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Colliers International Reports Second Quarter Results

GlobeNewswire - Tue Jul 30, 6:00AM CDT

Momentum continues with solid internal revenue growth and overall operating performance

Operating highlights:

Three months ended    Six months ended
                                 June 30               June 30
(in millions of US$, except EPS) 2019       2018       2019         2018
Revenues                         $   745.5  $   667.4  $   1,380.6  $   1,219.8
Adjusted EBITDA (note 1)             87.3       69.4       130.9        105.6
Adjusted EPS (note 2)                1.10       0.95       1.61         1.39
GAAP operating earnings              57.2       45.6       70.6         61.3
GAAP EPS                             0.60       0.60       0.63         0.72

Colliers International Group Inc. (NASDAQ:CIGI) (TSX:CIGI.TO) today reported operating and financial results for its second quarter ended June 30, 2019. All amounts are in US dollars.

Revenues for the second quarter were $745.5 million, a 12% increase (15% in local currency) relative to the same quarter in the prior year, adjusted EBITDA (note 1) was $87.3 million, up 26% (30% in local currency) and adjusted EPS (note 2) was $1.10, a 16% increase versus the prior year quarter. Second quarter adjusted EPS would have been approximately $0.04 higher excluding foreign exchange impacts. GAAP operating earnings were $57.2 million, relative to $45.6 million in the prior year period. GAAP diluted net earnings per common share was $0.60 in the quarter, flat versus $0.60 per share for the same quarter a year ago. Second quarter GAAP EPS would have been approximately $0.04 higher excluding changes in foreign exchange rates.

For the six months ended June 30, 2019, revenues were $1.38 billion, a 13% increase (17% in local currency) relative to the comparable prior year period, adjusted EBITDA was $130.9 million, up 24% (27% in local currency) and adjusted EPS was $1.61, a 16% increase versus the prior year period. Year-to-date adjusted EPS would have been approximately $0.05 higher excluding foreign exchange impacts. GAAP operating earnings were $70.6 million, relative to $61.3 million in the prior year period. GAAP diluted net earnings per common share for the six month period was $0.63, compared to $0.72 per share in the prior year period. Year-to-date GAAP EPS would have been approximately $0.05 higher excluding changes in foreign exchange rates.

"Colliers delivered solid internal revenue growth and overall operating performance during the second quarter. Based on our results to date, current business pipelines and acquisitions during the year, we remain optimistic about our growth prospects for the balance of the year," said Jay S. Hennick, Chairman and CEO of Colliers International. "During the second quarter, we completed two more acquisitions of former Colliers affiliates in Charlotte, North Carolina and Sweden. With our investment-grade balance sheet, disciplined growth strategy and more diversification than ever, we are well positioned to continue creating value for shareholders in the future," he concluded.

About Colliers International Group Inc.

Colliers International (NASDAQ, TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning approximately 40% of our equity, have delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management.

Learn more about how we accelerate success at corporate.colliers.com, Twitter @Colliers or LinkedIn.

Consolidated Revenues by Line of Service

Three months ended                           Six months ended
(in thousands of US$)   June 30                   Growth    Growth   June 30                       Growth    Growth
(LC = local currency)   2019         2018         in US$ %  in LC %  2019           2018           in US$ %  in LC %
Outsourcing & Advisory  $   281,638  $   257,438  9%        13%      $   540,022    $   497,208    9%        13%
Lease Brokerage             253,374      221,706  14%       17%          435,158        389,398    12%       14%
Sales Brokerage             163,603      185,671  -12%      -9%          315,468        327,948    -4%       -1%
Investment Management       46,902       2,535    NM        NM           89,992         5,269      NM        NM
Total revenues          $   745,517  $   667,350  12%       15%      $   1,380,640  $   1,219,823  13%       17%

Consolidated revenues for the second quarter grew 15% on a local currency basis, with a significant contribution from Harrison Street Real Estate Capital, LLC ("Harrison Street") (acquired in July 2018) in Investment Management. Consolidated internal revenue growth in local currencies was 5% (note 3) led by Lease Brokerage and Outsourcing & Advisory, offset by declines in Sales Brokerage, in all three geographic regions.

