Colliers International(CIGI) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2022, revenues were $1.1 billion, up 12% in local currency, with adjusted EBITDA at $145 million, up 21%, and adjusted EPS at $1.42, up 11% compared to the prior period [7][17] - Year-to-date revenues reached $3.2 billion, up 21%, with adjusted EBITDA of $428 million, up 24%, and adjusted EPS at $4.69, up 20% versus the prior year [7][17] Business Line Data and Key Metrics Changes - Outsourcing & Advisory and Investment Management service lines saw strong growth, while Capital Markets activity softened due to higher interest rates and reduced availability of capital [5][17] - Investment Management revenues for Q3 were $96 million, up 23% from the prior year, with adjusted EBITDA for the quarter at $37 million, up 33% [21][22] Market Data and Key Metrics Changes - Americas revenues for Q3 were $695 million, up 13%, with Outsourcing & Advisory up 27% and Leasing activity up 21% [18] - EMEA revenues for Q3 were $164 million, up 23%, with strong growth particularly in the United Kingdom [19] - Asia Pacific revenues were $153 million, down 4%, impacted by higher interest rates and COVID-19 restrictions [20] Company Strategy and Development Direction - The company is focusing on diversifying its services and expanding its Investment Management business, which now represents about 30% of pro forma EBITDA [8][13] - Recent acquisitions, including PEAKURBAN and Pangea Property Partners, are aimed at enhancing engineering capabilities and strengthening market presence in key regions [10][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of rising interest rates and geopolitical uncertainties on Capital Markets but emphasized the resilience and diversification of the overall business model [5][14] - The outlook for the full year 2022 has been adjusted to reflect year-to-date results and anticipated challenges, with expected adjusted earnings per share growth now at a mid-teens percentage rate [26][27] Other Important Information - The company repurchased 373,000 shares for a total consideration of $35 million in the past month, with a year-to-date total of 1.4 million shares repurchased for $161 million [25] - Financial leverage ratio as of September 30, 2022, was 1.5 times, with expectations to deleverage over time using operating cash flow [24] Q&A Session Summary Question: Discussion on cost management in a tougher economic environment - Management indicated that the cost structure is highly variable, particularly in the transactional business, and there is no formal cost-cutting program currently planned [29][30] Question: Clarification on Q4 EBITDA growth attribution - Majority of Q4 EBITDA growth is expected to come from acquisitions, with strong organic growth anticipated in Outsourcing & Advisory [32][33] Question: Expected internal growth for Q4 - Management confirmed that the expected softness in internal growth is primarily from Capital Markets [37][38] Question: Insights on Americas margin and discretionary costs - Increased discretionary costs are attributed to resumed client engagement activities and higher commission splits due to strong performance earlier in the year [44][45] Question: Capital Markets activity trends - Management noted a significant gap between buyer and seller expectations due to current market conditions, impacting Capital Markets activity [52][58] Question: Investment Management capital raising and valuation risks - The company is optimistic about its capital raising pipeline, with defensive asset classes expected to maintain market values [62][64] Question: Future hiring and margin dynamics - Management acknowledged that recruiting new producers may initially impact margins but is considered a strategic investment for long-term growth [80]