The Company's backlog represents remaining performance obligations and is defined as contracted work yet to be performed. As at June 30, 2022, the aggregate amount of backlog was $589,132 (December 31, 2021 - $464,134). The Company expects to recognize revenue on the remaining backlog over the next 12 months.

Disaggregated revenues are as follows:

		Three months			Six months
		ended June 30			ended June 30
		2022			2021			2022			2021
Revenues
FirstService Residential		$	457,489			$	406,221			$	851,572			$	756,701
FirstService Brands company-owned			423,210				375,520				821,662				702,898
FirstService Brands franchisor			48,835				48,548				89,632				80,692
FirstService Brands franchise fee			1,173				1,341				2,413				2,405

The Company disaggregates revenue by segment. Within the FirstService Brands segment, the Company further disaggregates its company-owned operations revenue; these businesses primarily recognize revenue over time as they perform because of continuous transfer of control to the customer. As such, revenue is recognized based on the extent of progress towards completion of the performance obligation. The Company generally uses the percentage of completion method. The extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred.

We believe this disaggregation best depicts how the nature, amount, timing and uncertainty of the Company's revenue and cash flows are affected by economic factors.

4. ACQUISITIONS - During the six months ended June 30, 2022, the Company did not complete any acquisitions. In the prior year quarter, the Company completed four acquisitions in the FirstService Brands segment; the acquisition date fair value of consideration transferred was as follows: cash of $39,603 and contingent consideration of $3,414.

The purchase price allocations for certain transactions completed in the last twelve months are not yet complete, pending final determination of the fair value of assets acquired. These acquisitions were accounted for by the purchase price method of accounting for business combinations and accordingly, the consolidated statements of earnings do not include any revenues or expenses related to these acquisitions prior to their respective closing dates. There have been no material changes to the estimated purchase price allocations determined at the time of acquisition during the six months ended June 30, 2022.

Certain vendors, at the time of acquisition, are entitled to receive a contingent consideration payment if the acquired businesses achieve specified earnings levels during the one- to three-year periods following the dates of acquisition. The ultimate amount of payment is determined based on a formula, the key inputs to which are (i) a contractually agreed maximum payment; (ii) a contractually specified revenue or earnings level; and (iii) the actual revenue or earnings for the contingency period. If the acquired business does not achieve the specified revenue or earnings level, the maximum payment is reduced for any shortfall, potentially to nil.

Page 10 of 13

Contingent consideration is recorded at fair value each reporting period. The fair value recorded on the consolidated balance sheet as at June 30, 2022 was $32,303 (see note 8). The estimated range of outcomes (undiscounted) for these contingent consideration arrangements is $29,789 to a maximum of $35,046. The contingencies will expire during the period extending to December 2023. During the six months ended June 30, 2022, $1,118 was paid with reference to such contingent consideration (2021 - $650).

5. LEASES - The Company has operating leases for corporate offices, copiers, and certain equipment. Its leases have remaining lease terms of 1 year to 15 years, some of which may include options to extend the leases for up to 10 years, and some of which may include options to terminate the leases within 1 year. The Company evaluates renewal terms on a lease by lease basis to determine if the renewal is reasonably certain. The amount of operating lease expense recorded in the statement of earnings for the six months ended June 30, 2022 was $23,679 (2021 - $21,465).

Other information related to leases was as follows (in thousands):

Supplemental Cash Flows Information, six months ended June 30		2022
Cash paid for amounts included in the measurement of operating lease liabilities		$	23,385
Right-of-use assets obtained in exchange for operating lease obligation		$	28,729

6. INCOME TAX - The provision for income tax for the six months ended June 30, 2022 reflected an effective tax rate of 26% (2021 - 24%) relative to the statutory rate of approximately 27% (2021 - 27%). The difference between the effective rate and the statutory rate relates to the differential between tax rates in certain jurisdictions, as well as taxable permanent differences.

7. LONG-TERM DEBT - The Company has $90,000 of senior secured notes (the "Senior Notes") bearing interest at a rate of 3.84%. The Senior Notes are due on January 16, 2025, with three annual equal repayments, the next payment coming due on January 16, 2023.

In February 2022, the Company entered into a second amended and restated credit agreement providing for a $1,000,000 revolving credit facility on an unsecured basis. The maturity date of the revolving credit facility is February 2027. The new revolving credit facility bears interest at 0.20% to 2.50% over floating reference rates, depending on certain leverage ratios. The current revolving credit facility replaced the Company's previous $450,000 revolving credit facility and $440,000 term loan (drawn in a single advance) that were set to mature in January 2023 and June 2024, respectively. The new revolving credit facility was used to repay the remaining term loan balance of $407,000 under the prior credit agreement, and will continue to be utilized for working capital and general corporate purposes and to fund future tuck-under acquisitions.