For the six months ended June 30, 2019, consolidated revenues grew 17% on a local currency basis, with a significant contribution from Harrison Street. Year-to-date consolidated internal revenue growth in local currencies was 5% led by Outsourcing & Advisory and Lease Brokerage in all three geographic regions.

Segmented Second Quarter Results

The Americas region's revenues totalled $421.4 million for the second quarter compared to $388.6 million in the prior year quarter, up 8% (up 9% on a local currency basis). Local currency revenue growth was comprised of 5% growth from acquisitions and 4% internal growth. Internal growth for the quarter was driven by Lease Brokerage, particularly in the US Northeast and Southwest regions, offset by a reduction in higher margin Sales Brokerage, especially in Canada. Outsourcing & Advisory revenues were up 7% on a local currency internal growth basis across the region. Adjusted EBITDA was $36.2 million, flat versus $36.2 million in the prior year quarter, and was impacted by the change in service mix noted above, as well as ongoing incremental investments in talent acquisition relative to the prior year. GAAP operating earnings were $25.6 million, versus $26.8 million in the prior year period.

EMEA region revenues totalled $151.6 million for the second quarter compared to $147.0 million in the prior year quarter, up 3% (up 9% on a local currency basis). Local currency revenue growth was comprised of 7% internal growth and 2% growth from acquisitions. Internal revenue growth was attributable to an increase in Outsourcing & Advisory services across the entire region, particularly workplace solutions and project management. Adjusted EBITDA was $19.0 million, versus $22.2 million in the prior year quarter, impacted by planned investments in talent acquisition in corporate solutions and capital markets practice areas and a change in revenue mix with workplace solutions and project management carrying lower margins than other services. GAAP operating earnings were $10.8 million, versus $14.7 million in the prior year quarter.

Asia Pacific region revenues totalled $125.1 million for the second quarter compared to $128.8 million in the prior year quarter, down 3% (up 3% on a local currency basis). Local currency revenue growth was comprised of 2% internal growth and 1% growth from recent acquisitions. Internal revenue growth was led by Outsourcing & Advisory but was offset by a decline in higher margin Sales Brokerage. Adjusted EBITDA was $14.2 million, relative to $15.4 million in the prior year quarter, and was impacted by revenue mix. GAAP operating earnings were $12.5 million, versus $13.5 million in the prior year period.

Investment Management revenues for the second quarter were $46.9 million, of which $4.3 million represented pass-through revenue from historical carried interest. Revenues reflected significant incremental management fees from new capital commitments completed during the quarter. The carried interest recognized was payable to former owners of Harrison Street and certain long-serving employees, affecting reported margin but having no impact on earnings. Adjusted EBITDA was $19.2 million. Operating earnings, which are impacted by acquisition-related intangible asset amortization, were $12.2 million in the quarter. Assets under management stood at $30.3 billion as of June 30, 2019.

Global corporate costs as reported in adjusted EBITDA were $1.3 million in the second quarter, relative to $3.6 million in the prior year period. The corporate GAAP operating loss for the second quarter was $4.1 million, relative to $8.7 million in the prior period.

Adoption of New Lease Accounting Standard

On January 1, 2019, the Company adopted FASB Accounting Standard Codification Topic 842, Leases ("ASC 842"). ASC 842 requires the recognition of operating lease right-of-use assets and lease liabilities for virtually all premise and equipment leases on the consolidated balance sheet, with no impact on earnings. The Company adopted ASC 842 effective January 1, 2019 without adjusting comparative periods and recorded a $274.9 million right-of-use asset and corresponding $309.6 million lease liability as of June 30, 2019.

