Colliers International(CIGI) - 2021 Q3 - Quarterly Report

Executive Summary Third Quarter and Nine-Month Highlights Colliers reported strong Q3 and 9M 2021 results, with significant revenue and adjusted EBITDA growth across all service lines, recovering from prior year's COVID-19 impact, despite GAAP figures being affected by a large settlement | Metric | Q3 2021 (US$ millions) | Q3 2020 (US$ millions) | 9M 2021 (US$ millions) | 9M 2020 (US$ millions) | | :----------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Revenues | 1,022.8 | 692.3 | 2,743.7 | 1,873.1 | | Adjusted EBITDA | 123.6 | 92.1 | 352.3 | 206.5 | | Adjusted EPS | 1.27 | 1.08 | 3.91 | 2.35 | | GAAP operating earnings | 76.0 | 52.1 | (269.9)* | 85.1 | | GAAP diluted EPS | 0.40 | 0.52 | (10.19)* | 0.38 | * Includes $471.9 million settlement of Long-Term Incentive Arrangement with the Company's Chairman & CEO - Q3 2021 Revenues: $1.02 billion, up 48% (46% in local currency) YoY, recovering from COVID-19 impact[5] - 9M 2021 Revenues: $2.74 billion, up 46% (42% in local currency) YoY[6] - Q3 2021 Adjusted EBITDA: $123.6 million, up 34% (32% in local currency) YoY[5] - 9M 2021 Adjusted EBITDA: $352.3 million, up 71% (65% in local currency) YoY[6] - Q3 2021 Adjusted EPS: $1.27, up 18% YoY[5] - 9M 2021 Adjusted EPS: $3.91, up 66% YoY[6] - GAAP operating loss for 9M 2021 was $269.9 million, including a $471.9 million settlement of the Long-Term Incentive Arrangement (LTIA) with the Chairman & CEO[6] CEO Commentary and Strategic Initiatives The CEO highlighted strong Q3 results driven by Investment Management, Capital Markets, and Leasing, with Investment Management raising a record $4.9 billion in new capital and reaching over $46 billion in AUM, while executing the 'Enterprise '25' growth strategy to double profitability and increase recurring revenues - Investment Management generated strong operating results, raised a record $4.9 billion in new capital commitments year-to-date, and finished Q3 with over $46 billion in assets under management[7] - Capital Markets and Leasing showed significant growth over both prior year and pre-pandemic 2019 levels, while Outsourcing & Advisory also delivered strong internal growth[7] - Completed the acquisition of Bergmann to diversify and scale the Colliers Engineering & Design business[7] - Announced new five-year 'Enterprise '25' growth strategy aiming to double profitability and generate over 65% of AEBITDA from recurring revenues by 2025[7] - Subsequent to quarter-end, announced acquisitions of Antirion (Italian investment management firm with >$4 billion AUM) and Colliers Italy, expected to close by Q1 2022, strengthening Global Investors platform and European operations[7] Company Overview Colliers is a leading diversified professional services and investment management company operating in 65 countries with over 15,000 professionals, providing expert real estate advice and boasting annualized revenues of $3.6 billion and $46 billion in assets under management - Colliers is a leading diversified professional services and investment management company with operations in 65 countries and over 15,000 professionals[9] - Provides expert advice to real estate occupiers, owners, and investors[9] - Annualized revenues of $3.6 billion ($4.0 billion including affiliates) and $46 billion of assets under management[9] Financial Performance Analysis Consolidated Revenues by Line of Service Consolidated revenues for Q3 2021 increased 48% (46% LC) and 9M 2021 increased 46% (42% LC), driven by strong growth across all service lines, particularly Capital Markets and Investment Management, surpassing pre-pandemic peaks | Service Line | Q3 2021 (US$ thousands) | Q3 2020 (US$ thousands) | Change in US$ % | Change