8. FAIR VALUE MEASUREMENTS - The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2022:

					Fair value measurements at June 30, 2022
			Carrying value at
			June 30, 2022				Level 1				Level 2				Level 3
Contingent consideration liability		$	32,303			$	-			$	-			$	32,303
Interest rate swap asset			3,632				-				3,632				-

The Company has one interest rate swap in place to exchange the floating interest rate on $100,000 of debt under its Credit Agreement for a fixed rate. The fair value of the interest rate swap asset was determined using widely accepted valuation techniques. The inputs to the measurement of the fair value of contingent consideration related to acquisitions are Level 3 inputs using a discounted cash flow model; significant model inputs were expected future operating cash flows (determined with reference to each specific acquired business) and discount rates (which range from 8% to 10%). The range of discount rates is attributable to level of risk related to economic growth factors combined with the length of the contingent payment periods; and the dispersion was driven by unique characteristics of the businesses acquired and the respective terms for these contingent payments. Within the range of discount rates, there is a data point concentration at 9%. A 2% increase in the weighted average discount rate would not have a significant impact on the fair value of the contingent consideration balance.

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Changes in the fair value of the contingent consideration liability are comprised of the following:

		2022
Balance, January 1		$	32,346
Fair value adjustments			1,141
Resolved and settled in cash			(1,118	)
Other			(66	)
Balance, June 30		$	32,303
Less: Current portion			15,557
Non-current portion		$	16,746

The carrying amounts for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate fair values due to the short maturity of these instruments, unless otherwise indicated. The inputs to the measurement of the fair value of long term debt are Level 3 inputs. The fair value measurements were made using a net present value approach; significant model inputs were expected future cash outflows and discount rates (which range from 1.5% to 2.0%).

		June 30, 2022			December 31, 2021
		Carrying			Fair			Carrying			Fair
		amount			value			amount			value
Other receivables		$	4,794			$	4,794			$	4,719			$	4,719
Long-term debt			656,772				658,781				652,804				661,492

9. REDEEMABLE NON-CONTROLLING INTERESTS - The minority equity positions in the Company's subsidiaries are referred to as redeemable non-controlling interests ("RNCI"). The RNCI are considered to be redeemable securities. Accordingly, the RNCI is recorded at the greater of: (i) the redemption amount; or (ii) the amount initially recorded as RNCI at the date of inception of the minority equity position. This amount is recorded in the "mezzanine" section of the balance sheet, outside of shareholders' equity. Changes in the RNCI amount are recognized immediately as they occur. The following table provides a reconciliation of the beginning and ending RNCI amounts:

		2022
Balance, January 1		$	219,135
RNCI share of earnings			3,015
RNCI redemption increment			7,661
Distributions paid to RNCI			(2,602	)
Purchases of interests from RNCI, net			(19,179	)
Other			1,504
Balance, June 30		$	209,534

The Company has shareholders' agreements in place at each of its non-wholly owned subsidiaries. These agreements allow the Company to "call" the non-controlling interest at a price determined with the use of a formula price, which is usually equal to a fixed multiple of trailing two-year average earnings before income taxes, interest, depreciation, and amortization, less debt. The agreements also have redemption features which allow the owners of the RNCI to "put" their equity to the Company at the same price subject to certain limitations. The formula price is referred to as the redemption amount and may be paid in cash or in the Company's Common Shares. The redemption amount as of June 30, 2022 was $193,767. The redemption amount is lower than that recorded on the balance sheet as the formula prices of certain RNCI are lower than the amount initially recorded at the inception of the minority equity position. If all put or call options were settled with Common Shares as at June 30, 2022, approximately 1,600,000 such shares would be issued; this would be accretive to net earnings per Common Share.

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Increases or decreases to the formula price of the underlying shares are recognized in the statement of earnings as the NCI redemption increment or decrement.

10. NET EARNINGS PER COMMON SHARE - Earnings per share calculations cannot be anti-dilutive, therefore diluted shares are not used in the denominator when the numerator is in a loss position. The following table reconciles the basic and diluted common shares outstanding:

		Three months ended			Six months ended
(in thousands)		June 30			June 30
		2022			2021			2022			2021
Basic shares			44,193				43,830				44,139				43,764
Assumed exercise of Company stock options			286				535				351				523
Diluted shares			44,479				44,365				44,490				44,287

11. STOCK-BASED COMPENSATION

Company stock option plan

The Company has a stock option plan for certain directors, officers and full-time employees of the Company and its subsidiaries, other than its Founder and Chairman. The stock option plan came into existence on June 1, 2015. Options are granted at the market price for the underlying shares on the date of grant. Each option vests over a four-year term, expires five years from the date granted and allows for the purchase of one Common Share. All Common Shares issued are new shares. Grants under the Company's stock option plan are equity-classified awards. As at June 30, 2022, there were 567,850 options available for future grants.

Grants under the Company's stock option plan are equity-classified awards. There were 10,000 stock options granted during the three months ended June 30, 2022 (2021 - 447,000). Stock option activity for the six months ended June 30, 2022 was as follows:

								Weighted average
					Weighted			remaining
		Number of			average			contractual life			Aggregate
		options			exercise price			(years)			intrinsic value
Shares issuable under options -
Beginning of period			1,951,035			$	104.41
Granted			590,000				149.01
Exercised			(179,900	)			55.90
Shares issuable under options -
End of period			2,361,135			$	119.25				2.91			$	38,700
Options exercisable - End of period			1,016,638			$	96.38				1.93			$	31,236

The amount of compensation expense recorded in the statement of earnings for the six months ended June 30, 2022 was $9,856 (2021 - $7,690). As of June 30, 2022, there was $25,217 of unrecognized compensation cost related to non-vested awards which is expected to be recognized over the next 5 years. During the six month period ended June 30, 2022, the fair value of options vested was $12,172 (2021 - $9,479).

