Colliers International(CIGI) - 2022 Q4 - Annual Report

Executive Summary & Highlights This section provides an overview of Colliers' financial performance for Q4 and full-year 2022, highlighting strategic achievements and business model evolution Fourth Quarter 2022 Performance Overview Colliers' Q4 2022 revenue decreased year-over-year, while Adjusted EBITDA and Adjusted EPS grew, driven by strong Investment Management and Outsourcing & Advisory, despite Capital Markets challenges 2022 Fourth Quarter Key Financial Data | Metric | Q4 2022 (Million USD) | Q4 2021 (Million USD) | YoY Change (US$) | YoY Change (Local Currency) | | :------------------- | :-------------------- | :-------------------- | :--------------- | :-------------------------- | | Revenue | 1,222.4 | 1,345.5 | -9% | -5% | | Adjusted EBITDA | 202.7 | 192.0 | 6% | 9% | | Adjusted EPS | 2.31 | 2.25 | 3% | | | GAAP Operating Earnings | 103.8 | 138.4 | -25% | | | GAAP Diluted EPS | 0.51 | 0.92 | -45% | | - Investment Management and Outsourcing & Advisory businesses achieved strong revenue growth, with Leasing revenue flat year-over-year[8] - Capital Markets business was impacted by interest rate volatility, debt availability challenges, and geopolitical issues, expected to persist into the first half of 2023[8] Full Year 2022 Performance Overview Colliers delivered strong full-year 2022 results with significant growth in revenue, Adjusted EBITDA, and Adjusted EPS, supported by high-value recurring revenue streams and strategic acquisitions 2022 Full Year Key Financial Data | Metric | FY 2022 (Million USD) | FY 2021 (Million USD) | YoY Change (US$) | YoY Change (Local Currency) | | :------------------- | :------------------ | :------------------ | :--------------- | :-------------------------- | | Revenue | 4,459.5 | 4,089.1 | 9% | 13% | | Adjusted EBITDA | 630.5 | 544.3 | 16% | 19% | | Adjusted EPS | 6.99 | 6.18 | 13% | | | GAAP Operating Earnings | 332.5 | (131.5)* | N/A | | | GAAP Diluted EPS | 1.05 | (9.09)* | N/A | | - A record $1 billion in acquisitions was completed in 2022, strengthening core businesses and creating additional shareholder value growth opportunities[36] - Investment Management's Assets Under Management (AUM) reached $98 billion at year-end, positioning Colliers as a global leader in the alternative private capital industry[36] Strategic Highlights & Business Model Colliers is transforming into a diversified services company with a globally balanced and highly diversified business model driven by high-value recurring revenue streams - Recurring revenue currently accounts for 58% of pro forma Adjusted EBITDA, progressing towards a target of 65% by the end of 2025[3] - The company boasts a globally balanced and highly diversified business model with a proven track record of delivering approximately 20% compound annual growth for shareholders over the past 28 years[3][9][36] About Colliers This section provides a brief overview of Colliers International Group Inc Company Overview Colliers is a leading diversified professional services and investment management company operating in 65 countries with 18,000 professionals dedicated to accelerating client, investor, and employee success - Colliers is a leading diversified professional services and investment management company, operating in 65 countries with 18,000 professionals[36] - The company generates $4.5 billion in annual revenue and manages $98 billion in assets[36] Consolidated Financial Performance This section details Colliers' consolidated revenue performance across its service lines for both the fourth quarter and full year of 2022 Consolidated Revenues by Line of Service In Q4 2022, consolidated revenue decreased by 5% in local currency, primarily due to a decline in Capital Markets, offset by strong growth in Investment Management and Outsourcing & Advisory; full-year 2022 consolidated revenue grew 13% in local currency, driven by strong performance across Investment Management, Outsourcing & Advisory, and Leasing Consolidated Revenues by Line of Service (Q4 2022 vs Q4 2021) | Line of Service | Q4 2022 (Thousand USD) | Q4 2021 (Thousand USD) | USD Change % | Local Currency Change % | | :-------------------- | :--------------------- | :--------------------- | :----------- | :---------------------- | | Outsourcing & Advisory | 519,084 | 479,593 | 8% | 14% | | Investment Management | 121,307 | 79,511 | 53% | 53% | | Leasing | 335,724 | 336,876 | 0% | 3% | | Capital Markets | 246,290 | 449,485 | -45% | -43% | | Total Revenues | 1,222,405 | 1,345,465 | -9% | -5% | Consolidated Revenues by Line of Service (FY 2022 vs FY 2021) | Line of Service | FY 2022 (Thousand USD) | FY 2021 (Thousand USD) | USD Change % | Local Currency Change % | | :-------------------- | :----------------- | :----------------- | :----------- | :---------------------- | | Outsourcing & Advisory | 1,872,328 | 1,599,313 | 17% | 22% | | Investment Management | 378,881 | 252,890 | 50% | 50% | | Leasing | 1,124,106 | 1,000,683 | 12% | 16% | | Capital Markets | 1,084,172 | 1,236,243 | -12% | -9% | | Total Revenues | 4,459,487 | 4,089,129 | 9% | 13% | - Consolidated internal revenue decreased by 11% in local currency year-over-year in Q4 2022, entirely due to reduced Capital Markets activity[11] Segmented Financial Results This section presents Colliers' financial performance broken down by geographic region and business segment for both the fourth quarter and full year of 2022 Fourth Quarter 2022 Segmented Results Q4 2022 saw varied performance across regions and business lines, with Americas revenue declining due to Capital Markets slowdown, EMEA and Asia Pacific also experiencing revenue drops, but EMEA's Outsourcing & Advisory growing in local currency, and Investment Management showing strong global growth Americas Region Americas Region Q4 2022 Performance | Metric | Q4 2022 (Thousand USD) | Q4 2021 (Thousand USD) | USD Change % | Local Currency Change % | | :------------- | :--------------------- | :--------------------- | :----------- | :---------------------- | | Revenue | 678,878 | 813,573 | -17% | -16% | | Adjusted EBITDA | 82,933 | 94,476 | -12% | -11% | - Revenue decline was primarily associated with the interest rate-driven slowdown in Capital Markets, while Outsourcing & Advisory revenue grew solidly, and Leasing revenue was flat year-over-year[38] - Adjusted EBITDA margin improved by 60 basis points, benefiting from lower average commission rates, reduced incentive compensation, and discretionary cost reductions[38] EMEA Region EMEA Region Q4 2022 Performance | Metric | Q4 2022 (Thousand USD) | Q4 2021 (Thousand USD) | USD Change % | Local Currency Change % | | :------------- | :--------------------- | :--------------------- | :----------- | :---------------------- | | Revenue | 228,346 | 233,116 | -2% | 8% | | Adjusted EBITDA | 35,920 | 42,367 | -15% | -9% | - Local currency revenue growth was driven by strong Outsourcing & Advisory activity, including recent acquisitions, offset by decreased Capital Markets activity due to interest rate volatility and geopolitical uncertainty[13] Asia Pacific Region Asia Pacific Region Q4 2022 Performance | Metric | Q4 2022 (Thousand USD) | Q4 2021 (Thousand USD) | USD Change % | Local Currency Change % | | :------------- | :--------------------- | :--------------------- | :----------- | :---------------------- | | Revenue | 193,631 | 219,089 | -12% | -3% | | Adjusted EBITDA | 34,253 | 38,391 | -11% | -2% | - Revenue was impacted by interest rate volatility and ongoing COVID-19 restrictions in several Asian markets, particularly China[14] Investment Management Investment Management Q4 2022 Performance | Metric | Q4 2022 (Thousand USD) | Q4 2021 (Thousand USD) | USD Change % | Local Currency Change % | | :------------- | :--------------------- | :--------------------- | :----------- | :---------------------- | | Revenue | 121,286 | 79,523 | 53% | 53% | | Adjusted EBITDA | 53,070 | 28,277 | 88% | 88% | | AUM | 97,700,000 | 51,000,000 | 92% | | - Revenue growth was primarily driven by acquisitions and increased management fees from higher Assets Under Management, with revenue excluding historical carried interest up 86% (87% in local currency)[40] Unallocated Global Corporate Costs Unallocated Global Corporate Costs (Adjusted EBITDA) | Metric | Q4 2022 (Thousand USD) | Q4 2021 (Thousand USD) | | :------------------------- | :--------------------- | :--------------------- | | Adjusted EBITDA Corporate Costs | (3,490) | (11,501) | - The decrease in costs was primarily attributable to lower performance-based