in LC % | 9M 2021 (US$ thousands) | 9M 2020 (US$ thousands) | Change in US$ % | Change in LC % | | :----------------------- | :---------------------- | :---------------------- | :-------------- | :------------- | :---------------------- | :---------------------- | :-------------- | :------------- | | Outsourcing & Advisory | 390,943 | 315,352 | 24% | 22% | 1,119,720 | 849,686 | 32% | 27% | | Investment Management | 78,275 | 41,704 | 88% | 87% | 173,379 | 128,918 | 34% | 34% | | Leasing | 242,890 | 169,688 | 43% | 41% | 663,807 | 470,966 | 41% | 37% | | Capital Markets | 310,648 | 165,563 | 88% | 85% | 786,758 | 423,571 | 86% | 79% | | Total revenues | 1,022,756 | 692,307 | 48% | 46% | 2,743,664 | 1,873,141 | 46% | 42% | - Q3 2021 Capital Markets revenues were up 34% on an internal local currency basis compared to 2019 pre-pandemic levels[10] - Q3 2021 Leasing revenues were up 8% compared to 2019 pre-pandemic levels[10] - 9M 2021 Capital Markets revenues were up 28% on an internal local currency basis compared to 2019 pre-pandemic levels[11] - 9M 2021 Leasing revenues recovered to within 2% of 2019 pre-pandemic levels[11] Segmented Third Quarter Results All regions demonstrated strong revenue growth in Q3 2021, with Asia Pacific leading at 56% (51% LC) and EMEA showing the highest Adjusted EBITDA growth at 96%, while Investment Management saw an 88% (87% LC) revenue increase with AUM growing 27% YoY Americas Region The Americas region reported Q3 revenues of $617.1 million, a 46% (45% LC) increase YoY, driven by strong Capital Markets and Outsourcing & Advisory growth, with Adjusted EBITDA growing 20% to $65.8 million - Q3 Revenues: $617.1 million, up 46% (45% in local currency) YoY[12] - Revenue growth driven by strong Capital Markets activity (industrial, multi-family) and robust Outsourcing & Advisory growth (Engineering & Design, Valuation, Mortgage services)[12] - Adjusted EBITDA: $65.8 million, up 20% YoY[12] EMEA Region The EMEA region's Q3 revenues reached $154.9 million, up 32% (29% LC) YoY, with strong growth across all service lines, and Adjusted EBITDA surged 96% to $15.0 million due to higher revenues and cost savings - Q3 Revenues: $154.9 million, up 32% (29% in local currency) YoY, with strong growth across all service lines[13] - Adjusted EBITDA: $15.0 million, up 96% YoY, due to higher revenues and cost savings[13] Asia Pacific Region The Asia Pacific region recorded Q3 revenues of $172.3 million, a 56% (51% LC) increase YoY, with robust growth across all service lines and geographies, and Adjusted EBITDA rose 62% to $20.7 million from improved operating leverage - Q3 Revenues: $172.3 million, up 56% (51% in local currency) YoY[14] - Robust revenue growth across all service lines and geographies, especially Australia and New Zealand[14] - Adjusted EBITDA: $20.7 million, up 62% YoY, with margin improvement from operating leverage[14] Investment Management Investment Management revenues for Q3 were $78.3 million, an 88% (87% LC) increase YoY, significantly boosted by $18.6 million in passthrough revenue from carried interest, with AUM reaching $46.1 billion, up 27% YoY - Q3 Revenues: $78.3 million, up 88% (87% in local currency) YoY[15] - Passthrough revenue from historical carried interest contributed $18.6 million to Q3 revenues[15] - Excluding carried interest, revenue was up 50% driven by management fee growth from increased AUM[15] - Adjusted EBITDA: $27.8 million, up 82% YoY[15] - Assets under management (AUM): $46.1 billion as of September 30, 2021, up 27% from $36.2 billion YoY[15] Unallocated Global Corporate Costs Unallocated global corporate costs (Adjusted EBITDA basis) were $5.6 million in Q3 2021, a shift from earnings of $1.8 million in the prior year, primarily