Market Overview

Colliers International Reports Second Quarter Results

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Continuing strong growth in revenues and earnings

Operating highlights:

    Three months ended   Six months ended
    June 30   June 30
(in millions of US$, except EPS) 2018   2017   2018   2017
                         
Revenues $ 667.4   $ 586.2   $ 1,219.8   $ 1,052.5
Adjusted EBITDA (note 1)   69.4     60.3     105.6     91.5
Adjusted EPS (note 2)   0.95     0.77     1.39     1.13
                         
GAAP operating earnings   45.6     41.2     61.3     54.1
GAAP EPS   0.60     0.29     0.72     0.32
                       

TORONTO, July 31, 2018 (GLOBE NEWSWIRE) -- Colliers International Group Inc. (NASDAQ:CIGI) (TSX:CIGI) today reported operating and financial results for its second quarter ended June 30, 2018. All amounts are in US dollars.

Revenues for the second quarter were $667.4 million, a 14% increase (11% in local currency) relative to the same quarter in the prior year, adjusted EBITDA (note 1) was $69.4 million, up 15% (10% in local currency) and adjusted EPS (note 2) was $0.95, a 23% increase versus the prior year quarter. Second quarter adjusted EPS would have been approximately $0.05 lower excluding foreign exchange impacts. GAAP operating earnings were $45.6 million, relative to $41.2 million in the prior year period. GAAP diluted net earnings per common share was $0.60 in the quarter, versus $0.29 per share for the same quarter a year ago. Second quarter GAAP EPS would have been approximately $0.05 lower excluding changes in foreign exchange rates.

For the six months ended June 30, 2018, revenues were $1.22 billion, a 16% increase (12% in local currency) relative to the comparable prior year period, adjusted EBITDA was $105.6 million, up 15% (12% in local currency) and adjusted EPS was $1.39, a 23% increase versus the prior year period. Year-to-date adjusted EPS would have been approximately $0.06 lower excluding foreign exchange impacts. GAAP operating earnings were $61.3 million, relative to $54.1 million in the prior year period. GAAP diluted net earnings per common share for the six month period was $0.72, compared to $0.32 per share in the prior year period. Year-to-date GAAP EPS would have been approximately $0.06 lower excluding changes in foreign exchange rates.

"Once again, Colliers generated strong results in the second quarter, through a combination of acquisitions and solid internal growth. Based on results to date, current business pipelines and acquisitions completed subsequent to the quarter end, 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 three acquisitions in our services business, in each case expanding to new markets within North America. We also successfully completed a private placement of €210 million of ten-year senior notes at an attractive fixed interest rate. And then, just after quarter-end we completed our strategic investment in Harrison Street Real Estate Capital, one of the largest real estate investment firms dedicated to the education, healthcare and storage sectors globally with approximately $15.6 billion in assets under management. Harrison Street, together with our existing European investment management business, will form the core of our new Investment Management platform with over $20 billion in assets under management from the world's most respected institutional investors. With this important new platform for growth now in place, an investment-grade balance sheet, disciplined growth strategy and a proven track record of success, we are well positioned to continue creating value for shareholders in 2018 and beyond," he concluded.

About Colliers International Group Inc.
Colliers International Group Inc. (NASDAQ:CIGI) (TSX:CIGI) is a top tier global real estate services and investment management company operating in 69 countries with a workforce of more than 13,000 professionals. Colliers is the fastest-growing publicly listed global real estate services and investment management company, with 2017 corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide, and through its investment management services platform, has more than $20 billion of assets under management from the world's most respected institutional real estate investors.

Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services firm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row.

Colliers is led by an experienced leadership team with significant equity ownership and a proven record of delivering more than 20% annualized returns for shareholders, over more than 20 years.

For the latest news from Colliers, visit Colliers.com or follow us on Twitter: @Colliers and LinkedIn.

Consolidated Revenues

    Three months ended       Six months ended    
(in thousands of US$)   June 30 Growth Growth   June 30 Growth Growth
(LC = local currency)   2018   2017 in US$ % in LC %   2018   2017 in US$ % in LC %
                                 
Outsourcing & Advisory   $ 259,613   $ 233,645 11% 8%   $ 501,343   $ 432,661 16% 11%
Lease Brokerage     221,889     180,384 23% 21%     389,623     325,212 20% 17%
Sales Brokerage     185,848     172,204 8% 5%     328,857     294,622 12% 8%
                                 
Total revenues   $ 667,350   $ 586,233 14% 11%   $ 1,219,823   $ 1,052,495 16% 12%
 

Consolidated revenues for the second quarter grew 11% on a local currency basis, with contributions from each service line. Consolidated internal revenue growth in local currencies was 5% (note 3) led by Lease Brokerage in all three geographic regions.