compensation expenses in the current period[15] Full Year 2022 Segmented Results For full-year 2022, Americas and EMEA regions saw strong revenue growth in local currency, driven by Outsourcing & Advisory and Leasing, despite Capital Markets headwinds, while Asia Pacific revenue declined due to COVID-19 restrictions, and Investment Management achieved exceptional growth Americas Region Americas Region FY 2022 Performance | Metric | FY 2022 (Thousand USD) | FY 2021 (Thousand USD) | USD Change % | Local Currency Change % | | :------------- | :----------------- | :----------------- | :----------- | :---------------------- | | Revenue | 2,756,345 | 2,489,217 | 11% | 11% | | Adjusted EBITDA | 332,347 | 296,133 | 12% | 13% | - Revenue growth was primarily driven by Outsourcing & Advisory, including Engineering & Design, and Leasing, benefiting from increased activity in office and industrial asset classes[16] - Capital Markets revenue was impacted by interest rate volatility and market uncertainty, leading to reduced sales brokerage and debt origination activity in the second half of the year[16] EMEA Region EMEA Region FY 2022 Performance | Metric | FY 2022 (Thousand USD) | FY 2021 (Thousand USD) | USD Change % | Local Currency Change % | | :------------- | :----------------- | :----------------- | :----------- | :---------------------- | | Revenue | 715,140 | 672,737 | 6% | 18% | | Adjusted EBITDA | 68,501 | 82,505 | -17% | -9% | - Revenue growth was driven by strong Outsourcing & Advisory and Leasing activity, while Capital Markets revenue was impacted by regional interest rate volatility and geopolitical uncertainty throughout the year[16] Asia Pacific Region Asia Pacific Region FY 2022 Performance | Metric | FY 2022 (Thousand USD) | FY 2021 (Thousand USD) | USD Change % | Local Currency Change % | | :------------- | :----------------- | :----------------- | :----------- | :---------------------- | | Revenue | 608,460 | 673,661 | -10% | -3% | | Adjusted EBITDA | 85,092 | 95,238 | -11% | -3% | - Revenue was primarily impacted by ongoing COVID-19 restrictions in several Asian markets, particularly China, which persisted through most of the year[42] Investment Management Investment Management FY 2022 Performance | Metric | FY 2022 (Thousand USD) | FY 2021 (Thousand USD) | USD Change % | Local Currency Change % | | :------------- | :----------------- | :----------------- | :----------- | :---------------------- | | Revenue | 378,881 | 252,890 | 50% | 50% | | Adjusted EBITDA | 145,955 | 95,122 | 53% | 54% | - Revenue was positively impacted by acquisitions and active fundraising across all investment strategies, leading to increased management fees[17] - Revenue, excluding historical carried interest, grew by 60% (61% in local currency)[17] Unallocated Global Corporate Costs Unallocated Global Corporate Costs (Adjusted EBITDA) | Metric | FY 2022 (Thousand USD) | FY 2021 (Thousand USD) | | :------------------------- | :----------------- | :----------------- | | Adjusted EBITDA Corporate Costs | (1,370) | (24,660) | - The decrease in costs was primarily driven by lower performance-based compensation expenses[43] Outlook for 2023 This section outlines Colliers' financial expectations and strategic focus for the upcoming year 2023 Financial Outlook Colliers anticipates strong growth in high-value recurring service lines (Investment Management and Outsourcing & Advisory) and stable Leasing revenue in 2023, with Capital Markets activity expected to remain volatile in H1 and moderate in H2, alongside an improved Adjusted EBITDA margin - Strong growth is anticipated in high-value recurring service lines (Investment Management and Outsourcing & Advisory), with Leasing revenue expected to remain stable[19] - Capital Markets activity is expected to continue to be impacted by interest rate-driven volatility and geopolitical tensions in the first half of 2023, moderating in the second half[19] - Adjusted EBITDA margin is projected to improve in 2023, primarily due to changes in business mix (increased Adjusted EBITDA contribution from higher-margin Investment Management) and company-wide cost control measures[19] 2023 Financial Outlook | Metric | 2022 | 2023 Outlook | | :------------ | :--------- | :------------------ | | Revenue | $4.5 billion | $4.6 