Structured Accounts Receivable Facility

In April 2019, the Company established a structured accounts receivable facility (the "AR Facility") with committed availability of $125 million and an initial term of 364 days and includes continuous sales of selected US and Canadian trade accounts receivable (the "Receivables"). Under the AR Facility, the Company receives a cash payment and a deferred purchase price for sold Receivables.

Cash proceeds from the AR Facility in the amount of $119.4 million were used to repay outstanding indebtedness under Colliers' multi-currency senior unsecured revolving credit facility. The AR Facility is recorded as a sale of accounts receivable, resulting in reductions in accounts receivable and long-term debt.

Conference Call

Colliers will be holding a conference call on Tuesday, July 30, 2019 at 11:00 a.m. Eastern Time to discuss the quarter's results. The call, as well as a supplemental slide presentation, will be simultaneously web cast and can be accessed live or after the call at corporate.colliers.com in the Events section.

Forward-looking Statements

This press release includes or may include forward-looking statements. Forward-looking statements include the Company's financial performance outlook and statements regarding goals, beliefs, strategies, objectives, plans or current expectations. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Such factors include: economic conditions, especially as they relate to commercial and consumer credit conditions and business spending; commercial real estate property values, vacancy rates and general conditions of financial liquidity for real estate transactions; the effects of changes in foreign exchange rates in relation to the US dollar on Canadian dollar, Euro, Australian dollar and UK pound sterling denominated revenues and expenses; competition in markets served by the Company; labor shortages or increases in commission, wage and benefit costs; disruptions or security failures in information technology systems; and political conditions or events, including elections, referenda, changes to international trade and immigration policies, and any outbreak or escalation of terrorism or hostilities.

Additional factors and explanatory information are identified in the Company's Annual Information Form for the year ended December 31, 2018 under the heading "Risk Factors" (which factors are adopted herein and a copy of which can be obtained at www.sedar.com) and other periodic filings with Canadian and US securities regulators. Forward looking statements contained in this press release are made as of the date hereof and are subject to change. All forward-looking statements in this press release are qualified by these cautionary statements. Except as required by applicable law, Colliers undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Summary financial information is provided in this press release. This press release should be read in conjunction with the Company's quarterly financial statements and MD&A to be made available on SEDAR at www.sedar.com.

Notes

1. Reconciliation of net earnings to adjusted EBITDA:

Adjusted EBITDA is defined as net earnings, adjusted to exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) depreciation and amortization; (v) acquisition-related items; (vi) restructuring costs and (vii) stock-based compensation expense. We use adjusted EBITDA to evaluate our own operating performance and our ability to service debt, as well as an integral part of our planning and reporting systems. Additionally, we use this measure in conjunction with discounted cash flow models to determine the Company's overall enterprise valuation and to evaluate acquisition targets. We present adjusted EBITDA as a supplemental measure because we believe such measure is useful to investors as a reasonable indicator of operating performance because of the low capital intensity of the Company's service operations. We believe this measure is a financial metric used by many investors to compare companies, especially in the services industry. This measure is not a recognized measure of financial performance under GAAP in the United States, and should not be considered as a substitute for operating earnings, net earnings or cash flow from operating activities, as determined in accordance with GAAP. Our method of calculating adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to adjusted EBITDA appears below.

Three months ended          Six months ended
(in thousands of US$)            June 30                     June 30
                                 2019        2018            2019           2018
Net earnings                     $   35,575  $   28,804      $  41,039      $  37,343
Income tax                           13,187      12,859         14,402         17,575
Other income, net                    179         (33    )       (322    )      (460    )
Interest expense, net                8,257       3,939          15,476         6,856
Operating earnings                   57,198      45,569         70,595         61,314
Depreciation and amortization        23,778      16,283         46,447         32,141
Acquisition-related items            5,263       5,741          9,898          7,995
Restructuring costs                  275         347            314            416
Stock-based compensation expense     809         1,487          3,640          3,701
Adjusted EBITDA                  $   87,323  $   69,427      $  130,894     $  105,567

