Colliers International Group Inc.

Hello, and welcome to Callers International third quarter 2021 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 November 2, 2021, and at this time, for opening remarks and introductions, I would like to turn the call over to the Global Chairman and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir.

Thank you, Operator. Good morning, and thanks for joining us for the third quarter conference call. As the Operator mentioned, I'm Jay Hennick, Chairman and Chief Executive Officer of the company, and with me today is Christian Mayer, Chief Financial Officer. As always, this call is being webcast and is available in the investor relations section of our website. A presentation slide deck is also there to accompany today's call. Earlier today, Collier's delivered strong results for the third quarter with continued momentum across all service lines. Here are some of the highlights. Investment management again generated strong results for the quarter, raised a record $4.9 billion in capital commitments so far this year, and finished the quarter with AUM, or Assets Under Management, of more than $46 billion. Capital markets and leasing were both up significantly over the prior year, while our recurring outsource and advisory segment including engineering and design, property and project management, and mortgage servicing and valuation, also delivered solid internal growth. Given these strong results and the continued momentum we are seeing, we now expect Collier's to exceed the top end of the previously provided outlook, as you'll hear from Christian in just a few minutes. During the quarter, we released our Elevate the Built Environment framework designed to embed ESG practices across our organization. We are implementing specific targets to reduce carbon emissions, and we have committed to net zero in our own operations by 2030. Expect more of our ESG efforts coming in the upcoming quarters. Last week, Collier's formally announced its new Enterprise 25 growth strategy, setting out ambitious growth targets for 2025. Over the next five years, we will strive to double our profitability and generate more than 60% of our adjusted EBITDA from recurring services. As shareholders know, our five-year plans have always been an important roadmap for our company. If we're able to achieve our new enterprise 2025 growth plan, it will be very good news for shareholders. After quarter end, we announced two acquisitions, Anterion and Colliers Italy, both of which are expected to close by the end of the first quarter of 2022. Anterion, one of the largest investment management firms in Italy, with more than $4 billion in AUM, will augment our Collier's global investors platform, while Collier's Italy adds another market leader to our strong company-owned services business in Europe. And yesterday, we completed the previously announced acquisition of Bergman, which provides additional scale, and further diversifies our rapidly growing engineering and design business. The bottom line is this, Colliers continues to seize opportunities and to think differently as we lead our company and our industry into the future. We are one of the top global players in the business with a global brand and platform second to none, and we have a highly diversified business model, diversified by revenue, by client, by asset class, and by geography. And we're also more resilient than ever, with more than 50% of our revenues coming from higher value recurring revenue streams. With our proven track record of more than 26 years, unique enterprising culture, differentiated and diversified business model, and significant inside ownership, Collier's is better positioned than ever to continue to create value for its shareholders one step at a time. Now let me turn things over to Christian for comment. Christian? Thank you, Jay.

As announced earlier today, Collier's report with strong third quarter financial results 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 as defined in the press release issued today. All references to revenue growth are expressed in local currency. Third quarter 2021 revenues were $1.02 billion, up 46% relative to the prior year period with continued momentum from earlier quarters. Revenues were up strongly across all service lines, particularly capital markets and investment management. Growth for the quarter was virtually all internally generated. Compared to 2019 pre-pandemic levels, capital markets revenues were up 34% and leasing was up 8%, with office leasing recovering to within 5% of 2019 levels. Our Q3 consolidated adjusted EBITDA was $124 million, up 32% from $92 million reported one year ago, with margins at 12.1% versus 13.3% in the prior year quarter. Our margin was impacted by performance-based incentive compensation, the reinstatement of variable costs, and higher support staffing costs, all due to the strong rebound in transaction activity levels. America's Q3 revenues were $617 million, up 45% over the prior year period. Capital markets revenues were up 92%, driven by significant increases in industrial and multifamily sales transaction activity. Leasing revenues were up 34%, largely due to stronger industrial and office leasing activity across the region versus the prior year period. Office leasing activities showed steady improvement in Q3, although remained below pre-pandemic levels. Outsourcing and advisory revenues were up 24%, driven by strong internal growth in engineering and design, valuation, and mortgage services. Adjusted EBITDA for the region was $66 million, up 20% from last year, with the margin impacted by performance-based incentive compensation from strong year-over-year growth in operating results, the reinstatement of certain variable costs, and higher support staffing costs. Third quarter EMEA revenues were $155 million, up 29% a year ago, with strong revenue increases in each service line, particularly leasing and capital markets. Adjusted EBITDA for the region was $15 million, up from $8 million last year on higher revenues and continued savings from pandemic-related cost measures. In the Asia-Pacific region, third quarter revenues were $172 million, up 51% relative to the prior year period, with all service lines reporting robust growth led by capital markets and leasing. On a geographic basis, growth was led by Australia, New Zealand, and China. Adjusted EBITDA was 21 million compared to 13 million last year, with the increase attributable to operating leverage and continued cost management in light of the pandemic. Certain parts of Australia, New Zealand, and Japan were under pandemic stay-at-home orders during the quarter, which made our operating results all the more impressive. Investment management revenues were 78 million, up 87% versus the prior year period. After eliminating the impact of pass-through carried interest, revenues were up 50% driven by management fee growth. Assets under management were $46 billion at quarter end, up 27% from one year ago and reflected another record quarter of fundraising following on the record capital commitments achieved in the first and second quarters. Adjusted EBITDA for the quarter was $28 million, up from $15 million generated in the prior year period reflecting solid operating leverage on incremental management fee revenue. Our consolidated operating cash flow for the first nine months of 2021 was $211 million. However, adjusting for the non-recurring cash component of the LTIA settlement, cash flow was almost triple the $104 million generated in the same period in 2020. impacted by a combination of higher earnings and a reduction of working capital usage, which was elevated during the pandemic last year. Capital expenditures for the nine months ended September 30, 2021, were $40.4 million, a significant increase from the prior year, and reflected investments in leaseholds in several markets, including certain markets where we deferred relocations and expansions during the pandemic. For the full year 2021, we expect CapEx to be in the range of $55 to $60 million. Almost one-third of this CapEx will be landlord-funded leasehold improvements, reducing the net cash capital expenditures to approximately $40 million. Turning to our debt capital structure, our leverage ratio, as defined as net debt to pro forma adjusted EBITDA, was 0.5 times at September 30th, 2021. After quarter end, we issued 300 million in U.S. and Euro-denominated senior notes due 2031 and paid down our revolving credit facility in full. As a result, we now have well over 1 billion of liquidity available to fund future acquisitions and ongoing operations. In addition to this liquidity, our capital structure has low leverage low borrowing rates, and laddered debt maturity extending to 2031. With all this in place, we believe we are perfectly positioned to execute on our Enterprise 25 growth plan. Given the strong results reported for Q3 and continued momentum, we are updating and increasing our financial outlook for the full year 2021. We now expect to exceed the top end of the previous outlook. We expect that adjusted EBITDA could be 40% to 45% above 2020 levels. The new outlook includes two months of the Bergman acquisition completed yesterday and is subject to the risks and uncertainties as outlined in the accompanying slides. That concludes my prepared remarks. I would now like to open the call for questions. Operator, can you please open the line?