Colliers International Group Inc.

Welcome to the First Quarter Investors Conference Call. Today's call is being recorded. Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance, or achievements contemplated in the forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's annual information form as filed with the Canadian Securities Administrators and in the company's annual report on Form 40F as filed with the U.S. Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is Friday, April 26, 2019. and at this time, for opening remarks and introductions, I would like to turn the call over to the Chairman and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir.

Jay Hennick Thank you, operator. Good morning and thanks, everyone, for joining us. I'm Jay Hennick, the Chairman and Chief Executive Officer, and with me today is John Fredrickson, Chief Financial Officer. This conference call is being webcast and is available at the Investor Relations A presentation slide deck is also available to accompany today's call. Earlier today, Colliers reported solid results for the seasonally slow first quarter, paving the way for another strong year of growth. We're confident in our outlook for 2019 and pleased with the impact Harrison Street Real Estate Capital is having on the growth and the diversification of our business. Revenues were US $635 million, up 19% in local currency. EBITDA was $44 million, up 22% and adjusted earnings per share came in at 51 cents a share, up 13% over the prior year. John will have more to say about our results in just a few minutes. As you know, we entered 2019 with great momentum. In addition to establishing a new real estate investment management segment, we completed a record 11 acquisitions, including five in the Americas, four in Europe, and two in Asia Pacific. In total, we added about $90 million in annualized EBITDA last year alone, without diluting shareholders at all. That momentum has continued so far this year. To date, we have completed another three acquisitions, including the market leader in Virginia with 340 real estate professionals, as well as our former affiliate and top player in the vibrant growth market of Charlotte, North Carolina. And yesterday, we announced the acquisition of Collier's Sweden, adding another company-owned operation in the Nordics, and many more. Finally, just after the quarter end, We extended our $1 million revolving credit facility to 2024 and established a new structured accounts receivable facility, giving us much more flexibility to our capital structure and reducing our overall borrowing costs. John will have more to say about this as well in just a few minutes. With a strong balance sheet, disciplined growth strategy, proven record of performance, With greater recurring revenue and diversification than ever before, Colliers is in an excellent position to continue to capitalize on opportunities in the massive global real estate market in 2019 and beyond. Now let me turn things over to John for his review, and then we can open things up for questions. John?

