Colliers International Group Inc.

Welcome to the Colliers International Second 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 Tuesday, July 30, 2019. At this time, for opening remarks and introductions, I would like to turn the call over to the Global Chief Executive Officer and Chairman, Mr. Jay Hennick. Please go ahead, sir.

Thank you, Operator. Good morning, everyone, and thanks for joining us for our second quarter conference call. As the Operator mentioned, I'm Jay Hennick, Chairman and Chief Executive Officer, and with me today is John Fredrickson, Chief Financial Officer. This morning's conference call is being webcast and is available on the Investor Relations section of our website, as well as a presentation slide deck also available to accompany today's call. This morning, Colliers reported solid internal growth with excellent overall performance in the quarter. In local currency, revenues were up 15%, adjusted EBITDA up 30%, and the Board of Directors, and adjusted earnings per share increased 16% over the prior year. Year to date, revenues were up 17%, adjusted EBITDA up 27%, and adjusted earnings per share increased 16% over the comparable period. Based on these results and our current business pipelines, we remain optimistic that we're on track to meet our outlook for the current year. In addition to our 5% internal growth, we completed two more acquisitions, both former Colliers affiliates, one in Charlotte, North Carolina, and the other in Sweden, bringing the total number of acquisitions so far this year to five. Augmenting internal growth with acquisitions has always been a key part of our strategy. Strengthening operations in existing markets, and adding new service lines with growth potential all help create value for shareholders. This quarter also marks the first anniversary of the establishment of our investment management business, a new engine for growth for our company. Through our investment in Harrison Street Real Estate Capital, Colliers is now one of the leading global investors in education, healthcare, storage, and Social Infrastructure with more than $30 billion in assets under management, up from $26 billion at the end of last year. Having a strong focus on alternate real estate assets gives us a tremendous advantage and Harrison Street has seen significant incremental growth both in North America and Europe as part of Collier's. Overall, Collier's is more diversified than ever in terms of our services and in terms of the geographies we cover. Diversification combined with more recurring and repeat revenue streams gives us a better balanced and more resilient business model, positioning us well to continue to capitalize on opportunities in the massive and global commercial real estate services industry. Now, before we open things up for questions, I'd like to turn things over to John for his financial highlights. John?

