Colliers International(CIGI) - 2022 Q3 - Quarterly Report

Interim Consolidated Financial Statements The interim consolidated financial statements provide a comprehensive overview of the company's earnings, financial position, cash flows, and detailed accounting notes for the period Consolidated Statements of Earnings (Loss) Q3 2022 revenues rose to $1.11 billion, with net earnings attributable to the company at $12.0 million; nine-month revenues reached $3.24 billion, with net earnings of $23.7 million Consolidated Earnings Summary (Q3 & Nine Months Ended Sep 30) | Indicator (in thousands USD) | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,108,324 | $1,022,756 | $3,237,082 | $2,743,664 | | Operating Earnings (Loss) | $84,030 | $75,966 | $228,714 | $(269,855) | | Net Earnings (Loss) | $44,524 | $50,496 | $132,572 | $(337,298) | | Net Earnings (Loss) Attributable to Company | $12,028 | $18,004 | $23,749 | $(433,626) | | Diluted EPS (in USD) | $0.27 | $0.40 | $0.54 | $(10.19) | Consolidated Balance Sheets Total assets increased to $4.56 billion as of September 30, 2022, driven by goodwill and intangibles; total liabilities rose to $3.21 billion, while shareholders' equity decreased to $477.1 million Consolidated Balance Sheet Highlights (in thousands USD) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $1,368,218 | $1,571,007 | | Goodwill | $1,600,724 | $1,091,048 | | Intangible Assets | $891,464 | $561,830 | | Total Assets | $4,561,649 | $3,873,730 | | Total Current Liabilities | $1,325,817 | $1,537,255 | | Long-term Debt | $1,149,483 | $529,596 | | Total Liabilities | $3,210,943 | $2,751,558 | | Total Company Shareholders' Equity | $477,061 | $581,599 | | Total Liabilities and Shareholders' Equity | $4,561,649 | $3,873,730 | Consolidated Statements of Cash Flows Nine-month operating activities used $171.5 million cash, a shift from prior year's inflow; investing activities used $403.4 million due to acquisitions, while financing provided $403.0 million, leading to a $209.8 million cash decrease Cash Flow Summary (Nine Months Ended Sep 30, in thousands USD) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(171,470) | $211,072 | | Net cash used in investing activities | $(403,446) | $(59,989) | | Net cash provided by (used in) financing activities | $403,044 | $(144,182) | | Effect of exchange rate changes on cash | $(37,959) | $(4,963) | | Net change in cash, cash equivalents and restricted cash | $(209,831) | $1,938 | - Significant cash outflow for investing activities was driven by $594.1 million spent on acquisitions of businesses, net of cash acquired[11] - Financing activities were primarily characterized by a net increase in long-term debt, with $990.1 million in proceeds and $315.1 million in repayments[11] Notes to Consolidated Financial Statements Detailed notes explain accounting policies and financial figures, including eight business acquisitions, the disposal of Russian operations, and changes to debt facilities Note 4: Acquisitions In the first nine months of 2022, the company acquired eight businesses, including Basalt Infrastructure Partners and Rockwood Capital, for a total consideration of $634.3 million, recognizing $577.9 million in goodwill - The company acquired eight businesses in the first nine months of 2022, including Basalt Infrastructure Partners (75% interest) and Rockwood Capital (65% interest)[22][23][24] Aggregate Acquisition Details (in thousands USD) | Item | Amount | | :--- | :--- | | Cash consideration, net of cash acquired | $594,089 | | Acquisition date fair value of contingent consideration | $40,176 | | Total purchase consideration | $634,265 | | Goodwill recognized | $577,937 | Note 5: Business disposals The company discontinued Russian operations and sold three smaller businesses, resulting in an aggregate loss of $27.4 million for the nine-month period - The company discontinued its Russian operations in March 2022 and sold three other minor operations, resulting in a total loss on disposal of $27.4 million for the nine-month period[33][35] Note 9: Long-term debt The company amended its revolving credit facility to $1.5 billion, maturing May 2027, with $816.1 million available; it also holds outstanding senior unsecured notes totaling €335 million and $150 million - The company amended and extended its Revolving Credit Facility to $1.5 billion, maturing in May 2027. The interest rate margin can be adjusted based on sustainability metrics[50] - As of September 30, 2022, there was $816.1 million of available undrawn credit under the Revolving Credit Facility[50] Note 15: Net earnings (loss) per common share This note details EPS calculations and the new NCIB, under which the company repurchased 1,087,839 shares for $134.5 million in 2022 - A new Normal Course Issuer Bid (NCIB) was approved in July 2022, allowing the repurchase of up to 3.5 million Subordinate Voting Shares[75] - Between March and September 2022, the company repurchased a total of 1,087,839 Subordinate Voting Shares for a combined consideration of approximately $134.5 million[75][76] Note 21: Revenue Q3 2022 total revenue was $1.11 billion, with Americas as the largest segment and Capital Markets leading service lines; nine-month revenue reached $3.24 billion Disaggregated Revenue by Service (Q3 2022, in thousands USD) | Service Line | Revenue | | :--- | :--- | | Leasing | $273,714 | | Capital Markets | $275,706 | | E&D and Project management | $203,165 | | Property management | $121,080 | | Valuation and advisory | $113,010 | | IM - Advisory and other | $96,070 | | Total Revenue | $1,108,324 | Disaggregated Revenue by Segment (Q3 2022, in thousands USD) | Segment | Revenue | | :--- | :--- | | Americas | $695,058 | | EMEA | $164,198 | | Asia Pacific | $152,845 | | Investment Management | $96,070 | | Corporate & Other | $153 | | Total Revenue | $1,108,324 | Note 22: Segmented information Q3 2022 saw Americas lead in revenue ($695.1 million) and operating earnings ($59.9 million); Investment Management showed strong profitability, while EMEA reported a nine-month operating loss of $20.5 million Operating Earnings by Segment (Q3 2022, in thousands USD) | Segment | Revenues | Operating Earnings (Loss) | | :--- | :--- | :--- | | Americas | $695,058 | $59,945 | | EMEA | $164,198 | $6,098 | | Asia Pacific | $152,845 | $17,451 | | Investment Mgmt | $96,070 | $19,515 | | Corporate | $153 | $(18,979) | | Consolidated | $1,108,324 | $84,030 | Note 23: Subsequent events Subsequent to quarter-end, the company acquired Arcadia Management Group and Versus Capital for $13.1 million and $364.0 million respectively, repurchased shares, and expanded its AR Facility to $175 million - Completed the acquisition of 75% of Versus Capital for an initial cash purchase price of $364.0 million on October 11, 2022[119] - Expanded the committed availability in its AR Facility from $150 million to $175 million on October 28, 2022[121] Management's Discussion and Analysis (MD&A) Management's discussion and analysis provides insights into the company's financial performance, operational results, future outlook, liquidity, and key risks Consolidated Review Q3 2022 consolidated revenues increased 8% to $1.11 billion, with Adjusted EPS up 11% to $1.41, driven by strategic acquisitions and growth in key service lines - Q3 2022 revenues were $1.11 billion, up 8% (12% in local currency) YoY, with adjusted EPS of $1.41, up 11%[126] - Key acquisitions in 2022 include Basalt Infrastructure Partners (infrastructure investment) and Rockwood Capital (US real estate investment)[128][129] Revenue Growth by Service Line (Q3 2022 vs Q3 2021) | Service Line | Change in US$ % | Change in LC% | | :--- | :--- | :--- | | Outsourcing & Advisory | 18% | 24% | | Investment Management | 23% | 23% | | Leasing | 13% | 16% | | Capital Markets | -11% | -8% | Results of Operations Q3 2022 revenue growth was 8% from acquisitions and 4% internal, with Adjusted EBITDA margin expanding to 13.1%; Investment Management AUM reached $86.2 billion, and nine-month revenues grew 18% - Q3 2022 Adjusted EBITDA was $145.1 million, up 17% YoY, with the margin increasing to 13.1% from 12.1%[138] - Investment Management AUM grew 87% YoY to $86.2 billion as of September 30, 2022, and reached $92.2 billion pro forma for the Versus Capital acquisition[146] - For the nine months ended Sep 30, 2022, revenues were $3.24 billion, up 18% (21% in local currency), with internal growth of 15%[148] 2022 Outlook The company adjusted its 2022 full-year outlook, forecasting AEBITDA margin expansion of 60-80 bps and mid-teens AEPS growth, with a consolidated income tax rate of 29%-31% Updated 2022 Full Year Outlook | Measure | Updated Outlook | Previous Outlook | | :--- | :--- | :--- | | Revenue growth | Low double digit | Low double digit | | AEBITDA Margin | Up 60 bps – 80 bps | Up 60 bps – 100 bps | | Consolidated income tax rate | 29%-31% | 27%-29% | | AEPS growth | Mid-teens | Low-twenties | Liquidity and Capital Resources Net indebtedness was $961.7 million as of September 30, 2022, with a 1.5x leverage ratio; the company extended its $1.5 billion revolving credit facility and used significant cash for acquisitions and share repurchases - Net indebtedness was $961.7 million as of Sep 30, 2022, with a leverage ratio of 1.5x pro forma Adjusted EBITDA[166] - The Revolving Credit Facility was increased to $1.5 billion and extended to May 2027, with $816.1 million of unused credit available[167] - Total outstanding contingent consideration for past acquisitions is estimated at a maximum of $403.7 million, with a fair value of $73.9 million recorded on the balance sheet[174] Reconciliation of non-GAAP financial measures This section reconciles GAAP to non-GAAP measures, showing Q3 2022 Net Earnings of $44.5 million reconciled to Adjusted EBITDA of $145.1 million and Diluted EPS of $0.25 to Adjusted EPS of $1.41 Reconciliation of Net Earnings to Adjusted EBITDA (in thousands USD) | Period | Net Earnings (Loss) | Adjusted EBITDA | | :--- | :--- | :--- | | Q3 2022 | $44,524 | $145,065 | | Q3 2021 | $50,496 | $123,641 | | Nine Months 2022 | $132,572 | $427,839 | | Nine Months 2021 | $(337,298) | $352,328 | Reconciliation of Diluted EPS to Adjusted EPS (in USD) | Period | Diluted Net EPS | Adjusted EPS | | :--- | :--- | :--- | | Q3 2022 | $0.25 | $1.41 | | Q3 2021 | $0.37 | $1.27 | | Nine Months 2022 | $0.49 | $4.69 | | Nine Months 2021 | $(9.20) | $3.91 | Forward-looking statements and risks The company faces risks from economic conditions, inflation, real estate market volatility, competition, and acquisition integration, alongside specific risks for Colliers Mortgage, interest rate changes, and cybersecurity threats - Key risks include economic conditions, rising inflation, real estate market volatility, competition, and integration of acquisitions[217] - Colliers Mortgage operations face unique risks, including changes in relationships with US government agencies (Fannie Mae, Ginnie Mae) and credit risk from borrower defaults on DUS Program loans[216] - Other significant risks mentioned are the effects of rising interest rates on borrowing costs, foreign exchange rate fluctuations, and cybersecurity threats[218]