billion - $4.8 billion | | Adjusted EBITDA | $630.5 million | $710 million - $750 million | | Adjusted EPS | $6.99 | $7.50 - $8.00 | Non-GAAP Financial Measures This section provides detailed reconciliations and definitions for Colliers' non-GAAP financial measures, including Adjusted EBITDA, Adjusted EPS, Free Cash Flow, and other key metrics Adjusted EBITDA Reconciliation Adjusted EBITDA is a non-GAAP measure used to assess the company's operating performance and debt servicing capacity, calculated by excluding non-operating or non-cash items such as income taxes, interest expense, depreciation, amortization, and acquisition-related items from net earnings - Adjusted EBITDA is defined as net earnings, adjusted to exclude income taxes, other expenses (income), interest expense, LTIA settlement, loss on disposition of businesses, depreciation and amortization, MSRs gain, acquisition-related items, restructuring costs, and stock-based compensation expense[50] Net Earnings to Adjusted EBITDA Reconciliation | (Thousand USD) | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :------------------------------------------- | :------------- | :------------- | :--------- | :----------- | | Net earnings (loss) | $61,972 | $99,741 | $194,544 | $(237,557) | | Income taxes | 24,976 | 37,020 | 95,010 | 85,510 | | Other income, including equity earnings from non-consolidated investments | (2,329) | (5,726) | (5,645) | (11,273) | | Interest expense, net | 19,163 | 7,319 | 48,587 | 31,819 | | Operating earnings (loss) | 103,782 | 138,354 | 332,496 | (131,501) | | LTIA settlement | - | - | - | 471,928 | | Loss on disposition of businesses | (524) | - | 26,834 | - | | Depreciation and amortization | 51,542 | 38,155 | 177,421 | 145,094 | | MSRs gain (loss) | 6,829 | (8,486) | (17,385) | (29,214) | | Equity earnings from non-consolidated investments | 1,856 | 1,565 | 6,677 | 6,190 | | Acquisition-related items | 26,406 | 11,235 | 77,144 | 61,008 | | Restructuring costs | 5,023 | 5,018 | 5,485 | 6,484 | | Stock-based compensation expense | 7,772 | 6,169 | 21,853 | 14,349 | | Adjusted EBITDA | $202,686 | $192,010 | $630,525 | $544,338 | Adjusted EPS Reconciliation Adjusted EPS is a non-GAAP measure calculated using the "if-converted" method for diluted net earnings per share, adjusted to exclude non-controlling interest redemption increment, LTIA settlement, loss on disposition of businesses, amortization of intangible assets, MSRs gain, acquisition-related items, restructuring costs, and stock-based compensation expense (all tax-affected), to provide a supplementary view of the company's underlying operating performance - Adjusted EPS is defined as diluted net earnings per share calculated using the "if-converted" method, adjusted to exclude non-controlling interest redemption increment, LTIA settlement, loss on disposition of businesses, amortization of intangible assets, MSRs gain, acquisition-related items, restructuring costs, and stock-based compensation expense (all tax-affected)[52] - The "if-converted" method is used to calculate earnings per share related to convertible notes if the assumed conversion is dilutive[26] Diluted Net Earnings to Adjusted EPS Reconciliation | (USD) | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :------------------------------------------- | :------------- | :------------- | :------- | :------- | | Diluted net earnings (loss) per share | $0.48 | $0.89 | $0.97 | $(8.21) | | Convertible note interest, net of tax | 0.04 | 0.03 | 0.14 | 0.14 | | Non-controlling interest redemption increment | 0.49 | 0.74 | 1.97 | 2.09 | | LTIA settlement | - | - | - | 9.92 | | Loss on disposition of businesses | - | - | 0.56 | - | | Amortization expense, net of tax | 0.50 | 0.31 | 1.63 | 1.25 | | MSRs gain, net of tax | 0.08 | (0.10) | (0.20) | (0.34) | | Acquisition-related items | 0.51 | 0.18 | 1.45 | 0.93 | | Restructuring costs, net of tax | 0.08 | 0.07 | 0.08 | 0.10 | | Stock-based compensation expense, net of tax | 0.13 | 0.13 | 0.39 | 0.30 | | Adjusted EPS | $2.31 | $2.25 | $6.99| $6.18| Free Cash Flow Reconciliation Free Cash Flow is a non-GAAP measure used to evaluate the company's operating performance and its ability to service debt, fund acquisitions, and pay dividends to shareholders, calculated by adjusting net cash