Colliers International(CIGI) - 2024 Q1 - Quarterly Report

Management's Discussion & Analysis This section provides an in-depth analysis of the company's financial condition, results of operations, and future outlook Consolidated Review For the first quarter of 2024, Colliers reported a 4% increase in consolidated revenues to $1.0 billion, driven by strong performance in Outsourcing & Advisory, which offset declines in Capital Markets Q1 2024 Consolidated Financial Highlights (vs. Q1 2023) | Financial Metric | Q1 2024 | Q1 2023 | Change (USD) | Change (LC) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,002.0M | $965.9M | +4% | +4% | | Outsourcing & Advisory | $497.5M | $454.9M | +9% | +9% | | Investment Management | $122.5M | $120.7M | +1% | +1% | | Leasing | $243.2M | $238.4M | +2% | +2% | | Capital Markets | $138.7M | $151.8M | -9% | -8% | | Operating Earnings | $43.3M | $22.1M | +95.7% | - | | Net Earnings (Loss) | $14.1M | ($0.9M) | N/A | - | | Diluted EPS | $0.26 | ($0.47) | N/A | - | | Adjusted EBITDA | $108.7M | $104.6M | +4% | - | - The increase in revenue was primarily driven by robust growth in Outsourcing & Advisory, particularly from Engineering and Project Management services, which helped offset continued weakness in Capital Markets due to interest rate uncertainty[125][127] - In February 2024, the company completed a $300 million public offering, using the net proceeds of $286.9 million to repay outstanding balances on its Revolving Credit Facility, thereby increasing capacity for future acquisitions and growth initiatives[102] - Adjusted EPS decreased to $0.77 from $0.86 in the prior year, attributed to higher depreciation, lower co-investment earnings, higher taxes, and the dilutive impact of the equity offering, which were partially offset by higher operating earnings and lower interest expense[125] Segment Performance In Q1 2024, the Americas segment saw 4% revenue growth to $606.4 million, driven by Outsourcing & Advisory and Leasing, while Asia Pacific revenue grew 5% (9% in local currency) to $126.4 million, boosted by strong Capital Markets activity in Japan Q1 2024 Segment Performance (vs. Q1 2023) | Segment | Revenue (Q1 2024) | Revenue Growth (LC) | Adjusted EBITDA (Q1 2024) | Adjusted EBITDA Growth (LC) | Key Drivers | | :--- | :--- | :--- | :--- | :--- | :--- | | Americas | $606.4M | +4% | $54.9M | +2% | Higher Outsourcing & Advisory and Leasing revenues | | EMEA | $146.6M | -1% | ($12.0M) | N/A | Lower transactional activity, especially in Germany | | Asia Pacific | $126.4M | +9% | $14.6M | +88% | Elevated Capital Markets activity, particularly in Japan | | Investment Management | $122.5M | +1% | $52.9M | -4% | Softer fundraising; increased investment in new strategies | - Assets Under Management (AUM) in the Investment Management segment stood at $96.3 billion as of March 31, 2024, a slight decrease from $98.2 billion at the end of 2023, primarily due to modest unrealized valuation adjustments[106] Outlook for 2024 The company maintained its full-year 2024 outlook, projecting revenue growth of 5% to 10%, Adjusted EBITDA growth of 5% to 15%, and Adjusted EPS growth of 10% to 20% Full-Year 2024 Outlook | Measure | Actual 2023 | 2024 Outlook | | :--- | :--- | :--- | | Revenue growth | -3% | +5% to +10% | | Adjusted EBITDA growth | -6% | +5% to +15% | | Adjusted EPS growth | -23% | +10% to +20% | - The outlook remains subject to change based on numerous macroeconomic, geopolitical, and health-related factors, where continued interest rate volatility or lack of credit availability could materially impact the forecast[133] Liquidity and Capital Resources As of March 31, 2024, the company's net indebtedness was $1.19 billion, a decrease from year-end 2023, with a financial leverage ratio of 2.0x, well below the 3.5x covenant maximum - Net indebtedness decreased to $1.19 billion as of March 31, 2024, from $1.32 billion at December 31, 2023[135] - The financial leverage ratio (net debt to pro forma Adjusted EBITDA) improved to 2.0x, comfortably below the maximum of 3.5x permitted under debt agreements[135] - The company had $914.3 million of available undrawn credit under its $1.75 billion Revolving Credit Facility as of March 31, 2024[68][136] - Net cash used in operating activities was $137.6 million for the quarter, compared to $132.6 million in the prior-year period, with the change driven by working capital timing and higher