12. CONTINGENCIES - In the normal course of operations, the Company is subject to routine claims and litigation incidental to its business. Litigation currently pending or threatened against the Company includes disputes with former employees and commercial liability claims related to services provided by the Company. The Company believes resolution of such proceedings, combined with amounts set aside, will not have a material impact on the Company's financial condition or the results of operations.

Page 13 of 13

13. SEGMENTED INFORMATION - The Company has two reportable operating segments. The segments are grouped with reference to the nature of services provided and the types of clients that use those services. The Company assesses each segment's performance based on operating earnings or operating earnings before depreciation and amortization. FirstService Residential provides property management and related property services to residential communities in North America. FirstService Brands provides franchised and company-owned essential property services to residential and commercial customers in North America. Corporate includes the costs of operating the Company's corporate head office.

OPERATING SEGMENTS

		FirstService			FirstService
		Residential			Brands			Corporate			Consolidated
Three months ended June 30
2022
Revenues		$	457,489			$	473,218			$	-			$	930,707
Depreciation and amortization			7,202				19,687				23				26,912
Operating earnings			43,256				23,669				(7,112	)			59,813
2021
Revenues		$	406,221			$	425,409			$	-			$	831,630
Depreciation and amortization			6,251				17,400				23				23,674
Operating earnings			40,404				30,749				(9,770	)			61,383

		FirstService			FirstService
		Residential			Brands			Corporate			Consolidated
Six months ended June 30
2022
Revenues		$	851,572			$	913,707			$	-			$	1,765,279
Depreciation and amortization			14,207				38,569				46				52,822
Operating earnings			66,653				39,420				(17,214	)			88,859
2021
Revenues		$	756,701			$	785,995			$	-			$	1,542,696
Depreciation and amortization			12,519				34,334				46				46,899
Operating earnings			63,648				47,255				(15,638	)			95,265

GEOGRAPHIC INFORMATION

		United States			Canada			Consolidated
Three months ended June 30
2022
Revenues		$	810,720			$	119,987			$	930,707
Total long-lived assets			1,205,659				313,865				1,519,524
2021
Revenues		$	733,388			$	98,242			$	831,630
Total long-lived assets			1,103,845				305,217				1,409,062

		United States			Canada			Consolidated
Six months ended June 30
2022
Revenues		$	1,537,608			$	227,671			$	1,765,279
2021
Revenues		$	1,352,184			$	190,512			$	1,542,696

FIRSTSERVICE CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

For the Six Month Period Ended June 30, 2022

(in US dollars)

August 5, 2022

The following Management's Discussion and Analysis ("MD&A") should be read together with the unaudited interim consolidated financial statements of FirstService Corporation (the "Company" or "FirstService") for the three and six month periods ended June 30, 2022 and the Company's audited consolidated financial statements, and MD&A, for the year ended December 31, 2021. The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). All financial information herein is presented in United States dollars.

The Company has prepared this MD&A with reference to National Instrument 51-102 - Continuous Disclosure Obligations of the Canadian Securities Administrators (the "CSA"). Under the U.S./Canada Multijurisdictional Disclosure System, the Company is permitted to prepare this MD&A in accordance with the disclosure requirements of Canada, which requirements are different from those of the United States. This MD&A provides information for the three and six month periods ended June 30, 2022 and up to and including August 5, 2022.

Additional information about the Company, including the Company's Annual Information Form, which is included in FirstService's Annual Report on Form 40-F, can be found on SEDAR at www.sedar.com and on the US Securities and Exchange Commission website at www.sec.gov.

Results of operations - three months ended June 30, 2022

Revenues for our second quarter were $930.7 million, 12% higher than the comparable prior year quarter. Organic growth was 6% in the quarter, with the balance coming from recent acquisitions.

Adjusted EBITDA (see "Reconciliation of non-GAAP measures" below) for the second quarter was $91.3 million, up from $89.9 million reported in the prior year quarter. Our Adjusted EBITDA margin was 9.8% of revenues versus 10.8% of revenues in the prior year quarter. Operating earnings for the second quarter were $59.8 million, down from $61.4 million in the prior year quarter. Our operating earnings margin was 6.4% of revenues versus 7.4% of revenues in the prior year quarter.

Depreciation and amortization expense totalled $26.9 million, relative to $23.7 million in the prior year, with the increase primarily related to recently acquired company-owned operations in our FirstService Brands segment.

Net interest expense was $5.0 million, up from $4.0 million recorded in the prior year quarter, with the difference primarily attributable to higher cost of debt.

The consolidated income tax rate for the quarter was 26% of earnings before income tax, versus 24% in the prior year quarter, and relative to the statutory rate of 27% in both periods. The effective tax rate for the full year is expected to be approximately 26%.

