Colliers International Group Inc.

Hello and welcome to Collier's 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 complicated in the forward-looking statements. Additional information concerning factors that could use 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 4-F as filed with the U.S. Securities and Exchange Commission. As a reminder, today's call has been recorded. Today is October 27, 2020, and at this time, for opening remarks and introductions. I would like to turn the call over to Global Chairman and Chief Executive Officer, Jay Hennick. Sir, you may begin.

Jay Hennick Thank you, Operator. Good morning, everyone, and thanks for joining us for our third quarter conference call. As the operator mentioned, I'm Jay Hennick, Chairman and Chief Executive Officer of the company. With me today is John Fredrickson, Chief Operating Officer and Christian Mayer, Chief Financial Officer. This conference call is being webcast and is available on the Investor Relations section of our website. A presentation slide deck is also available to accompany today's call. Despite the impact of the pandemic, Collier's reported better than expected results for the third quarter with continued growth from recurring services. These results are a testament to the resilience of our business model, a business that is also diversified by geography, by service, and by asset class. Revenues came in at $692 million, down 6%. Adjusted EBITDA was $92 million, up 9%, and adjusted earnings per share came in at $1.08, up 4% relative to the prior year. While uncertainties persist, we expect our full year results to come in stronger than anticipated. As a result, we have increased our operating assumptions for the balance of the year, as you will hear. In a few minutes, I'll turn things over to Christian and John for comment, but before I do, I'd like to make four points today. The first is culture counts. Our unique entrepreneurial culture at Colliers has always been a differentiator for us. Culture takes years to create and discipline to sustain, and that's why it's so difficult to copy. I'm extremely proud of our leadership teams around the world who continue to execute the Collier's way. Our bias for action and propensity to make informed decisions quickly has always allowed us to respond better than most, to contain costs, to align resources, while always continuing to provide essential advice to our clients. I'm also confident that coming out of this pandemic, we will adapt to the new normal faster and better than the others with our unique entrepreneurial and enterprising culture leading the way. Second, like we've done in the past, Colliers is programmed to capitalize on opportunities. We always maintain a strong balance sheet to capitalize on opportunities to strengthen our business, especially in times of change when others are either hitting the pause button or running for cover. This year was no exception. So far, we've invested $240 million in acquisitions, up from $45 million last year. During the quarter, we continued to integrate recently acquired Collier's Mortgage and Mazer Consulting and also completed the acquisition of Collier's Nashville, a leader in one of the fastest growing markets in the United States. Though still in the early days, I'm very excited about the potential for all of these additions this year and look forward to helping them accelerate their growth as part of our global platform. We continue to see great opportunities out there to add talent, to expand our services, and to streamline our businesses while also looking for incremental acquisition targets to strengthen and further diversify our business. Number three, almost 60% of our earnings now come from high quality recurring services. Having such a high percentage of our earnings coming from recurring revenues gives Collier's more resilience than ever and clearly sets us apart. Not only in terms of the percentage of recurring revenues, but also in terms of the quality of the recurring revenues. Today, the investment management, property management, project management, engineering and design, and mortgage services represent a growing majority of our business and we fully expect this growth to continue in the years to come. Make no mistake. There's nothing wrong with traditional capital markets and leasing. Transaction volumes may be down, but they will be back, and they'll be back strongly as the economy stabilizes because there are essential services that are needed and required by real estate owners and occupiers everywhere. In fact, we're already seeing some signs of recovery in most of our markets, as John will talk about. Finally, it's time to better appreciate the value of what we're creating at Colliers. The Colliers leadership team has been creating value for shareholders for a long time. Over the past 25 years, we've delivered about 20% compound annual growth rate in share value. This record of achievement is enviable to say the least, but it also suggests that we know a thing or two about how to value and build and many other high quality service businesses. The way I see it, Collier's remains materially undervalued. From an investment perspective, whether you value us on a standalone basis or on the basis of the sum of the parts, Collier's trades at a significant discount to other property or professional service companies with similar characteristics. Where can you find a global Highly diversified company with an institutional brand, compelling growth prospects on a global basis with almost 60% of its earnings coming from resilient revenue streams, trading at the value that we trade at. Especially one with an impressive track record of creating value for shareholders where management has so much skin in the game, almost 40% of the equity of our company. With that said, I'd like to now pass things over to Christian. Christian? Thank you, Jay.

As announced earlier today, Colliers reported better than expected financial results for the third quarter. My comments follow the flow of the slides posted on the investor relations section of colliers.com to accompany this call. Please note that the non-GAAP measures referenced on this call are defined as in the press release issued today. All references to revenue growth are calculated based on local currency. Third quarter revenues were $692 million, down 7% relative to the prior year. Internal revenues were down 19%, primarily due to the impact of the COVID-19 pandemic on our trend in capital markets operations globally. Our internal revenue variance showed significant improvement sequentially, that is, relative to Q2 2020. as economies began to reopen after the initial phase of the pandemic. Third quarter consolidated adjusted EBITDA was $92 million, up 8% from $84 million last year, with margins at 13.3% versus 11.4% in the prior year quarter. Margins in each region were impacted by reduced revenues but mitigated by continuing aggressive measures to manage expenses including discretionary support and admin costs. as well as compensation. In the case of the Americas, margins were favorably impacted by acquisitions. America's Q3 revenues totaled $423 million, essentially flat versus the prior year period overall. America's outsourcing and advisory revenues were up 25% as a result of engineering and loan servicing revenues from recent acquisitions. Capital markets revenues were down 6% but included the benefit of debt origination revenues from a recent acquisition. Leasing revenues were down 18%, a significant improvement from the 45% reduction experienced during Q2. Adjusted EBITDA was $55 million, up 41% last year with significant contribution from acquisitions as well as continuing cost savings implemented early in the pandemic. In the EMEA region, Q3 revenues were $117 million, down 19% overall. Capital markets was down 37%, leasing was down 25%, and outsourcing and advisory was down 4%, all impacted by the ongoing pandemic. Adjusted EBITDA for the region was $8 million compared to $13 million last year. In the Asia-Pacific region, Q3 revenues Q3 revenues were $110 million, down 23%. Leasing and capital markets were down 45% and 35%, respectively, with all markets and asset classes impacted. Outsourcing and advisory revenues were down 5%. Adjusted EBITDA was $13 million compared to $19 million last year. Q3 investment management revenues were $42 million, up 4%. Assets under management were $36.2 billion as at September 30, 2020, up modestly from June 30. Harrison Street's demographic investment strategy focuses on lower volatility alternative asset classes, including student and senior housing, medical office, storage, and social infrastructure, and for the most part,