2. Reconciliation of net earnings and diluted net earnings per common share to adjusted net earnings and adjusted earnings per share:

Adjusted earnings per share is defined as diluted net earnings per common share, adjusted for the effect, after income tax, of: (i) the non-controlling interest redemption increment; (ii) amortization expense related to intangible assets recognized in connection with acquisitions; (iii) acquisition-related items; (iv) restructuring costs and (v) stock-based compensation expense. We believe this measure is useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company and enhances the comparability of operating results from period to period. Adjusted earnings per share is not a recognized measure of financial performance under GAAP, and should not be considered as a substitute for diluted net earnings per share, as determined in accordance with GAAP. Our method of calculating this non-GAAP measure may differ from other issuers and, accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to adjusted net earnings and of diluted net earnings per share to adjusted earnings per share appears below.

Three months ended          Six months ended
(in thousands of US$)                         June 30                     June 30
                                              2019          2018          2019          2018
Net earnings                                  $  35,575     $  28,804     $  41,039     $  37,343
Non-controlling interest share of earnings       (6,586 )      (3,547 )      (7,831 )      (4,216 )
Amortization of intangible assets                15,238        8,779         29,958        17,368
Acquisition-related items                        5,263         5,741         9,898         7,995
Restructuring costs                              275           347           314           416
Stock-based compensation expense                 809           1,487         3,640         3,701
Income tax on adjustments                        (4,212 )      (2,550 )      (8,216 )      (4,973 )
Non-controlling interest on adjustments          (2,346 )      (1,206 )      (4,592 )      (2,050 )
Adjusted net earnings                         $  44,016     $  37,855     $  64,210     $  55,584
                                              Three months ended          Six months ended
(in US$)                                      June 30                     June 30
                                              2019          2018          2019          2018
Diluted net earnings per common share         $  0.60       $  0.60       $  0.63       $  0.72
Non-controlling interest redemption increment    0.13          0.03          0.20          0.11
Amortization of intangible assets, net of tax    0.23          0.14          0.46          0.28
Acquisition-related items                        0.12          0.13          0.22          0.18
Restructuring costs, net of tax                  -             0.01          0.01          0.01
Stock-based compensation expense, net of tax     0.02          0.04          0.09          0.09
Adjusted earnings per share                   $  1.10       $  0.95       $  1.61       $  1.39

3. Local currency revenue growth rate and internal revenue growth

Percentage revenue variances presented on a local currency basis are calculated by translating the current period results of our non-US dollar denominated operations to US dollars using the foreign currency exchange rates from the periods against which the current period results are being compared. Percentage revenue variances presented on an internal growth basis are calculated assuming no impact from acquired entities in the current and prior periods. Revenue from acquired entities, including any foreign exchange impacts, are treated as acquisition growth until the respective anniversaries of the acquisitions. We believe that these revenue growth rate methodologies provide a framework for assessing the Company's performance and operations excluding the effects of foreign currency exchange rate fluctuations and acquisitions. Since these revenue growth rate measures are not calculated under GAAP, they may not be comparable to similar measures used by other issuers.

4. Assets under management

We use the term assets under management ("AUM") as a measure of the scale of our Investment Management operations. AUM is defined as the gross market value of operating assets and the projected gross cost of development properties of the funds, partnerships and accounts to which we provide management and advisory services, including capital that such funds, partnerships and accounts have the right to call from investors pursuant to capital commitments. Our definition of AUM may differ from those used by other issuers and as such may not be directly comparable to similar measures used by other issuers.