Net earnings for the quarter were $40.5 million, versus $44.0 million in the prior year quarter. The decline was primarily attributable to the decrease in operating earnings in the FirstService Brands segment, as well as higher interest expense, partially offset by growth in operating earnings in the FirstService Residential segment.

The non-controlling interest ("NCI") redemption increment for the quarter was $3.5 million, versus $5.7 million in the prior year period, and was attributable to changes in the trailing two-year average of earnings of non-wholly owned subsidiaries.

The FirstService Residential segment reported revenues of $457.5 million for the second quarter, up 13% versus the prior year, including organic growth of 8%. The strong revenue performance in the quarter was driven by increased labour-related services and contract wins, with particular strength in the South and MidAtlantic regions and in our Dallas and California markets. Adjusted EBITDA was $50.5 million, or 11.0% of revenues, versus $46.5 million, or 11.4% of revenues, in the prior year quarter. Operating earnings were $43.3 million, or 9.5% of revenues, versus $40.4 million, or 9.9% of revenues, for the second quarter of last year. Operating margins in the division were impacted by ongoing wage inflation and a higher proportion of labour-driven services relative to higher margin ancillaries, compared to the prior year quarter.

Page 2 of 10

Second quarter revenues at our FirstService Brands segment were $473.2 million, up 11% relative to the prior year quarter. Organic growth was 4%, with the balance from recent tuck-under acquisitions. The revenue growth was driven by continued strength across our home improvement lines, as well as significant growth at our Century Fire operations. Top-line performance in our restoration businesses was relatively in-line with prior year, due to the strong prior year quarter comparative from weather-related activity and large loss claims tied to the Texas Freeze event. Adjusted EBITDA for the quarter was $43.9 million, or 9.3% of revenues, versus $48.2 million, or 11.3% of revenues, in the prior year quarter. Operating earnings for the second quarter were $23.7 million, or 5.0% of revenues, versus $30.7 million, or 7.2% of revenues, in the prior year quarter. Margins within the division declined due to the combination of softer weather-related claims activity and ongoing growth investments within our restoration operations, as well as inflationary impacts within certain areas of our businesses.

Corporate costs, as presented in Adjusted EBITDA, were $3.1 million in the quarter, versus $4.8 million in the prior year quarter. On a GAAP basis, corporate costs for the quarter were $7.1 million, relative to $9.8 million in the prior year quarter. The year-over-year cost decrease was primarily driven by lower compensation expense.

Results of operations - six months ended June 30, 2022

Revenues for the six months ended June 30, 2022 were $1.77 billion, 14% higher than the comparable prior year, of which 8% was organic.

Year-to-date Adjusted EBITDA (see "Reconciliation of non-GAAP measures" below) was $153.7 million versus $149.6 million reported in the comparable prior year period. Our Adjusted EBITDA margin was 8.7% of revenues versus 9.7% of revenues in the prior year. Operating earnings for the period were $88.9 million, versus $95.3 million in the prior year. Our operating earnings margin was 5.0% of revenues versus 6.2% of revenues in the prior year period.

Depreciation and amortization expense totalled $52.8 million, relative to $46.9 million in the prior year, with the increase primarily related to recently acquired company-owned operations in our FirstService Brands segment.

Net interest expense was $9.4 million, up from $8.2 million recorded in the prior year period, with the difference primarily attributable to higher cost of debt.

Our consolidated income tax rate for the six month period was 26%, versus 24% in the prior year-to-date period, and relative to the statutory rate of 27% in both periods.

Net earnings for the six month period were $59.3 million, down from $67.9 million in the prior year period. The decline in net earnings was primarily attributable to decreased profitability in the FirstService Brands segment.

The NCI share of earnings was $3.0 million for the six month period, relative to $5.4 million in the prior period, with the decrease from earnings mix due to the relative performance and seasonality at our non-wholly owned operations. The NCI redemption increment for the six month period was $7.7 million, versus $3.9 million in the prior year period, and was attributable to changes in the trailing two-year average of earnings of non-wholly owned subsidiaries.

Our FirstService Residential segment reported revenues of $851.6 million for the six month period, up 13% over the prior year period, including 8% organic growth. The strong revenue performance reflected an increase in labour-driven services across various markets. Adjusted EBITDA was $80.9 million, or 9.5% of revenues, up from $75.9 million, or 10.0% of revenues, in the prior year period. Operating earnings were $66.7 million, or 7.8% of revenues, for the six-month period, relative to $63.6 million, or 8.4% of revenues, in the prior year period. Operating margins were impacted by increased wage inflation, as well increased mix of labour-related services relative to ancillaries.

Page 3 of 10

Year-to-date revenues at FirstService Brands were $913.7 million, an increase of 16% relative to the prior year period. On an organic basis, revenues were up 8%, with the balance of the revenue increase from acquisitions. Organic growth in the division was driven by robust home improvement demand and growth at Century Fire, partially offset by restoration performance, the latter of which benefited from increased weather-related activity and large loss claims in the prior year period. Adjusted EBITDA for the period was $80.0 million, or 8.8% of revenues, down from $81.6 million, or 10.4% of revenues, in the prior year period. Operating earnings were $39.4 million, or 4.3% of revenues, versus $47.3 million, or 6.0% of revenues, in the prior year. Margin compression resulted from labour and cost inflation, as well as supply chain disruptions in the first quarter. Job mix at our restoration operations also negatively impacted margins.

