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Colliers International Reports Second Quarter Results

July 31, 2018 7:00 AM

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$) June 30GrowthGrowth June 30GrowthGrowth
(LC = local currency) 2018 2017in US$ %in LC % 2018 2017in US$ %in LC %
Outsourcing & Advisory $259,613 $233,64511%8% $501,343 $432,66116%11%
Lease Brokerage 221,889 180,38423%21% 389,623 325,21220%17%
Sales Brokerage 185,848 172,2048%5% 328,857 294,62212%8%
Total revenues $667,350 $586,23314%11% $1,219,823 $1,052,49516%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 ResultsThe 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 CallColliers 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.

Notes1. 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. HennickChairman & CEO

John B. FriedrichsenCFO

(416) 960-9500

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Source: Colliers International Group Inc.

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