Colliers International Group Inc.

Welcome to the Colliers International fourth quarter year-end investors conference call. Today's call is being recorded. Legal counsel requires us to advise 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, Wednesday, February 12, 2020. 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 and thanks for joining us. As the operator mentioned, I'm Jay Hennick, Chairman and Chief Executive of the company. With me today is John Fredrickson, Chief Operating Officer and Christian Mayer, Chief Financial Officer. Before we begin, I'd like to congratulate both John and Christian on their recent appointments. They're both well-deserved, and they demonstrate once again the depth of our leadership team. So congratulations, guys. As always, this conference call is being webcast and available in the investor relations section of our website. A presentation deck is also available there to accompany today's call. Earlier today, Collier's announced another solid year of revenue and earnings growth, with strong results across each of our service segments. For the quarter, revenues were $928 million, up 5% in local currency. Adjusted EBITDA was $144 million, up 10%. And adjusted earnings per share came in at $2.01. Up 14% against a very strong fourth quarter last year. For the full year, revenues topped the $3 billion milestone for the first time, up 10% over the prior year. Adjusted EBITDA was $360 million, up 18%. And adjusted earnings per share came in at $4.67 per share, up 14 cents. In a few minutes, Christian will have more to say about our financial results. and John will offer his comments on our operating performance after which we'll take some questions. Last year we completed a total of four acquisitions including the strategically important acquisition of Synergy Project Management, the market leader in India, one of the fastest growing economies in the world. With this acquisition, we welcomed an exceptional team of professionals with deep institutional relationships that we expect to leverage significantly as we expand our operations in this important and growing market. During the fourth quarter, we also announced an agreement to acquire Doherty Financial, a leading debt finance and loan servicing platform in the U.S., and then in January we acquired our former affiliate in Austin, Texas, adding another important market to our U.S. business. Austin is one of the fastest growing markets in the U.S. and as always we expect to be able to accelerate its growth as a company-owned operation. As we enter the year, the fifth year and final year of our growth plan, We are well on track to meet or exceed our goal of doubling the size of the business by the end of 2020. When we initially established this plan five years ago, many thought it was ambitious. In my view, growth plans always should be ambitious. At Colliers, we needed a target to provide us with a roadmap for the future, to rally our troops around, and to provide milestones against which we could measure our success. We're currently working on our next five-year plan, which we hope to announce this coming fall. I have little doubt that our 2025 plan, our 2025 growth plan, don't know what we're going to call it just yet, will be as ambitious as the last one. Going forward, we will continue to pursue internal growth as we have in the past. And as you have seen, quietly, we have also been setting our sights on new and related growth engines that will strengthen our overall business for the future. One example of this strategy in action is the acquisition two years ago of Harrison Street, which established Colliers as an important player in the real estate investment management business, primarily alternate investments. Another example will be the acquisition of Doherty, a company that provides commercial mortgage banking, debt financing, and mortgage servicing. Both open vast new opportunities for growth, and both will grow faster by being part of Colliers than they could have on their own. And let's not forget something else. Both also bring more recurring and contractual revenue streams to our platform, changing the composition and the fundamentals of our company for the future. Last year, outsourcing, advisory, and investment management segment of our business represented about 44% of our overall revenues, up from 41% the prior year. As we continue to grow our stable revenue streams, Colliers is slowly evolving into a different kind of professional services company. This year, we expect revenues from outsourcing, advisory and investment management to approach 50% for the first time. With a higher percentage of stable revenue streams, the Colliers business model is much stronger and more resilient than ever. Our shareholders know that creating value has always been at the forefront of our efforts. That's because our leadership owns more than 40% of the equity in our company, far exceeding any of our publicly traded competitors. Over the last 25 years, we've delivered compound annual returns and share price of almost 20%. That record of performance is impressive by any standard and speaks volumes about our ability to continue to maximize the potential of our business in the future. When you consider our well-known global brand, highly diversified global platform, and more stable revenue streams than at any time in the past, and you couple that with The massive growth opportunities we have, the significant free cash flow we generate, not to mention the proven track record I just spoke of, it is clear to me that Collier's is significantly undervalued, especially when you compare it to the attributes of other public companies. But of course, I'll leave all of that to you to figure out for yourselves. Remarkably few companies out there that have the quality and growth potential of a company like Collier's. With that said, and looking forward to the coming year, provided we have relatively stable market and geopolitical conditions, we remain confident that we will deliver again solid revenue and earnings growth in 2020. With that, let me turn things over to Christian for his comments. Christian? Thank you, Jay.