due to increased performance-based incentive compensation accruals, leading to a GAAP operating loss of $22.5 million - Unallocated global corporate costs (Adjusted EBITDA basis): $5.6 million in Q3 2021, compared to earnings of $1.8 million in Q3 2020, mainly due to performance-based incentive compensation accruals[16] - Corporate GAAP operating loss: $22.5 million in Q3 2021, compared to $3.5 million loss in Q3 2020, attributed to increased fair value of contingent acquisition consideration and incentive compensation accruals[16] 2021 Outlook Colliers expects full-year 2021 revenue and Adjusted EBITDA to exceed the top end of its previous outlook (20-30% revenue increase, 25-35% Adjusted EBITDA increase relative to 2020), though subject to Q4 transaction velocity and operating costs - Company expects 2021 revenue and Adjusted EBITDA to exceed the top end of the previous outlook (20-30% revenue increase, 25-35% Adjusted EBITDA increase relative to 2020)[17] - Outlook may be impacted by changes in Capital Markets and Leasing transaction velocity in Q4 due to ongoing pandemic effects and higher than anticipated increases in operating costs[17] Capital Structure and Financing Private Placement of Senior Notes On July 28, 2021, Colliers entered a private placement for US$150 million of 3.02% Senior Notes due 2031 and €125 million of 1.52% Senior Notes due 2031, with proceeds used for general corporate purposes and revolving credit facility repayment - Issued US$150 million of 3.02% Senior Notes due 2031 and €125 million of 1.52% Senior Notes due 2031 via private placement on July 28, 2021[19] - Proceeds drawn on October 7, 2021, used for general corporate purposes and to repay outstanding borrowings under the revolving credit facility[19] Non-GAAP Financial Measures Reconciliation of Net Earnings to Adjusted EBITDA Adjusted EBITDA is a non-GAAP measure used to evaluate operating performance and debt servicing ability, excluding specific non-cash and non-recurring items, and serves as a supplemental indicator for investors due to the Company's low capital intensity - Adjusted EBITDA is defined as net earnings, adjusted to exclude: income tax, other expense (income), interest expense, LTIA settlement, depreciation and amortization (including MSRs), MSR gains, acquisition-related items, restructuring costs, and stock-based compensation expense[25] - Used to evaluate operating performance, debt servicing ability, and as an integral part of planning and reporting systems, as well as for enterprise valuation and acquisition target evaluation[25] | (in thousands of US$) | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :-------------------------------- | :---------- | :--------- | :---------- | :--------- | | Net earnings (loss) | 50,496 | 31,979 | (337,298) | 44,921 | | Income tax | 18,771 | 11,740 | 48,490 | 19,066 | | Other income, including equity | (1,601) | (509) | (5,547) | (1,479) | | Interest expense, net | 8,300 | 8,864 | 24,500 | 22,627 | | Settlement of LTIA | - | - | 471,928 | - | | Depreciation and amortization | 34,588 | 36,281 | 106,939 | 87,111 | | Gains attributable to MSRs | (5,812) | (6,888) | (20,728) | (7,397) | | Acquisition-related items | 14,231 | 4,965 | 49,773 | 11,499 | | Restructuring costs | 523 | 3,374 | 1,466 | 22,681 | | Stock-based compensation expense | 2,658 | 1,832 | 8,180 | 6,056 | | Adjusted EBITDA | 123,641 | 92,120 | 352,328 | 206,536 | Reconciliation of Net Earnings and Diluted EPS to Adjusted EPS Adjusted EPS is a non-GAAP measure derived from diluted net earnings per share, adjusted for specific non-recurring and non-cash items net of tax, aiming to provide a clearer view of underlying operating performance and enhance comparability across periods - Adjusted