Thank you, Jay. As announced in our press release earlier this morning and by Jay in his opening remarks, Collier's International Group reported strong consolidated financial results for our first quarter with solid performance across our global operations, once again highlighting the benefits of our service line and geographic diversification. I will address our overall consolidated financial results for the quarter, our operating results by reporting region, overall capital usage and financial position, and concluding with our outlook for 2019. For our first quarter of fiscal 2019, consolidated revenues increased to $635 million, up 19% in local currencies, from $553 million in the first quarter of 2018, with 8% of our growth generated internally and the balance from acquisitions. Adjusted EBITDA for the quarter totaled $43.6 million, up from $36.1 million in Q1 last year, an increase of 22% in local currencies, with our margin at 6.9%. up from 6.5% last year. And adjusted earnings per share came in at 51 cents compared to 45 cents per share last year, up 13% in our U.S. dollar reporting currency, with a 1 cent unfavorable impact of FX on adjusted earnings per share on the quarter. Our adjustments to GAAP EPS and arriving at adjusted EPS are outlined in our press release issued this morning. and our composed primary of non-cash charges that we view as largely unrelated to our operating results and are consistent with those presented historically. Turning to our operating results, I will now provide a review by major service line and by region with all percentage changes in revenues based on local currencies. Our 635 million in revenues for the quarter was comprised of 152 million in sales brokerage, up 10%, while lease brokerage came in at 182 million, Thank you for joining us today. and many more. Geographically, 56% of our revenues and 55% of our adjusted EBITDA was generated in Americas in our first quarter. Europe generated 19% of consolidated revenues, while Asia Pacific generated 18% and 23% of revenue and adjusted EBITDA, respectively. Our investment management operations, including Harrison Street, generated 7% of our revenues and 22% of our adjusted EBITDA on the quarter. During the regions in our first quarter, America revenues totaled $359 million, up 11%, with 4% internal growth and 7% from acquisitions. Lease brokerage revenues were up 17% versus last year. Sales brokerage revenues down 1%, with mid-single-digit percentage growth in the U.S., offset by a decline in Canada Subsequent to a very strong finish for 2018. And outsourcing and advisory revenues were up 13%, led by strong growth in U.S. property management and in project management in Canada. Adjusted EBIT document is $26.2 million, roughly flat with last year, and a margin of 7.3% versus 8.1%, negatively impacted by investment in producer recruitment and revenue mix. Turning to EMEA, revenues of $121 million in the quarter increased 15% with internal growth of 13% and 2% from acquisitions relative to Q1 of last year. Sales brokerage revenue was up 52% over last year with lease revenue experiencing a slight decline of 1%. Meanwhile, revenues from outsourcing and advisory services increased 9% led by a recovery in our workplace solutions business in France. Adjusted EBITDA was a loss of $2.5 million relative to a break-even performance in Q1 of 2018, impacted by incremental planned investment in revenue producers to drive new service line growth, which we expect to see later in the year. In our Asia-Pacific business, revenues came in at $112 million, up 11% in local currencies, with 9% of the growth generated internally. Sales brokerage revenue increased 14%, more than offsetting a decline of 8% in lease brokerage revenue, mainly due to timing factors in our Asia business. Outsourcing and advisory revenues increased 18%, with strong growth across project management, property management, and consulting and appraisal services. Adjusted EBITDA was $10.9 million, down slightly from $11.2 million last year, with a margin at $9.7 versus 10.4%, primarily due to revenue mix favoring a greater proportion of lower margin recurring services revenues. And finally, in our investment management operations, primarily due to the Harrison Street acquisition completed in the middle of 2018, revenues totaled $43 million compared to just under $3 million in Q1 of last year. Note that our Q1 2019 revenues included $11 million of carried interest pass-through revenues Attributable to pre-acquisition assets under management and which accrue to employees and former shareholders. Adjusted EBITDA came in at $10.2 million, while our margin, excluding the carried interest revenue that I just mentioned, which has no economic effect on employers, came in at 32.1%. Below our expectations, primarily due to timing related to fundraising and capital deployments. Both the capital raising and deployment pipelines remain robust, and we expect to see the positive benefits of these realizations over the coming quarters. Moving to our capital deployment and balance sheet, in our first quarter of 2019, capital expenditures totaled $10.4 million, up from $6.2 million last year, with the increase largely due to timing of spend deferred from 2018, as noted in our Q4 2018 conference call. Our forecast and range of capex spend for 2019 is in the 42 to 45 million range, consistent with the range previously indicated. We invested 20 million in acquisition activities during the quarter, down from 88 million in Q1 of last year, but with a solid pipeline of strategic acquisition opportunities aligned to our enterprise 2020 growth plan. Our net debt position stood at 686 million at the end of the quarter, compared to 545 million at year-end, which is typically the seasonal low point in terms of our debt level, and compared to $325 million at the end of Q1 last year. Our leverage ratio, expressing net debt to adjusted EBITDA, set at two times, versus 1.6 at year-end and 1.3 at the end of Q1 2018, reflective of the robust acquisition-related investment during the past year, currently at a level well within the leverage we are comfortable with. As already mentioned by Jay, after the end of the quarter, we extended our committed availability under our $1 billion revolver to 2024 and secured a $125 million structured accounts receivable facility, which further diversifies our sources of financing and reduces borrowing costs. Looking across our global operations, our pipelines in most markets continue to reflect solid commercial real estate activity. With market conditions that include favorable economic growth across most markets, stable interest rates, accessible debt financing, general stability of the supply and demand for commercial real estate, and continued interest in commercial real estate assets by investors, particularly institutional players, key drivers supporting steady activity in sales, leasing, and other commercial real estate services for the balance of 2019 remain intact. and therefore our outlook for the year presented during our 2018 year-end conference call remains unchanged as outlined on slide 12 of the presentation accompanying our call today. That concludes our prepared remarks and I would now like to ask our operator to open up the call to questions.