Colliers International Group Inc.

Welcome to the Colliers International Third 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 40-F as filed with the U.S. Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is Tuesday, October 29, 2019. And 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 third quarter conference call. I'm Jay Hennick, Chairman and Chief Executive Officer. As some of you have heard, unfortunately, John Fredrickson, our Chief Financial Officer, is not available for our call today. He's dealing with a medical issue. We hope to have him back very quickly, but in the interim, Christian Mayer, Senior Vice President and Treasurer, will be standing in for John. I'll turn things over to Christian in just a few minutes. This morning's conference call is being webcast and is available in the investor relations section of our website. As usual, a presentation deck is also available to accompany today's call. Collier's delivered solid operating results with higher margins for the third quarter. Revenues grew 5% over a very strong third quarter last year, Adjusted EBITDA was up 18% and adjusted earnings per share increased 13%. Year-to-date revenues were up 12%, adjusted EBITDA up 23%, while earnings per share came in at 14%. Year-to-date internal growth was 4%, which is in line with our full year expectations. We also continue to grow our recurring revenue streams. EBITDA from our outsourcing and advisory and investment management components of our business represented about 50% of our total EBITDA for the quarter. Having a high percentage of earnings coming from recurring revenues, especially those that are well diversified, Thank you for joining us today. with more than a thousand professionals operating out of eight offices across the country. Synergy will merge with our existing operations in India under the Colliers International brand and will take its place as one of the top players in one of the world's fastest growing economies. So far this year we've completed a total of four acquisitions. Two in the Americas and one in each of Europe and Asia, adding about $120 million in annualized revenue. This, together with our growth over the past four years, puts us firmly on track to meet or exceed our five-year growth target to double the size of our business by the year 2020. As you know, our leadership team owns more than 40% of the equity in our company making us truly unique in our industry and representing a tremendous vote of confidence in our company's future. As we look forward to next year and beyond, we're very enthusiastic about our prospects. In every way, Colliers is better today than it's ever been before. In addition to building a world-class, Internationally and institutionally recognized global brand. It is the fastest growing platform in our industry. Last year we established a new investment management segment that provides us with another important engine for growth. All of this to say our platform is strong and Colliers is in a very enviable position to continue to capitalize on opportunities for the benefit of our shareholders for many years to come. With that said, I'd now like to turn things over to Christian for his financial report. Christian? Thank you, Jay.

As announced earlier today, Clare's International Group reported solid third quarter financial results with higher margins. My comments will focus on our Q3 results by segment, investing activities, Financial Position, and our outlook for the remainder of 2019. My comments will follow the flow of the presentation deck posted on the investor relations section of Colliers.com to accompany this call. Please note that my comments 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 deck. The adjustments are composed primarily of non-cash charges that we view as largely unrelated to our operating results. It's important to note that in Q3, currency continued to have an impact on our reported results. Please note that references to revenue growth, including internal growth, are calculated based on local currency. Our third quarter revenues were $737 million, up 5% over the prior year. Outsourcing and advisory revenues of $278 million were up 10%. Revenues from sales brokerage totaled $201 million, up 4%. Lease brokerage revenues of $219 million were down 3% relative to a strong prior year imperative. Finally, in investment management, which was established in mid-2018, we generated $40 million of revenue in the quarter, up 26%, all internally generated. Consolidated adjusted EBITDA was $84 million for Q3, compared to $73 million, with our margin at 11.4% versus 10.2% in the prior year quarter. In fact, margins were up in every segment of our company, except for EMEA, as I will explain in a moment. The geographic split of both our revenues and adjusted EBITDA continued to be well diversified. Investment management represented 18% of adjusted EBITDA for the quarter. significantly relative to the comparative period due to the outsized growth of the segment over the past year. On an ongoing basis, we expect investment management to represent 15% to 20% of our EBITDA, assuming no further acquisitions. Quarterly revenues in the Americas totaled $424 million, up 5%. America's outsourcing and advisory revenues were up 16%. With continuing robust growth in each of project management, property management, and valuations, sales brokerage revenues were up 2% for the quarter, up broadly across the region, offset in part by a decline in Western Canada due to softer market conditions. Lease brokerage revenue of $160 million was down 1% against a strong prior year quarter. Adjusted EBITDA was $38.8 million, up 17% versus last year at a 9.1% margin, up 90 basis points compared to last year, primarily due to service mix and lower discretionary expenses. In the EMEA region, Q3 revenues were $139 million, down 1%, with a 3% internal decline. Outsourcing and advisory revenues were $67 million, down 1%, Impacted by lower project management revenues in our French workplace solutions business. Sales brokerage revenues, however, were up 16% across several countries. Lease brokerage revenues were down 17%, primarily due to timing of transactions in some markets. As a result, we expect a significant number of transactions to be recorded in the fourth quarter. Adjusted EBITDA for the region was $12.6 million. Thank you for joining us. led by property management. Sales brokerage revenues were up 1%. Lease brokerage revenues were up 2%. Adjusted EBITDA was $18.6 million compared to $17.8 million last year with margins at 13.9% up from 13.4% last year. In our investment management operations, revenues were $40 million in Q3 The shares industry, which was acquired in July 2018, is included in both the current and comparative quarters. Revenue growth reflected incremental management fees from new capital commitments in both open-ended and closed-end fund products. Assets under management were $30.6 billion as of September 30, 2019, up 18% from one year ago. Adjusted EBITDA for the quarter was $15.9 million, up from $9.6 million in the comparative period and more. Our net debt position was $509 million as of September 30, 2019, compared to $706 million one year ago. Our financial leverage, expressed in terms of net debt to EBITDA, was 1.5 times for the quarter. down substantially from 2.2 times reported one year ago. The reduction in leverage is attributable to debt repayment from operating cash flow as well as proceeds from our accounts receivable facility implemented earlier this year. In terms of financial capacity, with cash on hand and committed availability under our revolving credit facility, we had more than $700 million of liquidity at quarter end, a level sufficient to fund operations and other capital investments including acquisitions under our growth strategy. Looking ahead to the fourth quarter, which is our seasonally most significant quarter, our revenue pipeline continues to reflect solid activity in both sales, brokerage and leasing. In addition, we continue to see solid demand for our recurring outsourcing and advisory services and investment management fees are secure based on AUM in place. As a result, our 2019 outlook remains unchanged, including our expectations for low single-digit percentage internal revenue growth in local currency combined with growth from acquisitions, which we expect will result in high single-digit percentage growth in revenue. We anticipate a full-year adjusted EBITDA margin improvement of 100 to 120 basis points compared to 2018. We also estimate low double-digit growth in full-year adjusted EPS That concludes my prepared remarks. Operator, please open the line for questions.