provided by operating activities - Free Cash Flow is defined as net cash provided by operating activities, plus contingent acquisition consideration paid, plus the cash portion of LTIA settlement, less purchases of property and equipment, plus cash receipts from AR facility deferred purchase price[28] Net Cash Provided by Operating Activities to Free Cash Flow Reconciliation | (Thousand USD) | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :------------------------------------------- | :------------- | :------------- | :--------- | :----------- | | Net cash provided by operating activities | $238,501 | $77,908 | $67,031 | $288,980 | | Contingent acquisition consideration paid | 285 | 7,545 | 69,224 | 18,017 | | LTIA settlement (cash portion) | - | - | - | 96,186 | | Purchases of property and equipment | (25,874) | (13,501) | (67,681) | (57,951) | | Cash receipts from AR facility deferred purchase price | (57,052) | 116,907 | 288,004 | 151,202 | | Free Cash Flow | $155,860 | $188,859 | $356,578 | $496,434 | Local Currency & Internal Growth Rate Definitions Local currency revenue and Adjusted EBITDA variance are calculated by translating current period results of non-US dollar operations at prior period exchange rates, while internal revenue growth rates exclude the impact of acquired entities to assess underlying performance - The percentage change in local currency revenue and Adjusted EBITDA variance is calculated by translating current period results of non-US dollar operations at prior period exchange rates[29] - The percentage change in internal revenue growth rate is calculated assuming no impact from acquired entities in both the current and prior periods[29] Assets Under Management (AUM) Definition Assets Under Management (AUM) measures the scale of the company's Investment Management business, defined as the total fair market value of operating assets and the estimated total cost of development assets for funds, partnerships, and accounts for which the company provides management and advisory services, including capital that these entities are entitled to call from investors - AUM is defined as the total fair market value of operating assets and the estimated total cost of development assets for funds, partnerships, and accounts for which the company provides management and advisory services, including capital that these funds, partnerships, and accounts are entitled to call from investors[56] Adjusted EBITDA from Recurring Revenue Percentage Definition The Adjusted EBITDA from Recurring Revenue percentage is calculated on a trailing twelve-month basis, representing the proportion of Adjusted EBITDA derived from Outsourcing & Advisory and Investment Management service lines, which are considered medium to long-term sustainable revenue streams - The Adjusted EBITDA from Recurring Revenue percentage is calculated on a trailing twelve-month basis, representing the proportion of Adjusted EBITDA derived from Outsourcing & Advisory and Investment Management service lines[70] - These service lines represent medium to long-term sustainable revenue streams[70] Condensed Consolidated Financial Statements This section presents Colliers' condensed consolidated financial statements, including statements of earnings (loss), balance sheets, and cash flows, for the periods ended December 31, 2022 and 2021 Statements of Earnings (Loss) The condensed consolidated statements of earnings (loss) show a decrease in net earnings for Q4 2022 compared to Q4 2021, but a significant improvement in full-year 2022 net earnings from a loss in 2021, primarily due to the absence of the 2021 Long-Term Incentive Arrangement (LTIA) settlement impact Condensed Consolidated Statements of Earnings (Loss) (Selected Items) | (Thousand USD) | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :------------------------------------------- | :------------- | :------------- | :--------- | :----------- | | Revenues | $1,222,405 | $1,345,465 | $4,459,487 | $4,089,129 | | Operating earnings (loss) | 103,782 | 138,354 | 332,496 | (131,501) | | Net earnings (loss) | 61,972 | 99,741 | 194,544 | (237,557) | | Net earnings (loss) attributable to Colliers | $22,504 | $43,288 | $46,253 | $(390,338) | | Diluted earnings (loss) per share | $0.51 | $0.92 | $1.05 | $(9.09) | - GAAP operating loss and diluted loss per share in fiscal year 2021 were significantly impacted by a $471.9 million settlement of a Long-Term Incentive Arrangement (LTIA) with the company's Chairman and CEO[35][58] Balance Sheets The condensed consolidated balance sheets indicate a significant increase in both total assets and total liabilities from December 31, 2021, to December 31, 2022, primarily driven by substantial growth in goodwill and intangible assets and long-term debt, reflecting the company's acquisition activities Condensed Consolidated Balance Sheets (Selected Items) | (Thousand USD) | December 31, 2022 | December 31, 2021 | | :--------------------------- | :---------------- | :---------------- | | Total assets | $5,098,177 | $3,873,730 | | Goodwill and intangible assets | 3,148,449 | 1,652,878 | | Total liabilities | 4,604,803 | 3,288,461 | | Long-term debt - non-current | 1,437,739 | 529,596 | | Shareholders' equity | 493,374 | 585,269 | | Total debt | 1,439,099 | 531,054 | | Net debt/pro forma Adjusted EBITDA ratio | 1.8 | 0.3 | - Restricted cash primarily includes cash set aside to satisfy legal or contractual requirements arising in the normal course of business[33] - Warehouse receivables represent mortgage receivables, the majority of which are offset by borrowings under warehouse credit facilities[33][60] Statements of Cash Flows The condensed consolidated statements of cash flows show a decrease in net cash provided by operating activities in FY 2022 compared to 2021, a substantial increase in cash used in investing activities due to business acquisitions, and significant growth in cash provided by financing activities driven by increased long-term debt Condensed Consolidated Statements of Cash Flows (Selected Items) | (Thousand USD) | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :------------------------------------------- | :------------- | :------------- | :--------- | :----------- | | Net cash provided by operating activities | $238,501 | $77,908 | $67,031 | $288,980 | | Net cash (used in) provided by investing activities | (469,398) | 10,575 | (872,844) | (49,414) | | Net cash provided by financing activities | 209,873 | 18,601 | 612,917 | 247,738 | | Acquisitions of businesses, net of cash acquired | (413,208) | (56,035) | (1,007,297)| (60,832) | | Increase in long-term debt, net | 254,000 | 157,060 | 929,041 | 72,063 | - Net cash provided by operating activities in fiscal year 2021 included a $375,742 thousand cash portion of the LTIA settlement[61] Forward-Looking Statements & Risk Factors This section outlines the forward-looking nature of certain statements in the report and details the various risks and uncertainties that could impact the company's actual results Forward-Looking Statements and Risks This press release contains forward-looking statements regarding the company's future financial performance and expectations, which involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those anticipated - Forward-looking statements include the company's financial performance outlook and statements about objectives, beliefs, strategies, goals, plans, or current expectations[47] - These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements[47] - Risk factors include economic conditions, commercial real estate and real property values, competition, ability to attract and retain clients and employees, increased wage and benefit costs, impact of changes in interest rates, unexpected increases in operating costs, foreign exchange rate fluctuations, impact of pandemics, global climate change, political events, ability to make and integrate acquisitions, information technology strategies, and ability to comply with laws and regulations[47] - Colliers undertakes no obligation to publicly update or revise any forward-looking statements, except as required by applicable law[48] Company Contacts This section provides contact information for key executives at Colliers International Group Inc Contact Information This section provides contact details for Colliers International Group Inc.'s Global Chairman & CEO and Global Chief Financial Officer - Global Chairman & Chief Executive Officer: Jay S Hennick[77] - Global Chief Financial Officer: Christian Mayer[65] - Contact Phone: (416) 960-9500[65]