As announced earlier today, Colliers reported solid fourth quarter and full year financial results. My comments will follow the flow of the slides 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 defined in our as well as the accompanying slide presentation. The adjustments are composed primarily of non-cash charges that we view largely as unrelated to our operating results. All references to revenue growth are calculated based on local currency. Fourth quarter revenues were $928 million, up 5% over the prior year with growth led by outsourcing advisory and investment management. Consolidated adjusted EBITDA was $144 million for Q4 compared to $133 million, with our margin at 15.5% versus 15% in the prior year quarter. Margin growth was led by the Americas and Asia-Pac regions, as I will discuss in a moment. Quarterly revenues in the Americas totaled $486 million, up 2%, with internally generated revenues down slightly. America's outsourcing and advisory revenues were up 15%, with continuing robust growth in each of project management, property management, and valuations. Sales brokerage revenues were down 6% for the quarter relative to a very strong prior year quarter. Lease brokerage revenue was down 1%, also against a strong prior year quarter. Adjusted EBITDA was $50 million, up 10% versus last year with a 10.3% margin, up 70 basis points compared to last year primarily due to lower costs and operating leverage. In the EMEA region, Q4 revenues were $226 million, up 6%, almost entirely from internal growth. Outsourcing and advisory revenues were down 8%, impacted by significantly lower project management revenues in our French workplace solutions business. Sales brokerage revenues, however, were up 18%, with significant contributions from Germany, The Netherlands and Spain. Lease brokerage revenues were likewise up 18% aided in part by the closing of transactions that were deferred from Q3 as we indicated on our Q3 conference call. Adjusted EBITDA for the region was $51 million compared to $49 million last year at a 22.7% margin up 10 basis points from last year. Asia Pacific region revenues were $172 million, up 11% with 6% internal growth and the balance from the recent acquisition of Synergy, a leading project management firm in India. Outsourcing and advisory revenues were up strongly at 18%, sales brokerage revenues were up 3% and lease brokerage revenues were up 9%. Adjusted EBITDA was $32 million compared to $29 million last year with margins at 18.9% up 70 basis points due to operating leverage. In our investment management operations, revenues were $45 million in Q4, up 15%, all from internal sources. Revenue growth reflected incremental management fees from new capital commitments and all fund products. Assets under management stood at $32.9 billion as of December 31, adjusted EBITDA for the quarter was $17 million versus $18 million in the comparative period and was impacted by investments to establish new fund products in both Europe and the U.S. in 2020, as well as timing of transaction fee revenue in our legacy European operation. Our net debt position was $496 million as of December 31, 2019, compared to $545 million one year ago. During the fourth quarter, Our debt increased $94 million as a result of an investment in real estate assets to seed a new fund in Europe. We expect to transfer these assets off our balance sheet without gain or loss during the second quarter of 2020. Our financial leverage expressed in terms of net debt to EBITDA was 1.4 times for the quarter, down from 1.6 times reported one year ago. The reduction in leverage is attributable to debt repayment from operating cash flow, as well as the proceeds from our accounts receivable facility, implemented earlier in the year, offset by the temporary increase in debt related to the real estate assets noted above. 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 year end, an amount sufficient to fund In terms of our 2020 outlook, we expect low to mid single digit internal revenue growth in local currency combined with growth from recent acquisitions for total revenue growth in the high single digit percentage range. We anticipate a full year adjusted EBITDA margin improvement of 50 to 80 basis points compared to 2019, including operating leverage and the favorable impact of the acquisition of Doherty Financial, which generates higher margins and our consolidated average. We expect mid-teens percentage growth in adjusted EPS when compared to 2019. This excludes the impact of any feature acquisitions that may be completed between now and the end of the year. Finally, during 2020, we expect to make incremental investments in our global capital markets and occupier services businesses to further expand these important revenue streams. These costs are expected to be in the $12 million range and will be reported on separately going forward. John will discuss our capital markets and occupier services strategies in more detail shortly. That concludes my prepared remarks and I'd now like to pass the call over to John.