For the six months ended June 30, 2018, consolidated revenues grew 12% on a local currency basis. Year-to-date consolidated internal revenue growth in local currencies was 5% led by Lease Brokerage in all three geographic regions.

Segmented Quarterly Results
The Americas region's revenues totalled $388.6 million for the second quarter compared to $346.5 million in the prior year quarter, up 12% (11% on a local currency basis). Local currency revenue growth was comprised of 7% internal growth and 4% growth from recent acquisitions. Internal growth for the quarter was driven by Lease Brokerage, particularly on the US West Coast and in Canada. Adjusted EBITDA was $36.2 million, versus $32.9 million in the prior year quarter. GAAP operating earnings were $26.8 million, versus $22.9 million in the prior year period.

EMEA region revenues totalled $149.6 million for the second quarter compared to $120.6 million in the prior year quarter, up 24% (15% on a local currency basis). Local currency revenue growth was comprised of 14% growth from recent acquisitions and 1% internal growth. Internal revenue growth was impacted by a decline in Outsourcing & Advisory Services, particularly project management activity, more than offset by increases in Sales and Lease Brokerage. Adjusted EBITDA was $21.5 million, versus $17.5 million in the prior year quarter. GAAP operating earnings were $14.0 million, versus $11.8 million in the prior year quarter.

Asia Pacific region revenues totalled $128.8 million for the second quarter compared to $118.7 million in the prior year quarter, up 9% (6% on a local currency basis). Local currency revenue growth was comprised of 4% growth from recent acquisitions and 2% internal growth. Adjusted EBITDA was $15.4 million, up from $12.7 million in the prior year quarter, benefitting from operating leverage. GAAP operating earnings were $13.5 million, versus $11.2 million in the prior year period.

Global corporate costs as reported in adjusted EBITDA were $3.6 million in the second quarter, relative to $2.8 million in the prior year period. The corporate GAAP operating loss for the second quarter was $8.7 million, relative to $4.6 million in the prior period, with the current period impacted by transaction costs related to the Harrison Street acquisition.

Conference Call
Colliers will be holding a conference call on Tuesday, July 31, 2018 at 11:00 a.m. Eastern Time to discuss the quarter's results as well as the Harrison Street acquisition. The call, as well as a supplemental slide presentation, will be simultaneously web cast and can be accessed live or after the call at www.colliers.com in the "Shareholders / Newsroom" 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, 2017 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
  2018     2017     2018     2017  
                               
Net earnings $ 28,804     $ 25,957     $ 37,343     $ 32,757  
Income tax   12,859       12,799       17,575       17,126  
Other income, net   (33 )     (807 )     (460 )     (2,036 )
Interest expense, net   3,939       3,279       6,856       6,221  
Operating earnings   45,569       41,228       61,314       54,068  
Depreciation and amortization   16,283       14,381       32,141       26,408  
Acquisition-related items   5,741       3,310       7,995       7,519  
Restructuring costs   347       309       416       1,041  
Stock-based compensation expense   1,487       1,030       3,701       2,473  
Adjusted EBITDA $ 69,427     $ 60,258     $ 105,567     $ 91,509  
 

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
  2018     2017     2018     2017  
                               
Net earnings $ 28,804     $ 25,957     $ 37,343     $ 32,758  
Non-controlling interest share of earnings   (3,547 )     (5,091 )     (4,216 )     (7,293 )
Amortization of intangible assets   8,779       7,915       17,368       13,965  
Acquisition-related items   5,741       3,310       7,995       7,519  
Restructuring costs   347       309       416       1,041  
Stock-based compensation expense   1,487       1,030       3,701       2,473  
Income tax on adjustments   (2,550 )     (2,456 )     (4,973 )     (4,466 )
Non-controlling interest on adjustments   (1,206 )     (885 )     (2,050 )     (1,729 )
Adjusted net earnings $ 37,855     $ 30,089     $ 55,584     $ 44,268  
                       