Corporate costs, as presented in Adjusted EBITDA, for the six month period were $7.2 million, relative to $7.8 million in the prior year period. On a GAAP basis, corporate costs were $17.2 million versus $15.6 million in the prior year period.

Summary of quarterly results (unaudited)

The following table sets forth FirstService's unaudited quarterly consolidated results of operations data for each of the ten most recent quarters. The information in the table below has been derived from FirstService's unaudited interim consolidated financial statements that, in management's opinion, have been prepared on a consistent basis and include all adjustments necessary for a fair presentation of information. The information below is not necessarily indicative of results for any future quarter.

Quarter		Q1			Q2			Q3			Q4
(in thousands of US$, except per share amounts)
YEAR ENDING DECEMBER 31, 2022
Revenues		$	834,572			$	930,707
Operating earnings			29,046				59,813
Net earnings per share
Basic			0.32				0.78
Diluted			0.32				0.78
YEAR ENDED DECEMBER 31, 2021
Revenues		$	711,066			$	831,630			$	849,431			$	856,945
Operating earnings			33,882				61,383				61,527				44,850
Net earnings per share
Basic			0.50				0.84				1.04				0.71
Diluted			0.50				0.83				1.03				0.70
YEAR ENDED DECEMBER 31, 2020
Revenues		$	633,831			$	621,597			$	741,932			$	775,055
Operating earnings			15,984				44,903				59,130				49,395
Net earnings per share
Basic			0.13				0.64				0.76				0.51
Diluted			0.13				0.64				0.75				0.50
OTHER DATA
Adjusted EBITDA - 2022		$	62,338			$	91,346
Adjusted EBITDA - 2021			59,795				89,853			$	94,196			$	83,532
Adjusted EBITDA - 2020			43,865				71,231				88,732				79,894
Adjusted EPS - 2022			0.73				1.12
Adjusted EPS - 2021			0.66				1.21				1.50				1.21
Adjusted EPS - 2020			0.37				0.86				1.19				1.02

Page 4 of 10

Seasonality and quarterly fluctuations

Certain segments of the Company's operations are subject to seasonal variations. The seasonality of the service lines results in variations in quarterly revenues and operating margins. Variations can also be caused by acquisitions or dispositions, which alter the consolidated service mix.

FirstService Residential generates peak revenues and earnings in the third quarter, as seasonal ancillary swimming pool management revenues are earned. FirstService Brands includes certain home improvement brands, which generate the majority of their revenues during the second and third quarters, and restoration operations which are influenced by weather patterns that typically should result in higher revenues and earnings in the third and fourth quarters.

Reconciliation of non-GAAP measures

In this MD&A, we make reference to "adjusted EBITDA" and "adjusted earnings per share", which are financial measures that are not calculated in accordance with GAAP.

Adjusted EBITDA is defined as net earnings, adjusted to exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) depreciation and amortization; (v) acquisition-related items; and (vi) stock-based compensation expense. We use adjusted EBITDA to evaluate our own operating performance and our ability to service debt, as well as an integral part of our planning and reporting systems. Additionally, we use this measure in conjunction with discounted cash flow models to determine the Company's overall enterprise valuation and to evaluate acquisition targets. We present adjusted EBITDA as a supplemental measure because we believe such measure is useful to investors as a reasonable indicator of operating performance because of the low capital intensity of the Company's service operations. We believe this measure is a financial metric used by many investors to compare companies, especially in the services industry. This measure is not a recognized measure of financial performance under GAAP in the United States, and should not be considered as a substitute for operating earnings, net earnings or cash flow from operating activities, as determined in accordance with GAAP. Our method of calculating adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to adjusted EBITDA appears below.

		Three months ended			Six months ended
(in thousands of US$)		June 30			June 30
		2022			2021			2022			2021
Net earnings		$	40,506			$	44,020			$	59,327			$	67,863
Income tax			13,944				14,280				20,338				22,000
Other expense (income), net			322				(888	)			(213	)			(2,756	)
Interest expense, net			5,041				3,971				9,407				8,158
Operating earnings			59,813				61,383				88,859				95,265
Depreciation and amortization			26,912				23,674				52,822				46,899
Acquisition-related items			586				(107	)			2,147				(206	)
Stock-based compensation expense			4,035				4,903				9,856				7,690
Adjusted EBITDA		$	91,346			$	89,853			$	153,684			$	149,648

Page 5 of 10

A reconciliation of segment operating earnings to segment Adjusted EBITDA appears below.

