Colliers International Group Inc.

Welcome to the Collier's International Fourth Quarter and Year-End 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 February 10, 2022. 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.

Jay Hennick Thank you, Operator. Good morning, and thanks for joining us for this fourth quarter conference call. 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 deck is also available there to accompany today's call. As announced this morning, Collier's delivered very strong fourth quarter financial results with full year revenues exceeding the $4 billion milestone. Capital markets, leasing, and outsourcing and advisory were all up significantly across all service lines and across all geographies, while investment management delivered record results, raising more than $6 billion in capital and finishing the year with more than $50 billion in assets under management. With a globally balanced and highly diversified business model, significant recurring earnings, and a sharp focus on global growth opportunities, Colliers is stronger and more resilient than ever. As you know, last month we announced that we were investing in Basalt Infrastructure, a leading transatlantic investment management firm with more than $8 billion in assets under management, adding another highly differentiated investment business that specializes in the important utility, transportation, energy and renewables, and communication sectors. Together with the previously announced Milan-based Anterion, which we're acquiring to augment our existing operations in Europe. We expect to add more than $12 billion in assets under management to this segment of our business once both of these transactions are completed. As you know, last year we announced our new enterprise 2025 growth strategy. The goal is to double our profitability and generate more than 65% of our EBITDA from recurring revenue streams over the incoming five years. We finished year one well ahead of our internal targets, and we continue to make excellent progress. If we're able to achieve our current five-year plan, it will be very good news indeed for our shareholders. With our strong growth plan, strong growth global brand, and growth platform, well-balanced and highly diversified business model, unique enterprise and culture, and significant inside ownership, Colliers is better positioned today than at any time in our history to continue to create value and to generate superior returns for shareholders. However, Despite all of these characteristics and unique attributes, our company remains significantly undervalued when compared to others in my view. I have been investing in businesses and building companies for many years now, and I say this with very strong conviction. Few companies have our growth prospects. Few have the experienced and financially committed leadership team we do, and fewer still have our long-term record of performance, a track record of greater than 20% annualized returns over more than 27 years. With that said, let me now turn things over to Christian for comment, and then we'll open things up to questions. Christian? Thank you, Jay.

As announced this morning, Colliers reported very strong fourth 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 this morning's press release. All references to revenue growth are expressed in local currency. Our revenues for Q4 were $1.3 billion, up 48% relative to the prior year period, with revenues up strongly across all service lines and geographies. Growth to the quarter was predominantly internally generated. Compared to 2019 pre-pandemic peak levels, capital markets revenues were up 60%, and leasing was up 12%, with office leasing recovering to within 5% of 2019 levels. Fourth quarter consolidated adjusted EBITDA was 192 million, up 25% from 155 million reported one year ago, with margins at 14.3% versus 17% in the prior year quarter. Our margin was impacted by increased performance-based incentive compensation and the reinstatement of variable costs, mainly attributable to the strong growth in transaction activity. The America's region fourth quarter revenues were $814 million, up 54% over the prior period. Revenue growth was exceptionally strong, with leasing activity up 77% led by industrial. Capital markets activity was up 66% and was led by industrial, land, and multifamily asset classes. Office leasing activity showed steady improvement in Q4, although remained below pre-pandemic levels. Outsourcing and advisory revenues were up 29%, driven by engineering and design, valuation, and loan servicing, as well as recent acquisitions. Adjusted EBITDA was $94 million, up 34% from last year, with the margin impacted by significant incremental performance-based incentive compensation, from strong year-over-year growth in operating results, the reinstatement of variable costs, and higher support staffing costs. EMEA revenues for Q4 were $233 million, up 32% from one year ago, with robust growth across all service lines, led by outsourcing and advisory, and capital markets Adjusted EBITDA was $42 million, up 19% from last year on higher revenues, although margin was impacted by revenue mix from higher project management activity. In the Asia-Pacific region, fourth quarter revenues were $219 million, up 36%, driven by strong capital markets activity across the region, but especially in Australia and New Zealand. Adjusted EBITDA was $38 million, up 7% relative to the prior year quarter, and was affected by higher performance-based incentive compensation. Investment management revenues were $80 million, up 83% versus the prior year period. After eliminating the impact of pass-through carried interest, revenues were up 45%, driven by management fee growth. Assets under management were $51 billion a quarter end, up 29% from one year ago, and capped off a record year of fundraising with $6.1 billion of new capital commitments from investors. Adjusted EBITDA for the quarter was $28 million, up from $18 million in the comparative quarter on solid flow-through from incremental management fee revenue. Our consolidated operating cash flow for the full year was $289 million. However, adjusting for the non-recurring cash component of the LTIA settlement in April 2021, cash flow was $381 million, more than double the $166 million generated in 2020. Cash flow was positively impacted by a combination of higher earnings and a reduction in working capital usage, which was elevated during the earlier stages of the pandemic last year. Our financial leverage ratio as defined as net debt to pro forma adjusted EBITDA was 0.3 times as of December 31st, 2021. During the fourth quarter, we issued $300 million in U.S. and Euro-denominated senior notes due 2031 and paid down our revolving credit facility in full. As of December 31st, we had $397 million of cash on hand, the majority of which is available for investment. As a result, we now have well over $1.2 billion in liquidity available to fund future acquisitions and ongoing operations, including the recently announced basalt transaction, which is expected to close later this year. Our debt capital structure includes $530 million of attractively priced long-term fixed rate debt, which positions us well for any inflationary uncertainty ahead. Given our low leverage and significant financial capacity, we continue to be extremely well capitalized for future growth. We are introducing our outlook for 2022. which provides our broad expectations for the year ahead and represents a return to the format we issued historically during more normal times. We expect high single-digit revenue growth consisting of mid-single-digit internal growth and the balance from previously completed and recently announced acquisitions, including Anteria, Collier's Italy, and Basalt. We expect our adjusted EBITDA margin to improve 40 to 60 basis points relative to 2021 from a combination of internal operating leverage and higher margin acquisitions. Our income tax rate and non-controlling interest share of earnings are expected to be 26 to 28 percent and 18 to 20 percent, respectively, consistent with historical ranges. Finally, our adjusted earnings per share are expected to grow at mid-teens percentage rate for 2022. This new outlook is subject to risk uncertainties as outlined in our accompanying slides. That concludes my prepared remarks. I would now like to open the call for questions. Operator, can you please open the line?