COLLIERS INTERNATIONAL GROUP INC.
Condensed Consolidated Statements of Earnings
(in thousands of US dollars, except per share amounts)
                                                     Three months                  Six months
                                                     ended June 30                 ended June 30
(unaudited)                                          2019         2018             2019               2018
Revenues                                         $   745,517  $   667,350      $   1,380,640      $   1,219,823
Cost of revenues                                     484,220      430,725          905,570            793,025
Selling, general and administrative expenses         175,058      169,032          348,130            325,348
Depreciation                                         8,540        7,504            16,489             14,773
Amortization of intangible assets                    15,238       8,779            29,958             17,368
Acquisition-related items (1)                        5,263        5,741            9,898              7,995
Operating earnings                                   57,198       45,569           70,595             61,314
Interest expense, net                                8,257        3,939            15,476             6,856
Other income                                         179          (33     )        (322      )        (460      )
Earnings before income tax                           48,762       41,663           55,441             54,918
Income tax expense                                   13,187       12,859           14,402             17,575
Net earnings                                         35,575       28,804           41,039             37,343
Non-controlling interest share of earnings           6,586        3,547            7,831              4,216
Non-controlling interest redemption increment        5,205        1,410            7,962              4,314
Net earnings attributable to Company             $   23,784   $   23,847       $   25,246         $   28,813
Net earnings per common share
                Basic                            $   0.60     $   0.61         $   0.64           $   0.74
                Diluted                          $   0.60     $   0.60         $   0.63           $   0.72
Adjusted earnings per share (2)                  $   1.10     $   0.95         $   1.61           $   1.39
Weighted average common shares (thousands)
                                Basic                39,532       39,168           39,416             39,108
                                Diluted              39,954       39,842           39,887             39,752

Notes to Condensed Consolidated Statements of Earnings

(1) Acquisition-related items include transaction costs, contingent acquisition consideration fair value adjustments, and contingent acquisition consideration-related compensation expense.

(2) See definition and reconciliation above.