Thank you, Jay. As announced earlier today and highlighted by Jay in his opening remarks, Collier's International Group reported solid second quarter consolidated financial results with continuing momentum across our operations globally and noteworthy outperformance by our investment management platform led by Harrison Street. My comments will address our Q2 segmented results, capital deployment, as well as our financial capacity and outlook for 2019. And we'll follow the flow of the slides posted on our website that accompanied this call. Please note that my comments may reference non-GAAP measures such as adjusted EBITDA and adjusted EPS, both of which are outlined in our press release issued today, as well as the accompanying slide deck. and many more. Our second quarter revenues of $746 million were up 15% over the prior year and comprised of $282 million in outsourcing and advisory, up 13%. Leased brokerage revenues of $253 million, up 17%. Both of these service lines exhibit a strong year-over-year growth across all regions. Revenues from sales brokerage totaled $164 million, down 9% from elevated levels posted in 2018. However, despite greater market uncertainty, sales brokerage pipelines indicate healthy activity ahead for the balance of 2019. Finally, our investment management business established from Q3 of 2018 generated $47 million in fee revenue in the quarter. The more recurring revenues generated by our outsourcing and advisory services segment represented 38% of our overall revenues in the quarter, comparable to Q2 of last year. However, when combined with the recurring revenues generated by investment management, the recurring total was 44%. Consolidated adjusted EBITDA was $87.3 million compared to $69.4 million with our margin at 11.7 versus 10.4% in the prior year quarter. Both our revenues in adjusted EBITDA remained well diversified in our second quarter with little change compared to Q2 of 2018 other than the addition of investment management which contributed a significant 22% of EBITDA generated by our consolidated operations. Quarterly revenues in the Americas totaled $421 million, about 9% with 4% internal growth in the balance from acquisitions. Lease brokerage revenue of $188 million was up 18%, led by strong internal growth, particularly in the U.S. Northeast and Southwest regions. Meanwhile, sales brokerage revenues declined 9% in the quarter, led by a sharp decline in Canada, opposite a strong Q2 of 2018, and more modest decline in the U.S., most notably in the Western region. and many more. In addition to this, we also have a number of other projects that we are working on. We have a number of projects that we are working on. We have a number of projects that we are working on. We have a number Elevator Services, primarily in the U.S. Turning to EMEA, revenues of $152 million in the quarter increased 9%, with 7% internal growth. Outsourcing and advisory revenues were $76 million, up 10%, with growth led by workplace solutions and project management services. Sales brokerage revenues were up 5% overall, but included an internal decline of 9%, made me do to the UK and Germany compared to a very strong Q2 of 2018. Leased brokerage revenues were up 14% with strong internal growth of 13% led by our operations in Germany. Adjusted EBITDA for the region was 19 million compared to 22.2 million last year at a 12.6% margin, down from 15.1% last year, impacted by a revenue mix Planned Investments, and Talent Acquisition in our brokerage services, which we expect to contribute greater to revenue later this year. In our Asia-Pacific region, revenues came in at $125 million, up 3%, with 2% internal growth and the rest from acquisitions. Revenues generated by our outsourcing and advisory services were up 16%, led by strong growth in property management revenues in Australia, These brokerage revenues were up 14%, led by strong internal growth across most markets within our Asia-Pacific region. Finally, sales brokerage revenues contracted significantly, with lower activity across the region. Despite the decline, sales pipelines remain robust, and we expect a rebound in activity during the balance of the year. Adjusted EBITDA was $14.2 million compared to $15.4 million last year. and many more. In the last year. Turning to our investment management operations, Collier's posted revenues of $47 million in Q2 with most of this contributed by Harrison Street which was acquired in July of last year. Revenues consisted of management fees generated on investments in existing funds and on new capital commitments. Assets under management increased to just over $30 billion at the end of the quarter while adjusted EBITDA came in at $19.2 million. Moving to our capital deployment and balance sheet, in our second quarter of 2019, capital expenditures totaled $13.7 million, up from $7.8 million last year, and at the same level as Q2 of 2017. About $8 million of the spend related to upgrades to our industry-leading workplaces, and the balance relates to IT that supports our client services, our people, and our operations. For the full year of 2019, we expect to invest between $45 and $50 million in total CapEx cross-hour operations, up from our estimate of $42 to $45, outlining at the end of Q1. In terms of growth initiatives, we invested $20 million in strategic acquisitions during the quarter, on pace with the $19 million in Q2 of last year. Our net debt position stood at $590 million at the end of the quarter, compared to $316 million at the end of Q2 last year, which predated our investment in Harrison Street with our leverage ratio expressed in net debt to adjust to EBITDA at 1.7 compared to 1.2 at the end of the prior year quarter. During the quarter, and as previously announced, we extended our committed availability under our $1 million revolver in 2024 and secured a $125 million structured accounts receivable facility which further diversifies our source of financing to achieve our growth targets. In terms of our financial capacity, with cash on hand and committed availability under our revolver, we had more than $600 million of liquidity at quarter end, a level sufficient for fund operations and other capital investments, including acquisitions under our growth strategy. Looking across our global operations, our revenue pipelines in most markets continue to reflect solid commercial real estate activity, Tempered in some markets, most notably the UK, by geopolitical risks. However, with generally stable economic conditions and modest growth, accompanied by low interest rates that directionally have reversed from an increasing bias to an easing bias based on historical parameters and a supportive lending environment, the key elements remain in place to support steady activity Leasing, Sales, and other commercial real estate services for the balance of 2019. As a result, our 2019 outlook for Collier's remains unchanged, including our expectations for low single-digit percentage internal growth and local currency revenues that combined with the impact of growth in local currency revenues from acquisitions results in high single-digit percentage growth of revenues. and an adjusted EBITDA margin improvement of 100 to 120 basis points compared to 2018. On a consolidated basis, we estimate a tax rate in the 28 to 30% range and a low double-digit percentage growth from full-year adjusted EPS compared to 2018, all excluding the impact of any further acquisitions completed between now and the end of the year. That concludes my prepared remarks. and I would like to now turn the call back over to Jay.