  Three months ended   Six months ended
(in US$) June 30   June 30
  2018     2017     2018     2017  
                               
Diluted net earnings per common share $ 0.60     $ 0.29     $ 0.72     $ 0.32  
Non-controlling interest redemption increment   0.03       0.25       0.11       0.33  
Amortization of intangible assets, net of tax   0.14       0.13       0.28       0.22  
Acquisition-related items   0.13       0.08       0.18       0.18  
Restructuring costs, net of tax   0.01       -       0.01       0.02  
Stock-based compensation expense, net of tax   0.04       0.02       0.09       0.06  
Adjusted earnings per share $ 0.95     $ 0.77     $ 1.39     $ 1.13  
 

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 acquired entities were owned for the entire current period as well as the entire prior period. Revenue from acquired entities is estimated based on the operating performance of each acquired entity for the year prior to the acquisition date. 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.

 
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)     2018       2017       2018       2017  
                             
Revenues   $ 667,350     $ 586,233     $ 1,219,823     $ 1,052,495  
                             
Cost of revenues     430,725       374,922       793,025       675,028  
Selling, general and administrative expenses     169,032       152,392       325,348       289,472  
Depreciation     7,504       6,466       14,773       12,443  
Amortization of intangible assets     8,779       7,915       17,368       13,965  
Acquisition-related items (1)     5,741       3,310       7,995       7,519  
Operating earnings     45,569       41,228       61,314       54,068  
Interest expense, net     3,939       3,279       6,856       6,221  
Other income     (33 )     (807 )     (460 )     (2,036 )
Earnings before income tax     41,663       38,756       54,918       49,883  
Income tax expense     12,859       12,799       17,575       17,126  
Net earnings     28,804       25,957       37,343       32,757  
Non-controlling interest share of earnings     3,547       5,091       4,216       7,293  
Non-controlling interest redemption increment     1,410       9,530       4,314       12,750  
Net earnings attributable to Company   $ 23,847     $ 11,336     $ 28,813     $ 12,714  
                             
Net earnings per common share                        
  Basic   $ 0.61     $ 0.29     $ 0.74     $ 0.33  
  Diluted   $ 0.60     $ 0.29     $ 0.72     $ 0.32  
                             
Adjusted earnings per share (2)   $ 0.95     $ 0.77     $ 1.39     $ 1.13  
                             
Weighted average common shares (thousands)                        
    Basic     39,168       38,829       39,108       38,775  
    Diluted     39,842       39,317       39,752       39,212  

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.
(3) New US GAAP revenue guidance was adopted effective January 1, 2018 which had the impact of (i) increasing the proportion of reimbursable expenses related to property management activities accounted for as revenue on a gross basis, with no impact on earnings and (ii) accelerating the recognition of revenue related to certain Lease Brokerage transactions, with an accompanying immaterial increase to earnings. The Company also restated its results for the three- and six-month periods ended June 30, 2017 to reflect the impact of the adoption.

                 
Condensed Consolidated Balance Sheets
(in thousands of US dollars) 
                 
(unaudited) June 30, 2018   December 31, 2017   June 30, 2017
                   
Assets                
Cash and cash equivalents $ 104,246   $ 108,523   $ 122,982
Accounts receivable   446,515     487,279     406,938
Prepaids and other assets   81,520     68,556     62,479
  Current assets   632,281     664,358     592,399
Other non-current assets   83,624     72,736     65,802
Fixed assets   83,899     83,899     78,048
Deferred income tax   41,251     48,401     59,999
Goodwill and intangible assets   738,251     638,166     628,464
  Total assets $ 1,579,306   $ 1,507,560   $ 1,424,712
                   
                   
Liabilities and shareholders' equity                
Accounts payable and accrued liabilities $ 507,168   $ 646,722   $ 458,245
Other current liabilities   60,935     75,494     66,067
Long-term debt - current   1,614     2,426     3,312
  Current liabilities   569,717     724,642     527,624
Long-term debt - non-current   418,223     247,467     424,120
Other liabilities   80,554     67,904     69,483
Deferred income tax   23,988     19,044     16,538
Redeemable non-controlling interests   156,602     145,489     137,855
Shareholders' equity   330,222     303,014     249,092
  Total liabilities and equity $ 1,579,306   $ 1,507,560   $ 1,424,712
                   