contingent acquisition consideration paid[134] Reconciliation of Non-GAAP Financial Measures The company provides reconciliations for non-GAAP measures such as Adjusted EBITDA, Adjusted EPS, and free cash flow, with Adjusted EBITDA at $108.7 million and Adjusted EPS at $0.77 for Q1 2024 Reconciliation of Net Earnings to Adjusted EBITDA (Q1 2024 vs Q1 2023) | (in thousands of US$) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net earnings (loss) | $14,136 | ($907) | | Income tax | $9,970 | $3,539 | | Other income | ($651) | ($3,320) | | Interest expense, net | $19,872 | $22,832 | | Operating earnings | $43,327 | $22,144 | | Depreciation and amortization | $50,508 | $49,492 | | Acquisition-related items | $1,940 | $26,468 | | Stock-based compensation expense | $6,688 | $5,657 | | Other adjustments | $6,222 | $812 | | Adjusted EBITDA | $108,695 | $104,623 | Reconciliation of Diluted EPS to Adjusted EPS (Q1 2024 vs Q1 2023) | (in US$) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Diluted net earnings (loss) per common share | $0.26 | ($0.42) | | Non-controlling interest redemption increment | ($0.15) | $0.17 | | Amortization expense, net of tax | $0.47 | $0.48 | | Acquisition-related items | ($0.02) | $0.52 | | Other adjustments (Restructuring, Stock Comp, etc.) | $0.21 | $0.11 | | Adjusted EPS | $0.77 | $0.86 | Consolidated Financial Statements This section presents the company's primary financial statements, including earnings, balance sheet, and cash flow, for the reported periods Consolidated Statements of Earnings (Loss) For the three months ended March 31, 2024, Colliers reported total revenues of $1.002 billion, a 3.7% increase from $965.9 million in the prior year, achieving operating earnings of $43.3 million and net earnings of $12.7 million Consolidated Earnings Summary (Three months ended March 31) | (in thousands of US$) | 2024 | 2023 | | :--- | :--- | :--- | | Revenues | $1,001,980 | $965,903 | | Cost of revenues | $606,245 | $586,260 | | Selling, general and administrative | $299,960 | $281,539 | | Depreciation and Amortization | $50,508 | $49,492 | | Operating earnings | $43,327 | $22,144 | | Interest expense, net | $19,872 | $22,832 | | Net earnings (loss) | $14,136 | ($907) | | Net earnings (loss) attributable to Company | $12,657 | ($20,152) | | Diluted earnings (loss) per share | $0.26 | ($0.47) | Consolidated Balance Sheets As of March 31, 2024, Colliers' total assets were $5.27 billion, a slight decrease from year-end 2023, while total liabilities decreased to $4.11 billion, leading to a significant increase in total shareholders' equity to $1.16 billion Consolidated Balance Sheet Highlights | (in thousands of US$) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $1,297,509 | $1,474,264 | | Cash and cash equivalents | $165,321 | $181,134 | | Goodwill | $2,021,326 | $2,038,240 | | Total assets | $5,272,314 | $5,482,126 | | Total current liabilities | $1,100,775 | $1,441,213 | | Long-term debt | $1,337,471 | $1,500,843 | | Total liabilities | $4,108,212 | $4,631,636 | | Total shareholders' equity | $1,164,102 | $850,490 | Consolidated Statements of Cash Flows For Q1 2024, the company experienced a net cash outflow from operating activities of $137.6 million, with financing activities providing a net inflow of $175.9 million, largely driven by a $286.9 million share issuance used to repay debt Cash Flow Summary (Three months ended March 31) | (in thousands of US$) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($137,615) | ($132,568) | | Net cash used in investing activities | ($49,852) | ($3,174) | | Net cash provided by financing activities | $175,909 | $157,362 | | Effect of exchange rate changes | ($2,060) | $1,991 | | Net change in cash, cash equivalents and restricted cash | ($13,618) | $23,611 | | Cash, cash equivalents and restricted cash, end of period | $205,457 | $222,653 | - A significant financing activity was the issuance of subordinate voting shares, which generated proceeds of $286.9 million[36] - The primary use of cash in financing activities was the repayment of long-term debt totaling $431.7 million[36] Notes to Consolidated Financial Statements This section provides detailed disclosures and explanations supporting the consolidated financial statements, including accounting policies and specific financial instrument details Note 4. Acquisitions The company's acquisition strategy includes contingent consideration