(in thousands of US$)

Three months ended, June 30, 2022		FirstService			FirstService
		Residential			Brands			Corporate
Operating earnings (loss)		$	43,256			$	23,669			$	(7,112	)
Depreciation and amortization			7,202				19,687				23
Acquisition-related items			10				576				-
Stock-based compensation expense			-				-				4,035
Adjusted EBITDA		$	50,468			$	43,932			$	(3,054	)

Three months ended, June 30, 2021		FirstService			FirstService
		Residential			Brands			Corporate
Operating earnings (loss)		$	40,404			$	30,749			$	(9,770	)
Depreciation and amortization			6,251				17,400				23
Acquisition-related items			(161	)			22				32
Stock-based compensation expense			-				-				4,903
Adjusted EBITDA		$	46,494			$	48,171			$	(4,812	)

Six months ended, June 30, 2022		FirstService			FirstService
		Residential			Brands			Corporate
Operating earnings (loss)		$	66,653			$	39,420			$	(17,214	)
Depreciation and amortization			14,207				38,569				46
Acquisition-related items			18				2,025				104
Stock-based compensation expense			-				-				9,856
Adjusted EBITDA		$	80,878			$	80,014			$	(7,208	)

Six months ended, June 30, 2021		FirstService			FirstService
		Residential			Brands			Corporate
Operating earnings (loss)		$	63,648			$	47,255			$	(15,638	)
Depreciation and amortization			12,519				34,334				46
Acquisition-related items			(266	)			(11	)			71
Stock-based compensation expense			-				-				7,690
Adjusted EBITDA		$	75,901			$	81,578			$	(7,831	)

Adjusted earnings per share is defined as diluted net earnings per share, adjusted for the effect, after income tax, of: (i) the non-controlling interest redemption increment; (ii) acquisition-related items; (iii) amortization expense related to intangible assets recognized in connection with acquisitions; and (iv) stock-based compensation expense. We believe this measure is useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company and enhances the comparability of operating results from period to period. Adjusted earnings per share is not a recognized measure of financial performance under GAAP, and should not be considered as a substitute for diluted net earnings per share, as determined in accordance with GAAP. Our method of calculating this non-GAAP measure may differ from other issuers and, accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to adjusted net earnings and of diluted net earnings per share to adjusted earnings per share appears below.

Page 6 of 10

		Three months ended			Six months ended
(in thousands of US$)		June 30			June 30
		2022			2021			2022			2021
Net earnings		$	40,506			$	44,020			$	59,327			$	67,863
Non-controlling interest share of earnings			(2,450	)			(1,596	)			(3,015	)			(5,363	)
Acquisition-related items			586				(107	)			2,147				(206	)
Amortization of intangible assets			11,398				10,408				22,864				20,420
Stock-based compensation expense			4,035				4,903				9,856				7,690
Income tax on adjustments			(4,012	)			(3,981	)			(8,507	)			(7,309	)
Non-controlling interest on adjustments			(206	)			(177	)			(434	)			(352	)
Adjusted net earnings		$	49,857			$	53,470			$	82,238			$	82,743

		Three months ended			Six months ended
(in US$)		June 30			June 30
		2022			2021			2022			2021
Diluted net earnings per share		$	0.78			$	0.83			$	1.09			$	1.32
Non-controlling interest redemption increment			0.08				0.13				0.17				0.09
Acquisition-related items			0.01				-				0.05				-
Amortization of intangible assets, net of tax			0.18				0.17				0.37				0.33
Stock-based compensation expense, net of tax			0.07				0.08				0.17				0.13
Adjusted earnings per share		$	1.12			$	1.21			$	1.85			$	1.87

We believe that the presentation of adjusted EBITDA and adjusted earnings per share, which are non-GAAP financial measures, provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. We use these non-GAAP financial measures when evaluating operating performance because we believe that the inclusion or exclusion of the items described above, for which the amounts are non-cash or non-recurring in nature, provides a supplemental measure of our operating results that facilitates comparability of our operating performance from period to period, against our business model objectives, and against other companies in our industry. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our core business and the valuation of the Company. Adjusted EBITDA and adjusted earnings per share are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect all of the costs or benefits associated with the operations of our business as determined in accordance with GAAP. As a result, investors should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP.

Liquidity and capital resources

Net cash provided by operating activities for the six month period ended June 30, 2022 was $63.3 million, down from $106.7 million in the prior year period. The decrease in cash was impacted by changes in non-cash working capital to fund growth, as well as variances in deferred revenues and compensation arrangements, partially offset by an increase in collection of accounts receivable in the FirstService Brands segment. We believe that cash from operations and other existing resources will continue to be adequate to satisfy the ongoing working capital needs of the Company.

For the six months ended June 30, 2022, capital expenditures were $36.4 million, up from $29.1 million in the prior year period. Current year investments include service vehicle fleet replacements and additions in the FirstService Brands segment, as well as information technology system improvements in both segments. Based on our current operations, maintenance capital expenditures for the year ending December 31, 2022 are expected to be approximately $70 million, with total capital expenditures approaching $85 million.

In July 2022, we paid a quarterly dividend of $0.2025 per share on the Common Shares in respect of the quarter ended June 30, 2022.

Net indebtedness as at June 30, 2022 was $511.7 million, versus $487.1 million at December 31, 2021. Net indebtedness is calculated as the current and non-current portion of long-term debt less cash and cash equivalents. We are in compliance with the covenants contained in our financing agreements as at June 30, 2022 and, based on our outlook for the balance of the year, we expect to remain in compliance with these covenants. We had $395.8 million of available undrawn credit as of June 30, 2022.