EPS is defined as diluted net earnings per share, adjusted for the after-tax effect of: non-controlling interest redemption increment, LTIA settlement, amortization of intangible assets and MSRs, MSR gains, acquisition-related items, restructuring costs, and stock-based compensation expense[28] - Calculated using the 'if-converted' method for Convertible Notes, which was anti-dilutive for GAAP EPS but dilutive for adjusted EPS in Q3 and 9M 2021[29] | (in thousands of US$) | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :-------------------------------- | :--------- | :--------- | :---------- | :--------- | | Net earnings (loss) | 50,496 | 31,979 | (337,298) | 44,921 | | Non-controlling interest share | (13,623) | (6,264) | (33,148) | (13,906) | | Interest on Convertible Notes | 2,300 | 2,314 | 6,900 | 3,373 | | Settlement of LTIA | - | - | 471,928 | - | | Amortization of intangible assets | 23,148 | 25,912 | 74,019 | 59,013 | | Gains attributable to MSRs | (5,812) | (6,888) | (20,728) | (7,397) | | Acquisition-related items | 14,231 | 4,965 | 49,773 | 11,499 | | Restructuring costs | 523 | 3,374 | 1,466 | 22,681 | | Stock-based compensation expense | 2,658 | 1,832 | 8,180 | 6,056 | | Income tax on adjustments | (8,934) | (6,988) | (27,117) | (20,235) | | Non-controlling interest on adj. | (3,125) | (2,625) | (9,920) | (7,222) | | Adjusted net earnings | 61,862 | 47,611 | 184,055 | 98,783 | | (in US$) | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :------------------------------------- | :------ | :------ | :------ | :------ | | Diluted net earnings (loss) per share | 0.37 | 0.48 | (9.20) | 0.37 | | Interest on Convertible Notes, net of tax | 0.04 | 0.04 | 0.11 | 0.06 | | Non-controlling interest redemption increment | 0.39 | 0.10 | 1.34 | 0.37 | | Settlement of LTIA | - | - | 10.02 | - | | Amortization expense, net of tax | 0.28 | 0.38 | 0.94 | 0.88 | | Gains attributable to MSRs, net of tax | (0.07) | (0.12) | (0.25) | (0.14) | | Acquisition-related items | 0.20 | 0.10 | 0.75 | 0.27 | | Restructuring costs, net of tax | 0.01 | 0.06 | 0.02 | 0.40 | | Stock-based compensation expense, net of tax | 0.05 | 0.04 | 0.18 | 0.14 | | Adjusted EPS | 1.27 | 1.08 | 3.91 | 2.35 | | Diluted weighted average shares for Adjusted EPS (thousands) | 48,722 | 44,181 | 47,111 | 42,075 | Other Non-GAAP Definitions Colliers defines local currency revenue growth by translating non-US dollar results using prior period exchange rates, internal revenue growth by excluding acquired entities, and AUM as the gross market value of managed assets, including callable capital commitments, to assess performance and scale - Local currency revenue growth rates are calculated by translating current period non-US dollar results using prior period exchange rates[31] - Internal revenue growth rates exclude the impact of acquired entities in both current and prior periods[31] - Assets under management (AUM) is defined as the gross market value of operating assets and projected gross cost of development properties of funds, partnerships, and accounts managed, including callable capital commitments[32] Consolidated Financial Statements Condensed Consolidated Statements of Earnings (Loss) The condensed consolidated statements of earnings (loss) show Colliers' GAAP financial performance for Q3 and 9M 2021 and 2020, highlighting revenues, operating earnings (loss), net earnings (loss), and diluted EPS, with significant impacts from acquisition-related items and the LTIA settlement in 2021 | (in thousands of US$, except per share amounts) | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :---------------------------------------------- | :---------- | :--------- | :------------ | :---------- | | Revenues | 1,022,756 | 692,307 | 