based on the future earnings of acquired businesses, with total estimated undiscounted outcomes ranging from $343.9 million to $401.1 million as of March 31, 2024 Contingent Acquisition Consideration (as of March 31, 2024) | Consideration Type | Liability on Balance Sheet | Undiscounted Maximum Payout | | :--- | :--- | :--- | | Fair Value (Non-Compensatory) | $40.8M | Part of total below | | Compensatory | $87.3M | Part of total below | | Total (Estimated Range) | N/A | $343.9M to $401.1M | - Contingent consideration payments are tied to acquired businesses achieving specified earnings levels over periods up to five years post-acquisition[19] Note 8. Long-term debt The company's long-term debt includes a $1.75 billion revolving credit facility with $914.3 million undrawn capacity, and various senior unsecured notes, with the company in compliance with all financial covenants as of March 31, 2024 - The company increased its multi-currency Revolving Credit Facility to $1.75 billion, which has a 5-year term ending May 27, 2027, with $914.3 million of available undrawn credit as of March 31, 2024[68] - Outstanding long-term debt includes €210 million of Senior Notes due 2028 at a 2.23% fixed rate, and Senior Notes due 2031 totaling €125 million (1.52% rate) and $150 million (3.02% rate)[25][69] - The company was in compliance with all debt covenants, including leverage and interest coverage ratios, as of March 31, 2024[49] Note 13. Net earnings per common share For Q1 2024, basic and diluted earnings per share were both $0.26, a significant improvement from Q1 2023's loss per share of ($0.47), following the issuance of 2,479,500 Subordinate Voting Shares for $300 million EPS Calculation (Three months ended March 31) | (in thousands, except per share amounts) | 2024 | 2023 | | :--- | :--- | :--- | | Net earnings (loss) attributable to Company | $12,657 | ($20,152) | | Weighted average common shares - Basic | 48,498 | 43,047 | | Weighted average common shares - Diluted | 48,845 | 43,047 | | Basic earnings (loss) per share | $0.26 | ($0.47) | | Diluted earnings (loss) per share | $0.26 | ($0.47) | - On February 28, 2024, the Company issued 2,479,500 Subordinate Voting Shares for gross proceeds of $300.0 million, using the net proceeds to repay balances on the Revolving Credit Facility[57] Note 16. Financial instruments The company utilizes interest rate swaps to hedge floating-rate debt, with four active swaps hedging a notional amount of $600 million and resulting in $12.4 million in unrealized gains as of March 31, 2024 - The company uses interest rate swaps to convert floating interest on US dollar debt to fixed rates, with four active swaps hedging a total notional amount of $600 million as of March 31, 2024[88][109] - The swaps are accounted for as cash flow hedges, with unrealized gains of $12.4 million recorded in Accumulated Other Comprehensive Income (AOCI) as of March 31, 2024[64] - Contingent consideration related to acquisitions is a Level 3 fair value measurement, valued at $40.8 million using a discounted cash flow model with discount rates ranging from 3.5% to 10.3%[59][88] Note 19. Segmented information The company operates across four segments: Americas, EMEA, Asia Pacific, and Investment Management (IM), with Americas being the largest by revenue and IM highly profitable in Q1 2024 Segment Revenues and Operating Earnings (Q1 2024) | (in thousands of US$) | Americas | EMEA | Asia Pacific | Investment Management | Corporate | Consolidated | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $606,411 | $146,568 | $126,357 | $122,521 | $123 | $1,001,980 | | Operating Earnings (Loss) | $29,037 | ($20,461) | $11,540 | $38,880 | ($15,669) | $43,327 | Geographic Revenue and Long-Lived Assets (Q1 2024) | (in thousands of US$) | United States | Canada | United Kingdom | Other | Consolidated | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $580,506 | $101,540 | $62,690 | $257,244 | $1,001,980 | | Total Long-Lived Assets | $2,270,389 | $108,631 | $517,545 | $745,463 | $3,642,028 | Note 20. Subsequent events Following the end of the first quarter, on April 10, 2024, the company completed the acquisition of a controlling interest in Colliers Philadelphia for an initial cash purchase price of $14.2 million - On April 10, 2024, the Company acquired a controlling interest in Colliers Philadelphia for an initial cash purchase price of $14.2 million[121]