                   
Supplemental balance sheet information                
Total debt $ 419,837   $ 249,893   $ 427,432
Total debt, net of cash   315,591     141,370     304,450
Net debt / pro forma adjusted EBITDA ratio   1.2     0.6     1.3
                 


               
Consolidated Statements of Cash Flows
(in thousands of US dollars)
 
        Three months ended     Six months ended
        June 30     June 30
(unaudited)     2018       2017       2018       2017  
                           
Cash provided by (used in)                        
                           
Operating activities                        
Net earnings   $ 28,804     $ 25,957     $ 37,343     $ 32,757  
Items not affecting cash:                        
  Depreciation and amortization     16,283       14,381       32,141       26,408  
  Deferred income tax     1,792       1,519       1,399       3,366  
  Other     8,717       7,824       16,543       16,044  
        55,596       49,681       87,426       78,575  
                           
Net change from assets/liabilities                        
  Accounts receivable     (12,612 )     (22,029 )     38,655       10,951  
  Prepaids and other assets     (483 )     (1,462 )     4,373       (11,074 )
  Payables and accruals     11,960       29,546       (152,589 )     (107,103 )
  Other     (4,100 )     4,443       (4,838 )     7,592  
  Contingent acquisition consideration paid     -       -       (2,856 )     (301 )
Net cash provided by (used in) operating activities     50,361       60,179       (29,829 )     (21,360 )
                           
Investing activities                        
Acquisition of businesses, net of cash acquired     (18,848 )     (21,360 )     (98,580 )     (51,003 )
Purchases of fixed assets     (7,781 )     (13,768 )     (13,990 )     (20,501 )
Other investing activities     (13,498 )     (6,425 )     (17,960 )     (17,021 )
Net cash used in investing activities     (40,127 )     (41,553 )     (130,530 )     (88,525 )
                           
Financing activities                        
Increase in long-term debt, net     (14,472 )     17,215       172,361       157,352  
Purchases of non-controlling interests, net     -       (5,594 )     (73 )     (29,876 )
Dividends paid to common shareholders     -       -       (1,947 )     (1,932 )
Distributions paid to non-controlling interests     (7,399 )     (6,874 )     (12,603 )     (10,992 )
Other financing activities     (170 )     (339 )     (2,689 )     (400 )
Net cash provided by (used in) financing activities     (22,041 )     4,408       155,049       114,152  
                           
Effect of exchange rate changes on cash     4,404       2,253       1,033       5,567  
                           
Increase (decrease) in cash and cash equivalents     (7,403 )     25,287       (4,277 )     9,834  
                           
Cash and cash equivalents, beginning of period     111,649       97,695       108,523       113,148  
                           
Cash and cash equivalents, end of period   $ 104,246     $ 122,982     $ 104,246     $ 122,982  
                           


 
Segmented Results
(in thousands of US dollars)
                             
          Asia        
(unaudited) Americas   EMEA   Pacific   Corporate     Consolidated
                             
Three months ended June 30                            
                             
2018                            
Revenues $ 388,606   $ 149,566   $ 128,796   $ 382     $ 667,350
Adjusted EBITDA   36,176     21,458     15,366     (3,573 )     69,427
Operating earnings   26,800     13,950     13,471     (8,652 )     45,569
                             
2017                            
Revenues $ 346,478   $ 120,574   $ 118,670   $ 511     $ 586,233
Adjusted EBITDA   32,915     17,472     12,685     (2,815 )     60,257
Operating earnings   22,863     11,809     11,163     (4,607 )     41,228
                             
                             
          Asia        
  Americas   EMEA   Pacific   Corporate     Consolidated
                             
Six months ended June 30                            
                             
2018                            
Revenues $ 717,108   $ 265,283   $ 236,631   $ 801     $ 1,219,823
Adjusted EBITDA   62,631     21,027     26,583     (4,674 )     105,567
Operating earnings    46,806     4,379     22,845     (12,716 )     61,314
                             
2017                            
Revenues $ 630,300   $ 211,345   $ 209,869   $ 981     $ 1,052,495
Adjusted EBITDA   55,350     21,173     19,581     (4,596 )     91,508
Operating earnings   35,557     10,834     16,674     (8,997 )     54,068
                               

COMPANY CONTACTS:

Jay S. Hennick
Chairman & CEO                       

John B. Friedrichsen
CFO 

(416) 960-9500

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