2,743,664 | 1,873,141 | | Cost of revenues | 645,123 | 426,031 | 1,689,505 | 1,197,736 | | Selling, general and administrative expenses | 252,848 | 172,956 | 695,374 | 491,660 | | Depreciation | 11,440 | 10,369 | 32,920 | 28,098 | | Amortization of intangible assets | 23,148 | 25,912 | 74,019 | 59,013 | | Acquisition-related items (1) | 14,231 | 4,965 | 49,773 | 11,499 | | Settlement of long-term incentive arrangement (2)| - | - | 471,928 | - | | Operating earnings (loss) | 75,966 | 52,074 | (269,855) | 85,135 | | Interest expense, net | 8,300 | 8,864 | 24,500 | 22,627 | | Earnings (loss) before income tax | 69,267 | 43,719 | (288,808) | 63,987 | | Income tax | 18,771 | 11,740 | 48,490 | 19,066 | | Net earnings (loss) | 50,496 | 31,979 | (337,298) | 44,921 | | Net earnings (loss) attributable to Company | 18,004 | 21,167 | (433,626) | 15,443 | | Diluted net earnings (loss) per common share (3)| 0.40 | 0.52 | (10.19) | 0.38 | | Adjusted EPS (4) | 1.27 | 1.08 | 3.91 | 2.35 | - The 9-month period ended September 30, 2021, includes a $471.9 million settlement of the Long-Term Incentive Arrangement with the Company's Chairman and CEO, which significantly impacted GAAP operating earnings and net earnings[33][34] Condensed Consolidated Balance Sheets The condensed consolidated balance sheets provide Colliers' financial position as of September 30, 2021, showing relatively stable total assets, increased current liabilities, and a significant decrease in total debt (excluding warehouse credit facilities and convertible notes) from $643.9 million in Q3 2020 to $378.7 million in Q3 2021 | (in thousands of US$) | Sep 30, 2021 | Dec 31, 2020 | Sep 30, 2020 | | :-------------------------------------- | :----------- | :----------- | :----------- | | Assets | | | | | Cash and cash equivalents | 134,123 | 156,614 | 129,190 | | Total assets | 3,325,154 | 3,292,167 | 3,327,349 | | Liabilities and shareholders' equity| | | | | Accounts payable and accrued liabilities| 855,368 | 748,660 | 734,609 | | Current liabilities | 1,241,217 | 1,108,286 | 1,059,334 | | Long-term debt - non-current | 375,182 | 470,871 | 632,222 | | Convertible notes | 224,895 | 223,957 | 223,658 | | Shareholders' equity | 542,602 | 586,109 | 532,399 | | Total liabilities and equity | 3,325,154 | 3,292,167 | 3,327,349 | | Supplemental balance sheet info | | | | | Total debt (3) | 378,747 | 479,895 | 643,857 | | Total debt, net of cash and cash equivalents (3) | 244,624 | 323,281 | 514,667 | | Net debt / pro forma adjusted EBITDA ratio (4) | 0.5 | 1.0 | 1.5 | - Total debt (excluding warehouse credit facilities and convertible notes) decreased from $643.9 million in Q3 2020 to $378.7 million in Q3 2021[36] - Net debt / pro forma adjusted EBITDA ratio improved from 1.5 in Q3 2020 to 0.5 in Q3 2021[36] Condensed Consolidated Statements of Cash Flows The condensed consolidated statements of cash flows detail Colliers' cash movements for Q3 and 9M 2021 and 2020, showing net cash provided by operating activities for 9M 2021 increased significantly to $211.1 million, while financing activities shifted from providing to using cash due to decreased long-term debt | (in thousands of US$) | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :---------------------------------------- | :---------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | 192,524 | 197,203 | 211,072 | 104,250 | | Net cash used in investing activities | (25,122) | (113,665) | (59,989) | (148,150) | | Net cash (used in) provided by financing activities | (161,502) | (8,024) | (144,182) | 185,109 | | Increase in cash and cash equivalents and restricted cash | 1,904 | 81,495 | 1,938 | 132,740 | | Cash and cash equivalents and restricted cash, end of period | 179,471 | 247,733 | 179,471 | 247,733 | - Net cash provided by operating activities for the nine months ended September 30, 2021, was $211.1 million, a significant increase from $104.3 million in the prior year[38] - Financing activities shifted from providing cash in 9M 2020 (due to convertible notes issuance) to using cash in 9M 2021, primarily due to a net decrease in long-term debt[38] Segmented Results (Detailed Table) The segmented results provide a detailed breakdown of revenues, Adjusted EBITDA, and operating earnings (loss) by region (Americas, EMEA, Asia Pacific) and Investment Management, along with corporate unallocated amounts, for Q3 and 9M 2021 and 2020, highlighting regional contributions to overall performance | (in thousands of US dollars) | Americas | EMEA | Asia Pacific | Investment Management | Corporate | Consolidated | | :--------------------------- | :------- | :------ | :----------- | :-------------------- | :-------- | :----------- | | Q3 2021 | | | | | | | | Revenues | 617,098 | 154,937 | 172,303 | 78,263 | 155 | 1,022,756 | | Adjusted EBITDA | 65,808 | 14,994 | 20,652 | 27,770 | (5,583) | 123,641 | | Operating earnings (loss) | 48,879 | 11,399 | 18,342 | 19,812 | (22,466) | 75,966 | | Q3 2020 | | | | | | | | Revenues | 422,637 | 117,350 | 110,477 | 41,704 | 139 | 692,307 | | Adjusted EBITDA | 54,627 | 7,653 | 12,755 | 15,279 | 1,806 | 92,120 | | Operating earnings (loss) | 40,412 | (1,353) | 8,548 | 7,921 | (3,454) | 52,074 | | 9M 2021 | | | | | | | | Revenues | 1,675,644| 439,621 | 454,572 | 173,367 | 460 | 2,743,664 | | Adjusted EBITDA | 201,657 | 40,138 | 56,847 | 66,845 | (13,159) | 352,328 | | Operating earnings (loss) | 154,970 | 24,703 | 46,742 | 43,900 | (540,170) | (269,855) | | 9M 2020 | | | | | | | | Revenues | 1,101,512| 334,046 | 308,016 | 128,918 | 649 | 1,873,141 | | Adjusted EBITDA | 110,160 | 10,335 | 30,258 | 51,063 | 4,720 | 206,536 | | Operating earnings (loss) | 66,537 | (18,071)| 14,867 | 30,347 | (8,545) | 85,135 | Additional Information Conference Call Details Colliers scheduled a conference call for Tuesday, November 2, 2021, at 11:00 a.m. Eastern Time to discuss Q3 results, with a webcast and supplemental slide presentation available on the investor relations website - Conference call held on Tuesday, November 2, 2021, at 11:00 a.m. Eastern Time to discuss Q3 results[20] - Webcast and supplemental slide presentation available on corporate.colliers.com in the Events section[20] Forward-looking Statements This section contains forward-looking statements regarding Colliers' financial performance outlook, goals, and expectations, which are subject to various known and unknown risks and uncertainties, including economic conditions, market dynamics, and regulatory compliance, with no obligation to update except as required by law - Forward-looking statements include financial performance outlook and statements regarding goals, beliefs, strategies, objectives, plans, or current expectations[21] - Statements involve known and unknown risks and uncertainties that may cause actual results to differ materially, including economic conditions, real estate market conditions, competition, operating costs, foreign exchange rates, pandemic impacts, political events, and acquisition integration[21][22] - Colliers undertakes no obligation to publicly update or revise any forward-looking statement, except as required by applicable law[23] Company Contacts Contact information for Colliers International Group Inc. is provided for Jay S. Hennick, Global Chairman & Chief Executive Officer, and Christian Mayer, Global Chief Financial Officer - Jay S. Hennick: Global Chairman & Chief Executive Officer[41] - Christian Mayer: Global Chief Financial Officer[41] - Contact Phone: (416) 960-9500[41]