Page 7 of 10

In relation to acquisitions completed during the past two years, we have outstanding contingent consideration totalling $32.3 million as at June 30, 2022 ($32.3 million as at December 31, 2021) assuming all contingencies are satisfied and payment is due in full. Such payments, if any, are due during the period extending to December 2023. The contingent consideration liability is recognized at fair value upon acquisition and is updated to fair value each quarter, unless it contains an element of compensation, in which case such element is treated as compensation expense over the contingency period. The contingent consideration is based on achieving specified earnings levels, and is paid or payable at the end of the contingency period.

The following table summarizes our contractual obligations as at June 30, 2022:

Contractual obligations		Payments due by period
(in thousands of US$)					Less than									After
		Total			1 year			1-3 years			4-5 years			5 years
Long-term debt		$	644,059			$	30,609			$	60,000			$	553,450			$	-
Interest on long-term debt			60,735				20,472				30,935				9,328				-
Capital lease obligations			12,713				4,959				5,086				2,668				-
Contingent acquisition consideration			32,303				15,557				16,746				-				-
Operating leases			171,704				43,182				65,147				38,724				24,651
Total contractual obligations		$	921,514			$	114,779			$	177,914			$	604,170			$	24,651

At June 30, 2022, we had commercial commitments totaling $16.7 million comprised of letters of credit outstanding due to expire within one year. We are required to make semi-annual payments of interest on our senior secured notes at an interest rate of 3.8%.

Redeemable non-controlling interests

In most operations where managers or employees are also minority owners, the Company is party to shareholders' agreements. These agreements allow us to "call" the minority position at a value determined with the use of a formula price, which is in most cases equal to a multiple of trailing two-year average earnings, less debt. Minority owners may also "put" their interest to the Company at the same price, with certain limitations including: (i) the inability to "put" more than one-third to one-half of their holdings in any twelve-month period; and (ii) the inability to "put" any holdings for at least one year after the date of our initial acquisition of the business or the date the minority shareholder acquired the stock, as the case may be. The total value of the minority shareholders' interests (the "redemption amount"), as calculated in accordance with shareholders' agreements, was as follows.

		June 30			December 31
(in thousands of US$)		2022			2021
FirstService Residential		$	60,576			$	63,638
FirstService Brands			133,191				151,505
		$	193,767			$	215,143

The amount recorded on our balance sheet under the caption "Redeemable non-controlling interests" ("RNCI") is the greater of: (i) the redemption amount (as above); and (ii) the amount initially recorded as RNCI at the date of inception of the minority equity position. As at June 30, 2022, the RNCI recorded on the balance sheet was $209.5 million. The purchase prices of the RNCI may be satisfied in cash or in Common Shares of FirstService. If all RNCI were redeemed with cash on hand and borrowings under our Facility, the pro forma estimated accretion to diluted net earnings per share for the six months ended June 30, 2022 would be $0.18, and the accretion to adjusted EPS would be $0.01.

Page 8 of 10

Off-balance sheet arrangements

The Company does not believe that it has off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Company's financial performance or financial condition.

Critical accounting policies and estimates

The preparation of consolidated financial statements requires management to make estimates and assumptions with respect to the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. These estimates and assumptions are based upon management's historical experience and are believed by management to be reasonable under the circumstances. Such estimates and assumptions are evaluated on an ongoing basis and form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from these estimates. Our critical accounting policies and estimates have been reviewed and discussed with our Audit Committee. There have been no material changes to our critical accounting policies and estimates from those disclosed in the Company's MD&A for the year ended December 31, 2021.

Financial instruments

We use financial instruments as part of our strategy to manage the risk associated with interest rates and currency exchange rates from time to time. We do not use financial instruments for trading or speculative purposes. As of the date of this MD&A, we have one interest swap in place to exchange the floating interest rate on $100 million of debt under our Credit Agreement for a fixed rate.

Transactions with related parties

The Company has entered into office space rental arrangements and property management contracts with senior managers of certain subsidiaries. These senior managers are usually also minority shareholders of the subsidiaries. The business purpose of the transactions is to rent office space for the Company and to generate property management revenues for the Company. The recorded amount of the rent expense for the six months ended June 30, 2022 was $2.3 million (2021 - $1.9 million).

As at June 30, 2022, the Company had $2.4 million of loans receivable from minority shareholders (December 31, 2021 - $1.8 million). The business purpose of the loans receivable was to finance the sale of non-controlling interests in subsidiaries to senior managers. The loan amounts are measured based on the formula price of the underlying non-controlling interests, and interest rates are determined based on the Company's cost of borrowing plus a spread. The loans generally have terms of 5 to 10 years, but are open for repayment without penalty at any time.

Outstanding share data

The authorized capital of the Company consists of an unlimited number of Common Shares. The holders of Common Shares are entitled to one vote in respect of each Common Share held at all meetings of the shareholders of the Company.

As of the date hereof, the Company has outstanding 44,192,931 Common Shares. In addition, as at the date hereof, 2,371,135 Common Shares are issuable upon exercise of options granted under the Company's stock option plan.