Condensed Consolidated Balance Sheets
(in thousands of US dollars)
(unaudited)                                        June 30, 2019     December 31, 2018   June 30, 2018
Assets
Cash and cash equivalents                          $      102,092    $        127,032    $      104,246
Accounts receivable and contract assets                   359,850             554,700           446,515
Prepaids and other assets                                 141,948             78,581            81,520
                      Current assets                      603,890             760,313           632,281
Other non-current assets                                  88,504              83,765            83,624
Fixed assets                                              102,264             93,483            83,899
Operating lease right-of-use assets                       274,857             -                 -
Deferred income tax                                       38,954              34,195            41,251
Goodwill and intangible assets                            1,383,778           1,385,824         738,251
                      Total assets                 $      2,492,247  $        2,357,580  $      1,579,306
Liabilities and shareholders' equity
Accounts payable and accrued liabilities           $      548,022    $        720,938    $      507,168
Other current liabilities                                 65,890              75,929            60,935
Long-term debt - current                                  2,356               1,834             1,614
Operating lease liabilities - current                     70,953              -                 -
                      Current liabilities                 687,221             798,701           569,717
Long-term debt - non-current                              690,048             670,289           418,223
Operating lease liabilities - non-current                 238,602             -                 -
Other liabilities                                         85,608              125,706           80,554
Deferred income tax                                       23,525              27,550            23,988
Redeemable non-controlling interests                      338,405             343,361           156,602
Shareholders' equity                                      428,838             391,973           330,222
                      Total liabilities and equity $      2,492,247  $        2,357,580  $      1,579,306
Supplemental balance sheet information
Total debt                                         $      692,404    $        672,123    $      419,837
Total debt, net of cash                                   590,312             545,091           315,591
Net debt / pro forma adjusted EBITDA ratio                1.7                 1.6               1.2
Consolidated Statements of Cash Flows
(in thousands of US dollars)
                                                              Three months ended                Six months ended
                                                              June 30                           June 30
(unaudited)                                                   2019              2018            2019            2018
Cash provided by (used in)
Operating activities
Net earnings                                               $  35,575        $   28,804       $  41,039       $  37,343
Items not affecting cash:
                            Depreciation and amortization     23,778            16,283          46,447          32,141
                            Deferred income tax               (3,025   )        1,792           (7,044   )      1,399
                            Other                             15,714            8,717           30,641          16,543
                                                              72,042            55,596          111,083         87,426
Net change from assets/liabilities
                            Accounts receivable               (26,039  )        (12,612 )       17,297          38,655
                            Prepaids and other assets         (2,416   )        (483    )       (5,604   )      4,373
                            Payables and accruals             (14,033  )        7,949           (203,751 )      (157,884 )
                            Other                             (883     )        (89     )       3,564           457
Contingent acquisition consideration paid                     (5,101   )        -               (5,213   )      (2,856   )
Sale proceeds from AR facility, net of repurchases            119,425           -               119,425         -
Net cash provided by (used in) operating activities           142,995           50,361          36,801          (29,829  )
Investing activities
Acquisition of businesses, net of cash acquired               (10,433  )        (18,848 )       (23,677  )      (98,580  )
Purchases of fixed assets                                     (13,685  )        (7,781  )       (24,064  )      (13,990  )
Cash collections on AR facility deferred purchase price       7,337             -               7,337           -
Other investing activities                                    (6,403   )        (13,498 )       (15,602  )      (17,960  )
Net cash used in investing activities                         (23,184  )        (40,127 )       (56,006  )      (130,530 )
Financing activities
Increase in long-term debt, net                               (113,470 )        (14,472 )       21,424          172,361
Purchases of non-controlling interests, net                   (4,061   )        -               (6,765   )      (73      )
Dividends paid to common shareholders                         -                 -               (1,961   )      (1,947   )
Distributions paid to non-controlling interests               (13,363  )        (7,399  )       (19,557  )      (12,603  )
Other financing activities                                    (2,545   )        (169    )       2,399           (2,688   )
Net cash provided by (used in) financing activities           (133,439 )        (22,040 )       (4,460   )      155,050
Effect of exchange rate changes on cash                       (1,627   )        4,403           (1,275   )      1,032
Increase (decrease) in cash and cash equivalents              (15,255  )        (7,403  )       (24,940  )      (4,277   )
Cash and cash equivalents, beginning of period                117,347           111,649         127,032         108,523
Cash and cash equivalents, end of period                   $  102,092       $   104,246      $  102,092      $  104,246
Segmented Results
(in thousands of US dollars)
                                                          Asia         Investment
(unaudited)                 Americas          EMEA        Pacific      Management      Corporate        Consolidated
Three months ended June 30
2019
         Revenues           $        421,385  $  151,595  $   125,099  $   46,902      $   536          $      745,517
         Adjusted EBITDA             36,155      19,042       14,200       19,234          (1,308  )           87,323
         Operating earnings          25,619      10,842       12,539       12,249          (4,051  )           57,198
2018
         Revenues           $        388,607  $  147,029  $   128,796  $   2,535       $   383          $      667,350
         Adjusted EBITDA             36,176      22,226       15,366       (768   )        (3,573  )           69,427
         Operating earnings          26,800      14,727       13,471       (777   )        (8,652  )           45,569
                                                          Asia         Investment
                            Americas          EMEA        Pacific      Management      Corporate        Consolidated
Six months ended June 30
2019
         Revenues           $        780,211  $  272,059  $   237,416  $   89,992      $   962          $      1,380,640
         Adjusted EBITDA             62,388      16,534       25,108       29,480          (2,616  )           130,894
         Operating earnings          41,787      696          21,755       15,886          (9,529  )           70,595
2018
         Revenues           $        717,108  $  260,013  $   236,631  $   5,269       $   802          $      1,219,823
         Adjusted EBITDA             62,631      22,208       26,583       (1,181 )        (4,674  )           105,567
         Operating earnings          46,806      5,581        22,845       (1,202 )        (12,716 )           61,314

COMPANY CONTACTS:

Jay S. Hennick

Chairman & CEO

John B. Friedrichsen

CFO

(416) 960-9500

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