Canadian tax treatment of dividends

For the purposes of the enhanced dividend tax credit rules contained in the Income Tax Act (Canada) and any corresponding provincial and territorial tax legislation, all dividends (and deemed dividends) paid by us to Canadian residents on our Common Shares are designated as "eligible dividends". Unless stated otherwise, all dividends (and deemed dividends) paid by us hereafter are designated as "eligible dividends" for the purposes of such rules.

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Changes in internal controls over financial reporting

There have been no changes in our internal controls over financial reporting during the three and six month periods ended June 30, 2022 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

Public Health Crisis

FirstService's business, operations and financial condition could be materially adversely affected by the outbreak of epidemics or pandemics or other health crises beyond our control. Many governments may declare that an outbreak, or one or more waves or an outbreak, constitutes an emergency in their jurisdictions. Reactions to the spread of an outbreak, or the worsening of an outbreak from time to time, may lead to, among other things, significant restrictions on travel, business closures, quarantines, social distancing and other containment measures and a general reduction in consumer activity. While these effects may be temporary, the duration of any business disruptions and related financial impact cannot be reasonably estimated, and may be instituted, terminated and re-instituted from time to time as an outbreak worsens or waves of an outbreak occur from time to time.

Such public health crises can also result in volatility and disruptions in the supply and demand for various products and services, global supply chains and financial markets, as well as declining trade and market sentiment and reduced mobility of people, all of which could affect interest rates, credit ratings, credit risk and inflation. The risks to FirstService of such public health crises also include risks to employee health and safety and a slowdown or temporary suspension of operations in geographic locations impacted by an outbreak.

Forward-looking statements

This MD&A contains forward-looking statements with respect to expected financial performance, strategy and business conditions. The words "believe," "anticipate," "estimate," "plan," "expect," "intend," "may," "project," "will," "would," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These statements reflect management's current beliefs with respect to future events and are based on information currently available to management. Forward-looking statements involve significant known and unknown risk and uncertainties. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Factors which may cause such differences include, but are not limited to those set out below, those set out above under "Public Health Crisis" and those set out in detail in the "Risk Factors" section of the Company's Annual Information Form, which is included in the Company's Annual Report on Form 40-F:

·	Economic conditions, especially as they relate to credit conditions, consumer spending and demand for managed residential property, particularly in regions where our business may be concentrated.

·	Residential real estate property values, resale rates and general conditions of financial liquidity for real estate transactions.

·	Extreme weather conditions impacting demand for our services or our ability to perform those services.

·	Economic deterioration impacting our ability to recover goodwill and other intangible assets.

·	A decline in our ability to generate cash from our businesses to fund future acquisitions and meet our debt obligations.

·	The effects of changes in foreign exchange rates in relation to the U.S. dollar on our Canadian dollar denominated revenues and expenses.

·	Competition in the markets served by the Company.

·	Labour shortages or increases in wage and benefit costs.

·	The effects of changes in interest rates on our cost of borrowing.

·	A decline in our performance impacting our continued compliance with the financial covenants under our debt agreements, or our ability to negotiate a waiver of certain covenants with our lenders.

·	Unexpected increases in operating costs, such as insurance, workers' compensation, health care and fuel prices.

·	Changes in the frequency or severity of insurance incidents relative to our historical experience.

·	A decline in our ability to make acquisitions at reasonable prices and successfully integrate acquired operations.

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·	The performance of acquired businesses and potential liabilities acquired in connection with such acquisitions.

·	Changes in laws, regulations and government policies at the federal, state/provincial or local level that may adversely impact our businesses.

·	Risks related to liability for employee acts or omissions, or installation/system failure, in our fire protection businesses.

·	A decline in our performance impacting our ability to pay dividends on our common shares.

·	Risks arising from any regulatory review and litigation.

·	Risks associated with intellectual property and other proprietary rights that are material to our business.

·	Disruptions or security failures in our information technology systems.

·	Political conditions, including any outbreak or escalation of terrorism or hostilities and the impact thereof on our business.

·	Performance in our commercial and large loss property restoration business.

·	Volatility of the market price of our common shares.

·	Potential future dilution to the holders of our common shares.

·	Risks related to our qualification as a foreign private issuer.

·	Public health crisis, including COVID-19.

We caution that the foregoing list is not exhaustive of all possible factors, as other factors could adversely affect our results, performance or achievements. The reader is cautioned against undue reliance on these forward-looking statements. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in such forward-looking statements will be realized. The inclusion of such forward-looking statements should not be regarded as a representation by the Company or any other person that the future events, plans or expectations contemplated by the Company will be achieved. We note that past performance in operations and share price are not necessarily predictive of future performance. All forward-looking statements in this MD&A are qualified by these cautionary statements. The forward-looking statements are made as of the date of this MD&A and, unless otherwise required by applicable securities laws, we do not intend, nor do we undertake any obligation, to update or revise any forward-looking statements contained in this MD&A to reflect subsequent information, events, results or circumstances or otherwise.

Additional information

Additional information regarding the Company, including our Annual Information Form for the year ended December 31, 2021, is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Further information about us can also be obtained at www.firstservice.com.